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Former Poundland boss Barry Williams was parachuted back onto the board of the discount chain at the start of the year as owner Pepco looked to address its struggling performance.<\/p>\n
Williams stepped back from the helm of the value retailer in September 2023, when Pepco moved him across to head up and turnaround the group\u2019s European sister chain.<\/p>\n
His arrival coincided with the departure of Poundland\u2019s managing director Austin Cooke, who resigned from the business after seven years and more than a year since he took over from Williams.<\/p>\n
The return of its former boss comes at a crucial time for Poundland as Pepco revealed on Thursday (6 March) that it was \u201cactively evaluating\u201d all strategic options to separate the discount business from the group, including a potential sale.<\/p>\n
\u201cPoundland is a strong brand that serves millions of customers every week and had \u20ac2bn annual turnover in FY24, but it is also operating in an increasingly challenging UK retail landscape that is only intensifying,\u201d it told shareholders.<\/p>\n
Pepco said that the chain had continued to experience a negative like-for-like sales performance for the first two months of the year, with an \u201cunderperformance of all categories\u201d.<\/p>\n
It follows the 7.3% drop in sales it reported for Poundland during the three months to 31 December and 3.6% in its most recent financial year.<\/p>\n
Pepco has been working with advisors at AlixPartners on a \u201ccomprehensive assessment\u201d of the business after the underwhelming results contributed to a \u00a3650m writedown on the group\u2019s balance sheet and a \u00a3560m net loss.<\/p>\n
Poundland\u2019s weak performance is a stark difference to the group\u2019s Pepco and Dealz divisions, which both reported a like-for-like sales increase of 1.4% and 6.6% over the golden quarter.<\/p>\n
Williams\u2019 return certainly signals something major is afoot and with Pepco looking to spin off Poundland, Retail Gazette takes a look at what the returning boss may have up his sleeve and what\u2019s next for one of the high street\u2019s much-loved retailers.<\/p>\n
![\"Poundland\"](\"https:\/\/www.retailgazette.co.uk\/wp-content\/uploads\/2024\/04\/shutterstock_1602429757.jpg\")
<\/b><\/p>\nA leadership reshuffle<\/b><\/h3>\n
Pepco confirmed this morning that Williams, who had originally returned as on an interim basis, had now been permanently appointed as managing director as the group irons out its next steps for Poundland.<\/p>\n
Group chief executive Stephan Borchert said: \u201cBarry Williams did a great job as managing director of Pepco, returning it to like-for-like sales growth, and I am confident he will play a pivotal role in getting Poundland back on track, given his previous success there.\u201d<\/p>\n
Williams had previously transformed the discount chain business during his time as managing director between 2017 and 2023.<\/p>\n
During his tenure, he helped to expand Poundland\u2019s product offering to include more clothing, homewares and food, as well as move the business away from its single \u00a31 price point.<\/p>\n
Williams, who also spent seven years at Asda, has spent much of the last two years busy turning things around at a wider group level after the group\u2019s European division issued multiple profit warnings towards the end of 2023.<\/p>\n
Several sources that have worked alongside the former Poundland boss described him as \u201cone of the best people I\u2019ve ever worked for\u201d and said he was \u201cthe best man for the job\u201d to help turn things around.<\/p>\n
Retail analyst Nick Bubb says, \u201cIt makes a lot of sense for the veteran Barry Williams to be parachuted back from Poland to man the barricades\u201d.<\/p>\n
However, he notes that \u201cthe world is a tougher place since Barry was last running the business, with a lot more discount competition on the High Street from Aldl and Lidl and on retail parks from B&M, Home Bargains and The Range\u201d.<\/p>\n
What went w<\/b>rong for Poundland?<\/b><\/h3>\n
Poundland was poised to become one of the standouts of the discount sector following the collapse of Wilko in 2023. However, it has since faced challenges and continues to rack up steep losses.<\/span><\/p>\n Its struggles first materialised when the retailer\u2019s owner phased out its UK-based Pep&Co clothing range and general merchandise in the summer of 2023 in exchange for <\/span>Pepco-sourced products that were available across Europe.<\/b><\/p>\n The group attributed Poundland\u2019s 7.3% LFL decline over the golden quarter to \u201ccontinued weak clothing and general merchandise performance\u201d.<\/span><\/p>\n However, Pepco said in its latest quarterly results that its toughest comparative quarter for Poundland was now behind it, and that it anticipated the negative sales performance to moderate as it moved through the year.