Poundland is reportedly considering a plan to force through steep rent cuts on its properties in a last-ditch attempt to cut costs.
Hundreds of stores have been earmarked for rent reductions in an attempt by Pepco, the retailer’s parent company, to shore up its balance sheet amid an attempt to find a buyer for the struggling chain, according to the Telegraph.
The contest is said to have narrowed to a two-horse race, with Hilco and Gordon Brothers on the final shortlist.
Poundland last drove through big rent cuts during the pandemic, when it made average savings of more than a third on around 200 properties, according to company accounts at the time.
Poundland also angered landlords for failing to pay rent on some stores as several months of arrears built up.
This time around, up to 200 stores are reportedly singled out for imminent closure with up to 500 more selected for rent bill decreases.
The company hopes to cut rents by between 10% and 50% while pulling out of the others through a court-sanctioned restructuring scheme, the Telegraph reported. There is no guarantee a judge will approve the proposal.
This is typically done using an insolvency process known as a company voluntary arrangement, which gives landlords a vote on the cost-cutting measures that will affect them.
“The focus of the group and advisers is currently on a potential sale of Poundland,” said a Pepco spokesperson. “This is an ongoing process, and no final decisions have been taken.”
Poundland cut its profit guidance last month after revenues fell by more than expected. It said the downgrade “relates to highly challenging trading conditions, which have been further impacted by clearance of old stock and product availability issues”.
Its revenue fell 6.5% to £985m in the six months to 31 March, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped to €22m from €87m the year before.
It now expects EBITDA to fall between €0m to €20m, down from previous guidance of €50m to €70m.
Stephan Borchert, Pepco CEO, said efforts to sell Poundland are still ongoing with a deal expected by the end of September.
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