Alongside its interim results today, Pepco Group confirmed that it plans to separate off its struggling Poundland business by September after another period of weak performance. It also warned investors not to expect “major proceeds” from any sale, with the UK discount chain unlikely to make a profit in its current financial year.
Pepco Group revealed in March that it had attracted interest from potential buyers of Poundland. Last weekend, The Sunday Times reported that Gordon Brothers, the former owner of Laura Ashley, had emerged as one of the frontrunners to take control of the business, with several other turnaround investors such as Modella Capital, Alteri, Hilco Capital, and Endless also considering bids.
Sources told the newspaper that Poundland is likely to be sold for a nominal fee that would be “effectively a pound” because of the significant turnaround project that would be required to arrest the declining performance of the 825-strong chain. Reports have suggested that hundreds of loss-making Poundland stores are likely to be shuttered by the new owner.
“It’s clear, given the current situation Poundland is in, that major proceeds can’t be expected,” Pepco Group CEO Stephan Borchert told Reuters today.
“There are very different options on how to solve this problem,” he added, declining to comment on the separation process further.
In the half-year period to 31st March, Poundland’s like-for-like sales plummeted 7.3% to €985m, with underlying EBITDA down 74.7% to €22m. The company stated that an action plan was in place to improve performance, with a focus on general merchandise and a simpler in-store offer and price points. However, the chain continued to experience negative like-for-like sales performance in the current third quarter, with “underperformance of all categories”.
Pepco Group made another cut to its full-year outlook for Poundland, forecasting underlying EBITDA between zero and €20m, versus previous guidance of €50m to €70m. To reflect a deterioration in Poundland’s trading and its weaker outlook, it has booked a non-cash impairment charge of €234m. It had already booked a charge of €775m in December.
“At Poundland, trading remains challenging, which is reflected in a profit outturn below expectations for H1 and a weaker outlook for the full year,” said Borchert.
“Barry Williams, who was re-appointed as Poundland Managing Director in March 2025, and his team are actively driving a recovery plan to help turn around the business by refocusing on its traditional core strengths. We continue to undertake a process to separate Poundland from the group, as part of a wider strategy shift away from FMCG, with a divestiture expected before the end of FY25.”
The Pepco Group as a whole reported a 5.5% fall in first-half underlying EBITDA to €460m on revenue up 4.3% to €3.34bn.
Its core Pepco chain saw like-for-like sales increase 2.3% to €2.17bn, with underlying EBITDA up 11.1% to €440m. The company maintained its guidance for the Pepco brand to deliver “high single-digit” revenue and EBITDA growth over the full year.
The smaller Dealz chain saw like-for-like sales increase 2.9%, with both fascias seeing positive trading momentum continuing into the third quarter.
The Pepco Group opened 101 net new stores during the half-year period, resulting in a total of 5,049 stores in operation. It plans to add 250 net new stores across this year, with new stores focused on the Pepco brand in the CEE region.
“The Pepco brand continues to make good progress, delivering solid high single-digit revenue growth in H1 and a continued positive like-for-like sales trajectory,” concluded Borchert.
“Pepco Western Europe’s double-digit LFL performance is an encouraging signal for the continued improvement of this region. We have started to implement our strategic initiatives outlined at the Capital Markets Day in March 2025, and we are pleased with delivering double-digit EBITDA growth at Pepco, reflecting disciplined margin management. Dealz Poland also continues to perform well, with good growth across both FMCG and GM categories.”
