A rescue plan at Poundland has been approved by the High Court, giving the discount chain a vital lifeline and pathway to recovery.
The restructure plan involves the closure of 68 stores, 40 of which have ceased trading in recent weeks. It also involves ending online sales, closing its loyalty programme, pulling frozen and chilled food ranges from stores, and closing two distribution centres.
Investment firm Gordon Brothers, which bought Poundland from Pepco Group for £1 in June, has agreed to invest £90m to turn around the business, made up of an initial £60m and an additional £30m once the restructuring plan has been successfully implemented.
“Today’s decision is vitally important for Poundland, allowing us to stabilise the business, securing the future of hundreds of stores and thousands of jobs,” said Poundland MD Barry Williams.
“We’d like to thank the court, and the engagement of our creditors, throughout this process.
“Despite the opportunity this ruling provides, I’m extremely mindful of its consequences for our colleagues – especially those leaving us as we streamline our store estate, distribution network and support teams.
“We acknowledge the direct impact our plans have had on them and re-confirm our commitment to do all we can to support them.
“Nevertheless, our wider attention must now turn to getting Poundland back to growth.
“In the coming weeks we will focus on getting us back on track – revamping ranges, lowering prices and creating the simpler and more focused Poundland we know our customers are eager for us to deliver.”
Pepco Group is providing a further £30m revolving overdraft facility subject to implementation of the restructuring plan and in return for a 30% equity stake.
Poundland has said more stores will close over time as leases expire, taking its estate from 800 to between 650 and 700 stores.
Nick Stockley, partner and dispute resolution specialist at law firm Mayo Wynne Baxter, said: “The position with Poundland is similar to River Island in that they have convinced the court the business can survive with time for a restructure to work.
“This is another example of the recent trend of restructure plans that bind creditors if the court agrees that the plan has some prospect of success.
“Poundland will now operate on a significantly reduced level, many stores will close and jobs will be lost.”
Stockley said Poundland would “need to do more with the business than make superficial changes and short-term fixes” in order to survive long-term.
As revealed by The Grocer last week, the variety discounter is going back to pound shop basics in stores to win back shoppers, with its fmcg range reduced by about a half and split into three price points: £1, £2 and £3.
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