Poundland’s parent company, Pepco Group, has confirmed it is exploring a potential sale of the UK discount retailer as it faces mounting financial pressures and a difficult trading environment.

The Poland-based group announced it is considering “all strategic options” to separate Poundland from the wider business, with a potential sale on the table. The move comes as Pepco shifts its focus to its more profitable Pepco-branded stores across Europe, which generate the majority of the group’s earnings.

Despite Poundland reporting an annual turnover of approximately €2 billion (£1.67 billion) in the 2024 financial year, its performance has dragged down Pepco Group’s overall results. The company attributed this to declining sales and increased operating costs in an increasingly competitive UK retail market. In the final quarter of 2024, Poundland saw a 7.3 per cent drop in like-for-like sales, with further declines in early 2025.

Pepco Group warned that underlying earnings for Poundland will range between €50 million and €70 million (£41 million and £58.6 million) for the year, a sharp decline from the previous year’s earnings of €138 million (£118 million). The company has cited the underperformance of clothing and general merchandise following the transition to Pepco-sourced products as a key challenge.

Stephan Borchert, chief executive officer of Pepco Group, said: “The board and I are actively exploring separation options for Poundland, including a potential sale, from the group, with consideration also given to the separation of the well-performing Dealz Poland over the medium term.”

The company acknowledged that the UK retail market is becoming “increasingly challenging,” with additional tax changes set to impact Poundland’s cost base from April 2025. The UK government’s recent budget included measures that will raise national insurance contributions and increase the minimum wage, adding further financial strain on retailers.

As part of the restructuring, Barry Williams, who previously served as Poundland’s managing director, will return to his former role after leading Pepco since September 2023. Borchert praised Williams, stating: “Barry 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.”

Pepco Group has also indicated it will explore selling its Dealz operations in Poland in the future, although it plans to continue managing the chain for now. Additionally, the company is reviewing the performance of its Pepco business in Germany.

While Poundland’s future remains uncertain, Pepco continues to see strong growth opportunities for its core brand. The company has reported double-digit volume growth for Pepco stores and plans to expand further in Central and Eastern Europe, as well as selected Western European markets such as Spain and Italy.

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