European discounter Pepco Group said on Thursday it was evaluating all strategic options to separate its struggling 825-store Poundland in the UK this year, including a potential sale.
In a statement ahead of its Capital Markets Day, the Warsaw-listed group, which also owns the Pepco and Dealz brands, said that although Poundland had a turnover of over €2 billion last year, it was operating in an “increasingly challenging” UK retail landscape “that is only intensifying.”
It said higher employer taxes announced in the Labour government’s October budget will add further pressure to Poundland’s cost base.
Pepco said in December it was considering options for the Poundland chain after it booked a €775 million impairment charge, plunging the group to an annual net loss of €662 million.
The group said it would focus on the Pepco brand “as the single future format and engine driver of group earnings.”
It will also consider the separation of the well-performing Dealz Poland business over the medium term.
Speaking about Poundland's potential sale, group CEO Stephen Borchert said, "There are definitely interested parties for this business."
He did not comment on the type of interest, nor what stage talks had reached.
Bortchert also withheld Poundland's worth, but said he was confident the retailer's future would be decided by September.
Looking Ahead
Pepco – whose shares are down 6% year-on-year – said it was making a strategic move away from fast-moving consumer goods to focus on Pepco’s higher-margin clothing and general merchandise business and “white space” opportunities in Central, Eastern and Western Europe.
Borchert will assume responsibility for running Pepco, while Barry Williams has been appointed as the permanent managing director of Poundland.
Pepco’s like-for-like sales were up 1.5% in the eight weeks to 2 March, with growth at Pepco and Dealz offset by negative like-for-like sales at Poundland.
The group forecast profitable growth in its 2024/25 year, though Poundland’s EBITDA would dip to €50 to €70 million from €153 million in 2023/24.
It said the board has authorised a share buyback capability of up to €200 million.
Read More: UK Prices To Rise As Retailers Pass On Higher Employment Costs – BRC