<\/p>\n In its update on Thursday, the group noted that challenging trading conditions continued to impact profitability and, alongside margin pressure and an increasingly higher operating cost environment, it expects the retailer to deliver an underlying EBITDA of between \u00a341.9m to \u00a358.6m (\u20ac50m to \u20ac70m) during the current financial year.<\/p>\n Pepco said that it had \u201csought to integrate the operations of its three brands (Pepco, Poundland and\u00a0Dealz) with the aim to move to a simpler business model with one brand, one range and one team\u201d over the last few years but\u00a0admitted that the integration had \u201cnot delivered\u201d for its customers.<\/p>\n A person familiar with the situation admitted the ranges implemented were not right for Poundland customers and that the business had spent the last few months<\/span> making changes to the ranges to correct the key problem areas, such as expanding its men\u2019s and women\u2019s clothing.<\/p>\n GlobalData retail analyst Sophie Mitchell argues the issues at Poundland \u201cEvidently go beyond the failed introduction of its Pepco-sourced GM and clothing range\u201d.<\/p>\n Mitchell says the\u00a0like-for-like declines in its core FMCG category is reflective of the retailer failing to entice consumers away from other discounters and the big supermarkets.<\/p>\n She adds:\u00a0\u201cThe failure of its GM and clothing range has likely been due to a lack of marketing and the popularity of well-established value clothing ranges in the UK from the grocers and Primark.\u201d<\/p>\n Similarly, Shore Capital equity analyst David Hughes notes that Poundland has lost its value perception in recent years, \u201cDriven by the real success of the Clubcard and Nectar card schemes we\u2019ve seen at Sainsbury\u2019s and Tesco\u201d.<\/p>\n He explains that the improved value offer from the two supermarket giants and exclusive loyalty prices has meant \u201cthere\u2019s slightly less incentive in consumers minds to shop at the discounters because they don\u2019t feel like they\u2019re getting as big a saving as perhaps they felt they were before\u201d.<\/p>\n Pepco had been working with AlixPartners to work out a strategy and told shareholders on Thursday that it wanted Poundland off its books.<\/p>\n While the group hinted that it was exploring a possible sale of the business, Pepco or its new owner may still decide that a major restructuring needs to take place.<\/p>\n Bubb argues that drafting in Alix earlier in the year suggests the group \u201cmay well be thinking of a company voluntary arrangement or a pre-pack [administration], to cut a big tranche of stores, even though I personally think that Pepco is rich enough to bear any losses in its UK subsidiary\u201d.<\/p>\n A person familiar to the situation said the group was considering several options for the retailer but that no final decision had been made.<\/p>\n Borchert said at the start of last month that \u201cgetting Poundland back on track is a key priority\u201d and that the business had taken \u201cimmediate measures\u201d to improve cash performance and strengthen its customer proposition.<\/p>\n Borchert previously admitted to\u00a0Reuters\u00a0that the retailer had \u201clost a bit of its DNA\u201d with the transition to Pepco ranges and was working to \u201cbring this back\u201d.<\/p>\n The retailer launched its \u2018Home of the \u00a31\u2019 marketing campaign in December, and further increased the\u00a0number of core items at \u00a31 or below from 1,500 to almost 2,400 at the start of the year. It also launched its own rewards app in October.<\/p>\n Hughes argues there \u201cprobably needs to be a hard look at [Poundland\u2019s] range to make sure that the lines there are adding value\u201d, adding \u201ca tight range is an efficient range\u201d.<\/p>\n He adds that its makes sense for the retailer to increase the number of its products priced around \u00a31 \u201cbecause it\u2019s synonymous with the name\u201d.<\/p>\n \u201cIt\u2019s offputting when you go to Poundland and there are lots of things which are much more than a pound,\u201d Hughes says.<\/p>\n Pepco has also put a pause on the retailer\u2019s expansion plans for the year. Poundland, which opened 84 last year, shuttered 13 stores in its most recent quarter, which it attributed mostly to lease expirations.<\/p>\n The discount chain has also since closed more than a dozen of the 64 former Wilko sites it took on in September 2023 when its high street rival collapsed into administration. As of 10 December 2024, only 46 belonging to the fallen value retailer remained in Poundland\u2019s portfolio.<\/p>\n Pepco is remaining tight-lipped on how it plans to improve Poundland\u2019s performance other than it wants to separate the business from the group, but its clear that all eyes will be on Williams to turnaround the struggling discount chain.<\/p>\n![\"Poundland](\"https:\/\/www.retailgazette.co.uk\/wp-content\/uploads\/2023\/11\/Poundland-clothes.jpg.webp)
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\n<\/picture><\/p>\nWhat\u2019s next?<\/b><\/h3>\n
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