Poundworld has filed for administration after its private equity owner failed to find a buyer willing to take on the struggling British discount retailer.
The Yorkshire-based chain, which has more than 350 stores and employs 5,100 people, has suffered with lower footfall on many high streets where its stores are based, as well as with rising costs and exchange-rate volatility.
Poundworld, which was subject of the BBC’s Pound Shop Wars documentary, will continue to trade while a buyer for all or part of the business is sought. “There are no redundancies or store closures at this time,” the company said in a statement.
Chris Edwards, the group’s founder who sold a controlling stake in the group to TPG in 2015 for £150m, is considering a “last gasp” rescue attempt. He said it would be difficult to save the business because of its poor cash position and criticised Deloitte, the administrators, for failing to engage with him and his team six weeks ago. The first contact was on Monday, he said.
“They have exhausted every other option before they would deal with me. I think TPG didn’t want to deal with us.”
Mr Edwards acknowledged that he does not have enough funds to buy the business, but hoped to line up bank finance.
Like many high street retailers, Poundworld has suffered from cost inflation, decreasing footfall, weaker consumer confidence and an increasingly competitive discount retail market.
“The retail trading environment in the UK remains extremely challenging and Poundworld has been seeking to address this through a restructure of its business,” said Clare Boardman, joint administrator at Deloitte.
“We still believe a buyer can be found for the business or at least part of it and we are keeping staff appraised of developments as they happen”.
A TPG spokesperson said: “This was a difficult decision for every party involved. We invested in Poundworld because of our belief in how the company serves its customers and the strength of its employees. Despite investing resources to strengthen the business, the decline in UK retail and changing consumer behaviour affected Poundworld significantly.”
Poundworld was also affected by rising wage costs and business rates. The weaker pound against the dollar has raised the cost of imported stock. Clive Black, analyst at Shore Capital, said the company had also been “a bit injudicious with some of its locations and lease terms”. Poundworld made a £6m operating loss in the year to March 2017, against a profit of £12.2m the year before.
Graham Soult, an independent retail consultant, said that Poundworld had attempted to diversify into multiple price points like other pound shops, but that its execution had been wayward. “Poundland has done most things better. Especially, they have managed to navigate their way into being a multi-price retailer without confusing their customers,” he said.
Mr Edwards said the company was fixable. “The only thing that has destroyed the business is bad management . . . we are in the same place as B&M, Home Bargains and Poundland and they are doing OK”.