British companies that supply the budget retailer face millions of pounds-worth of losses if it collapses
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 with 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, selling off its stock and parcelling 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 major fragrance and toiletries supplier to Poundland, told the Guardian the company faced 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.
“Gordon Brothers should not be permitted to maximise its own financial return at the expense of suppliers without exploring all the alternatives of a solvent deal,” he said.
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 can 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. “We are unfortunately significantly exposed,” he said, adding that Poundland was its biggest UK client and “we are a family business, not a multinational that can afford to take a hit”.
Andrew Kay, the chief operating officer of 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. “It is going to be a nightmare that will hurt me badly to deal with all that inventory,” he said.
While Kay has only a relatively small amount of stock which he has yet to be paid for 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. But, he said, “we can stomach it”.
Shah, Turner and Kay said they were concerned about the future for their own suppliers if they missed out on Poundland orders.
“This affects everyone in the supply chain,” Shah said. “Situations like this can wipe businesses out.” It is estimated that Poundland’s collapse could affect up to 30,000 jobs when its supply chain is accounted for.
Gordon Brothers has been contacted for comment. It has previously said Poundland “faces multiple economic challenges, including rising inflation, increasing staffing costs and shrinkage from severe levels of shoplifting”.
