Poundland takes £642m hit as budget costs pile up
The owner of Walsall-based Poundland has written down the retailer by £642m, driven by costs linked to the Autumn Budget.
The non-cash impairment charge – a decrease in the value of Pepco’s assets, came due to a poor performance by Poundland amid increased competition and rising costs.
Poundland has also been impacted by the transition to Pepco-sourced products, which proved to be unpopular with consumers.
Chief executive Stephan Borchert said: “At Poundland, recent performance has been very challenging, impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.
“We are taking swift action to get Poundland performance back on track, focusing on a return to Poundland’s strengths.
“We will also closely evaluate Poundland’s overall competitive positioning and requirements for future success as an FMCG-led format”.
Pepco said: “As a result of the material underperformance in Poundland, along with slower growth prospects and a higher cost outlook in the UK following the recent budget, we have assessed the carrying value of that investment and recognised a non-cash impairment of the goodwill and brand asset related to Poundland of €775m, which has driven a reported net loss for the year for the Group of €662m.
“On an underlying basis, Group net profit for FY24 was €179m, up 14.0% on the prior year.”
Pepco reported a £457m pre-tax loss for the year ending 30 September, compared to a profit of £131m the previous year.
The company also warned of a higher cost outlook in the UK following the recent Budget, which includes an increase in the minimum wage and higher national insurance contributions set to take effect in April 2025.
During this period, Poundland also created jobs for 500 former Wilko employees.
