Poundland suppliers have warned that the retailer’s US owner, Gordon Brothers, should not seek to maximise its financial return at their expense. Their concerns come as ministers explore options for the chain, whose future remains uncertain after it filed a notice of intention to appoint administrators at the High Court last Thursday.
The uncertainty affects Poundland’s 12,000 employees and around 2,000 suppliers. Gordon Brothers, which bought the 600-store retailer for £1 last summer, is in talks with at least two potential buyers. One is Northern Ireland’s Martin Property Group, whose offer has the backing of Poundland’s management team.
Gordon Brothers executives are expected to meet Business Secretary Jonathan Reynolds on Wednesday. Separately, Poundland’s management and the shop workers’ union Usdaw are due to meet Kate Dearden, the minister for the future of work, amid political pressure to secure a rescue deal.
Gordon Brothers is understood to favour breaking up the business, selling its stock and offering groups of stores to other retailers, including Tesco and the owner of Poundstretcher. That option could repay more of a £30m shareholder loan, but suppliers warn it could leave them with unpaid debts and stock that has no retailer to sell it.
Karan Shah, a director of Poundland supplier Universal Toiletries, said his company faced a financial risk of about £1.5m. That includes nearly £700,000 of delivered stock that has not been paid for, as well as undelivered goods and components. Shah said Gordon Brothers should consider all alternatives to a solvent deal before pursuing a course that maximises its own return.
Universal Toiletries supplied Poundland for about a decade but stopped sending stock in recent weeks over concerns about payment. Shah said the chain was his company’s biggest UK customer and that his family business was significantly exposed.
Andrew Kay, chief operating officer of toy ball supplier John Leisure, said he would need to find new buyers for more than a million products, many already made and in transit for next spring. Some were produced specifically for Poundland, making it difficult to sell them in the same sizes and quantities to other retailers. Kay said that selling Poundland stores in groups might preserve some shops and retail jobs but would not resolve suppliers’ problems.
Adam Turner, sales director at Bradford-based confectionery supplier Highcrest Retail Brands, said his company could lose millions in payments for goods already supplied if Poundland fails. Highcrest has found alternative buyers for some stock and has insurance, but Turner said it could still lose payments and investments in new products developed for the chain.
The suppliers also warned that missed Poundland orders could affect businesses further down the supply chain. A collapse is estimated to put up to 30,000 jobs at risk when those linked businesses are included.
Gordon Brothers was contacted for comment. It has previously said Poundland faces several economic pressures, including rising inflation and staffing costs, as well as losses caused by shoplifting.
Sources: The Guardian Business.