Poundland has been unable to buy new stock for its 600 stores after its US owner, Gordon Brothers, blocked the discount chain from accessing about £50 million in its bank accounts, pushing the company closer to collapse as a rescue deadline approaches. One insider described the business as “running on fumes.”
The company has until Thursday to secure a rescue deal. It has filed a notice of intention to appoint administrators, which shields it from creditors during a 10-day moratorium that expires that day. Poundland employs about 11,000 people.
Gordon Brothers, which bought Poundland for £1 in June, has rejected a takeover bid that could have saved thousands of jobs, increasing pressure on the owner. Access to funds was limited by tension between Gordon Brothers’ dual role as creditor and shareholder, a source said. The source added that a relaxation of funding was expected within the next two days.
Poundland chief executive Barry Williams told staff that like-for-like sales, which exclude new store openings, rose 11.4% in the previous week, a period that included Halloween, and were £1.5 million ahead of budget. He said the business made a profit of £18.1 million in the year to September, describing it as a “strong recovery” from a £68 million loss the year before. The latest annual accounts have not yet been audited.
Gordon Brothers has offered a different assessment, saying the chain remains “challenged and vulnerable to any potential downturn in future trading.” It said it had provided significant funding to support Poundland’s trading since acquiring the business. The owner also said it had made £18 million from a combination of debt interest payments and other fees and charges.
On Wednesday, Gordon Brothers executives are due to appear before the Business Select Committee, where lawmakers will examine whether the owner is genuinely pursuing a solvent rescue and whether every realistic step is being taken to protect jobs and stores. The session will be held in private because commercially sensitive talks with bidders are still under way.
Deadline and bidders
The moratorium expires on Thursday. If a solvent deal is in prospect, the deadline could be extended. If not, Poundland is set to fall into administration and could be broken up.
A source familiar with the sale process said London-based Xyra Group was making “significant progress” in a last-minute bid for Poundland and could now be the front-runner. An extension of the Thursday deadline appears increasingly likely, but such a move would be difficult if Gordon Brothers continues to block funding. One observer remarked, “If Gordon Brothers is going in front of that committee, you don’t want to be giving the message we’re pulling up the drawbridge.”
Even a deal to sell the business as a whole would not guarantee that a new owner would keep all stores open. Suppliers to Poundland would prefer a whole-company sale to the sale of hundreds of sites to other retailers. Poundstretcher, Tesco and B&M are among those that have shown interest in picking up stores, a route that could preserve employment for many workers.
The central question is whether a piecemeal sale would protect more jobs than a buyer willing to keep Poundland trading as a national chain. Gordon Brothers has been approached for comment.