Suppliers facing millions of pounds in losses if Poundland collapses have said the chain’s US owner should not be permitted to maximise its return at their expense, as ministers attempt to intervene in the situation. The fate of the retail chain, its 12,000 staff and about 2,000 suppliers remains uncertain after it filed a notice of intention to appoint administrators at the high court last Thursday. The US restructuring specialist Gordon Brothers, which bought the now 600-store Poundland chain for £1 last summer, remains in talks with at least two possible buyers for the company.
They include Northern Ireland’s Martin Property Group, whose offer has been backed by the retailer’s management team. Gordon Brothers executives are understood to be meeting Jonathan Reynolds, the business secretary, on Wednesday while Poundland’s management team have a separate meeting with Kate Dearden, the minister for the future of work, and the shop workers’ union Usdaw amid political pressure to find a rescue deal. However, Gordon Brothers is understood to prefer the option to break up Poundland, sell off its stock and parcel up stores for sale to other retailers, including Tesco and the owner of Poundstretcher, because this would pay off more of a £30m shareholder loan.
This route could save some retail jobs but would leave suppliers with unpaid debts and millions of pounds’ worth of stock without a retailer to sell it to. Karan Shah, a director of Universal Toiletries, a fragrance and toiletries supplier to Poundland, told the Guardian the company faced a financial risk of about £1.5m, including almost £700,000 in stock already delivered but yet to be paid for, and the rest in undelivered stock and components. Shah suggested the timing of the potential administration appeared “very advantageous” to Gordon Brothers, “at the busiest time of year when the warehouses are full of stock”.
This could leave millions of pounds’ worth of stock that could be sold off by any administrator to pay back the loans held by Gordon Brothers if Poundland is broken up. Shah’s company worked with the chain for about a decade but stopped supplying stock in recent weeks amid concerns about payment. Andrew Kay, the chief operating officer of the Oldham-based toy ball supplier John Leisure, said he would have to “rehome” more than a million products, many of which had already been manufactured and were in transit for next spring.
He said doing so would be difficult because many items had been made specifically for Poundland, and other retailers would not want the same sizes and quantities. While Kay has only a relatively small amount of stock for which he has yet to be paid sitting in Poundland, he said Gordon Brothers had questions to answer about its treatment of suppliers. He felt the investment firm seemed to be “making money off the back of others” by attempting to put Poundland into administration at a time when it was filled with stock that had yet to be paid for.
He said Gordon Brothers’ aim to save stores and retail jobs by selling off groups of Poundland’s stores would not help suppliers. Adam Turner, the sales director at the confectionery supplier Highcrest Retail Brands, based in Bradford, said he was set to lose millions of pounds in payments on stock the company had already supplied if the retailer went bust. He said Highcrest had managed to find alternative buyers for some of its stock and had some insurance but was likely to lose out on payment for stock already provided and for investments in new products for Poundland.
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