The discount retailer has announced sweeping closures after the business was sold for the not-wholly unironic fee of £1.
After founding in 1990, Poundland experienced rapid growth and subsequent expansion after the turn of the millennium, with its budget-conscious focus seeing it weather the 2008 financial crisis well too.
So what changed for the retailer to find itself struggling in the present day?
Everything (not necessarily) a pound
The one key area that the media, and even Poundland’s founder, has pointed to is the pricing change that removed Poundland’s USP in one fell swoop: it started selling items at a range of prices.
After initial concerns that a single-price model wouldn’t work in the UK, Poundland showed that the opposite was true, and enjoyed great success with it. Once the ‘everything a pound’ model was ditched, Poundland became just another budget retailer with little to differentiate itself from its competition.
The Advertising Standards Authority eventually banned Poundland from using its slogan ‘Yes, everything’s £1’, further distancing the brand from what made it successful in the first place.
Increased competition
Given the cost-of-living crisis and general economic downturn of recent years, it should come as no surprise that the budget-store sector has become overcrowded. Poundland saw its market share dwindle as rivals such as B&M, The Range, Home Bargains, The Works and Savers began to establish more of a footing, while big international players such as Lidl and Aldi will have undoubtedly had an impact too.
Recent years have also seen the emergence of Chinese online retailers such as Temu and Shein make inroads into the same market, diluting Poundland’s attractiveness further still.
Tight margins
The age-old issue with running bargain stores is that they operate under tight margins. Once operating costs such as business rates, wage bills and energy prices start to rise, it can soon put a significant strain on finances.
In the face of such issues, single-price retailers don’t have the option to raise their prices. Even with Poundland’s adopted multi-price model, their budget-store identity prevents them from increasing prices beyond a nominal amount.
After the autumn budget announcement, a company spokesperson had warned that changes to employer national insurance contributions would make things even more difficult for Poundland.
Five-finger discounts
Poundland has struggled to contend with shoplifting over recent years.
2024 saw the retailer report £44m worth of stock lost to shoplifters over the course of the year. This was an increase of 30% from the two years prior. As somebody who has seen people brazenly filling backpacks with stock from Poundland shelves first-hand before they barely broke into a jog out of the door, it appears to be a large problem for the firm. Asking one of the cashiers afterwards, she explained that “it happens regularly. We’ve been asking for a security guard for months, but nothing’s been done”.
To capture their target market, Poundland have established a foothold in low-income towns and areas, but this can unfortunately have the unwanted side effect of occasionally being exposed to a higher shoplifting risk.
Inflation
For all the talk of Poundland’s fate being sealed once it moved away from its ‘everything’s a £1’ days, it is hardly a model that could work now that the 1990 pound is now worth around 40p.
New owners, Gordon Brothers, is committed to restructuring the company with one of the methods being to improve its range of £1 products.
Founder Steve Smith (who had attempted to buy back the company before the US investors stepped in), believes that the business should revert to a single-price model but recognises that a price rise would have to take place.
“It’s still a one-price concept, that’s what customers loved and what made Poundland different” the ex-boss said, “but I would’ve changed the price point and I think it does need new systems”.
Moving forward
It was only December 2024 when parent company, Pepco, declared a €662m net loss related to a €775m non-cash impairment of Poundland, so the new owners will have their work cut out to turn around the fortunes of the ailing retailer.
A company-wide restructuring is due to commence soon, which could see up to 100 of their stores close. 68 branches have already been identified for closure, and negotiations with landlords to reduce rent are set to take place. Around 1,000 retail staff and 350 warehouse workers are likely to be affected as a result of the cuts.
Finding high-street survival difficult?
As big name after big name disappears from the high street, it can seem as if there’s little hope for SMEs. However, there are several options available to business owners that seek help before it’s too late.
Forbes Burton provides free initial consultations for owners of limited companies. We can take a look at your business to create restructuring plans, or even help you with the easiest closure or sale solutions.
Call one of our friendly advisers on 0800 975 0380 or email advice@forbesburton.com to find out if a CVA would be suitable for your situation.