Poundland has cut its profit guidance for this year after revenues fell further ahead of an attempted sale of the business.
Poundland now expects its earnings before interest, taxes, depreciation, and amortisation (EBITDA) to fall between €0m to €20m, down from previous guidance of €50m to €70m.
It said the downgrade “relates to highly challenging trading conditions, which have been further impacted by clearance of old stock and product availability issues”.
Poundland is still battling a decision last year to start sourcing its clothing and general merchandise through its owner, Pepco Group, leaving shelves bare on crucial ranges such as DIY.
Its revenue fell 6.5% to £985m in the six months to 31 March, while EBITDA dropped to €22m from €87m the year before.
Its poor performance has also led to a €234m writedown of the value of its assets, primarily linked to “goodwill and brand assets”, the company said.
Stephan Borchert, Pepco CEO, said efforts to sell Poundland are still ongoing with a deal expected by the end of September. Pepco wants to offload the struggling asset to focus on its Pepco and Dealz retail brands where revenue grew 9.3% and 13.8% respectively in the last six months.
In the meantime, Poundland’s Barry Williams is looking to lead a recovery plan to turn around the business by refocusing on its traditional core strengths such as general merchandise.
This involves a simplified fmcg proposition and reinstating its old general merchandising lines to fill the gaps on shelves. It is also looking to restore its competitive edge by focusing on “core price points and lower prices”.
One source with knowledge of Poundland told The Grocer in January that Poundland’s problems were largely down to its recent indiscipline and a proliferation of new price points.
“There used to be a lot of discipline in that buying team around the £1 price point. They would go to suppliers for make-to-order products that worked at that price, with margins that worked,” they said.
GlobalData retail analyst Sophie Mitchell suggested Poundland’s failure was “likely due to a lack of marketing and the popularity of value clothing ranges in the UK from the grocers and Primark”.
Poundland had “failed to entice consumers away from other discounters and the grocers”, she said.
Poundland saw 18 net store closures during the last six months, with 818 stores now operating across the UK and Ireland.
No comments yet