POUNDLAND’S profits fell by £642m as the popular discount chain criticized the Labor government’s recent budget moves.
The owner of Britain’s favorite company – Poland’s Pepco Group – said it would consider “every strategic option” for the struggling chain.
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Poundland has suffered a major financial blowCredit: Getty
Pepco said it faces “higher UK cost prospects following the recent Budget” announced by Labor chancellor Rachel Reeves.
And the group said it had seen a “significant decline in results” over the past two years – which has hit its profits.
A 3.5% drop in like-for-like sales also rocked the chain.
Stephan Borchert, CEO of Pepco Group, said they would consider “every strategic option for this company to get it back on track.”
When asked if Poundland would remain in the group, Mr. Borchert said he would outline more plans for the group’s strategy and for Poundland when he hosts Capital Markets Day next March.
A spokesman said the large loss was “due to a non-cash impairment charge at Poundland relating to the acquisition of the UK chain in 2016”.
However, Poundland increased its revenues by 0.2% to £2.1bn in the year to 30 September 2024.
Mr Borchert added: “At Poundland, recent performance has been very challenging, impacted by the decline in clothing and general merchandise following the switch to the Pepco range at the start of the year.
“We are taking swift action to get Poundland’s performance back on track, focusing on returning to Poundland’s strengths.”
The group said it made the move to switch to Pepco’s ranges to help increase scale, increase cost savings and lower prices for customers.
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But it admits: “As the year progressed, it became clear that both the planning and execution of this implementation was flawed, with shortfalls in apparel and general merchandise for UK customers, impacting revenues and profitability during the year.
“It also became clear that our UK customers had different expectations of the Poundland brand offering compared to Pepco customers, leading to a thorough review of the approach going forward.”
REEVES’ CALCULATION
Chancellor Rachel Reeves confirmed the government will increase the National Living Wage by 6.7% from April 1 back in October.
She said: “The Labor government introduced the national minimum wage in 1999.
“It had a transformative impact on the lives of working people.
“As promised in our manifesto, we have asked the Low Pay Commission to consider the cost of living for the first time.
“I can confirm that we will accept the Low Pay Commission’s recommendation to increase the National Living Wage by 6.7% to £12.21 an hour.”
Meanwhile, the national minimum wage for 18-20-year-olds will rise from £8.60 to £10 an hour – a 16.3 per cent rise and the biggest rate rise ever, the chancellor confirmed.
Eligible young people working full-time will earn an extra £2,500 a year.
Both new rates are lower than the rate of £12.60 an hour calculated by the Living Wage Foundation and paid by 15,000 employers.
Bosses voluntarily pay a real living wage to staff and it is not a legal requirement unlike the minimum wage.
In budget papers, the Government also said it planned to create a single adult pay rate for workers across the UK “over time”.
But while the increase in the national minimum wage announced today is good news for workers, it will increase the pressure on businesses.
Robert Salter, director at Blick Rothenberg, said: “The increase in the national minimum wage from April 2025 to £12.21 means that small businesses have seen a 37% increase in the national minimum wage since 2020/21.
“This is a significant real-world increase in costs faced by businesses and could easily result in higher unemployment over time.”
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Source: HIS Education