By Ahmed Abdelsalam
Poundland suppliers facing millions of pounds in losses if the budget retailer collapses have warned its US owner, Gordon Brothers, not to maximize its financial return at their expense, as government ministers intervene to seek a rescue deal.
Administration and rescue talks
Poundland, which operates 600 shops in Britain and employs about 12,000 staff, filed a notice of intention to appoint administrators at the High Court last Thursday. Gordon Brothers, the US restructuring specialist that bought the chain for £1 last summer, is in talks with at least two potential buyers, including Northern Ireland's Martin Property Group, whose offer has backing from Poundland's management team. Gordon Brothers executives met with Business Secretary Jonathan Reynolds on Wednesday, while Poundland's management held separate talks with Kate Dearden, the minister for the future of work, and the shop workers' union Usdaw.
Break-up plan favors owner
Gordon Brothers is understood to prefer breaking up Poundland, selling off stock and parcelling stores to other retailers such as Tesco and the owner of Poundstretcher. This route would pay off more of a £30 million shareholder loan but would leave suppliers with unpaid debts and millions of pounds worth of stock without a retailer to sell it.
Suppliers warn of heavy losses
Karan Shah, a director of Universal Toiletries, a major fragrance and toiletries supplier, said his company faces a financial risk of about £1.5 million, including nearly £700,000 in stock already delivered but unpaid. He argued that Gordon Brothers should not be permitted to maximize its own return at the expense of suppliers without exploring all alternatives for a solvent deal. Andrew Kay, chief operating officer of Oldham-based toy ball supplier John Leisure, said he would have to rehome more than a million products, many custom-made for Poundland, calling it a nightmare. Adam Turner, sales director at confectionery supplier Highcrest Retail Brands, said he stands to lose millions in payments for stock already supplied, though his company has found alternative buyers for some inventory and has insurance.
Supply chain impact
The suppliers warned that the collapse could wipe out businesses throughout the supply chain. It is estimated that Poundland's failure could affect up to 30,000 jobs when supply chain roles are accounted for. Gordon Brothers has previously said Poundland faces multiple economic challenges, including rising inflation, increasing staffing costs, and shrinkage from severe shoplifting.
