Analysis: Will return to £1-per-item roots halt the slide at Poundland?

Owners Pepco Group, who also own the Pepco and Dealz brands in Europe, say "challenging trading" at its Poundland operations dragged the group's like-for-like revenues into a 1.1% decline despite strong performance from the group's other brands.

The firm has been described as one of the Black Country's biggest retail success stories, growing from a father-and-son operation in 1990 to its position today with over 850 stores across the UK and Ireland, and around 18,000 employees.

The business says it will now be undertaking a "comprehensive assessment" of the company's position in a bid to get back on track, with the firm now set to nearly double the amount of what it describes as "core items", those which sell at £1 or below, increasing the range from 1,500 to almost 2,400 in all its UK stores. 

But it remains to be seen if this will be enough to turn round fortunes at the company, with headwinds for discounters remaining strong amid an ongoing cost-of-living crisis in the UK. 

Rival operation B&M also saw millions wiped off its share value despite impressive third quarter results this week, as investors weighed up competition from major supermarket rivals at the lower end of the market.

That was despite the Liverpool-based firm recording 3.3% year-to-date growth, and the firm reporting strong seasonal sales throughout the festive trading period.

Rivals Poundstretcher also saw a pre-tax loss of £9.8m in the year to 31 March 2024, slipping from a £5m profit the year before, ahead of its acquisition by a US based investment consortium.

Earlier this month, the British Retail Consortium(BRC) said high street retailers had endured a "drab December", with footfall at shopping centres, retail parks and high streets own 2.2% in the month compared with the same period in 2023.

Stephan Borchert, chief executive officer of Pepco Group, said Poundland's 'ongoing challenges' had offset strong performance from the group's other brands, leading to "mixed" first quarter performance.

"It was pleasing to see Pepco – the key engine for the Group’s future strategic and financial growth – deliver its first quarter of like-for-like sales growth in more than a year. This reflects how we have enhanced our core offer, sharpened pricing, and increased availability, alongside continued improvements in gross margin," he said.

“However, Poundland saw Like-For-Likes fall, largely driven by continued underperformance in clothing and general merchandise following the transition to Pepco-sourced product, and a decline in gross margin. Getting Poundland back on track is a key priority – we are undertaking a comprehensive assessment of the business and taking immediate measures on improving our cash performance and strengthening the customer proposition.

“The opening of our 5,000th store is a landmark moment for Pepco Group, highlighting the potential we have to further leverage our estate by enhancing our product offer with a compelling price proposition to delight customers and drive a stronger performance. In addition, we will further focus on driving higher capital returns through targeted store expansion to deliver future success across our core European markets.”