Poundland suppliers urge owner to explore alternatives to break-up

Ministers due to meet Gordon Brothers and Usdaw as buyer talks continue

Poundland suppliers warned that Gordon Brothers, the US restructuring specialist that bought the British budget retailer for £1 last summer, should not use an administration to maximise its financial return at their expense. Karan Shah, Andrew Kay and Adam Turner — leaders at Universal Toiletries, John Leisure and Highcrest Retail Brands, respectively — said their companies could face substantial losses if Poundland collapsed or was broken up.

The Guardian reported that Poundland filed a notice of intention to appoint administrators at the High Court last Thursday, leaving the fate of the chain, its 12,000 staff and about 2,000 suppliers uncertain. Gordon Brothers remained in talks with at least two possible buyers, including Northern Ireland’s Martin Property Group, whose offer was backed by Poundland’s management team.

Gordon Brothers executives were understood to be meeting Business Secretary Jonathan Reynolds on Wednesday, while Poundland’s management team had a separate meeting planned with Kate Dearden, the minister for the future of work, and the shop workers’ union Usdaw. The meetings came amid political pressure for a rescue deal.

According to The Guardian, Gordon Brothers was understood to prefer breaking up Poundland, selling its stock and parceling stores for sale to other retailers, including Tesco and the owner of Poundstretcher. That route would pay off more of a £30m shareholder loan. It 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.

Karan Shah, a director of Universal Toiletries, said the fragrance and toiletries supplier faced a financial risk of about £1.5m. Almost £700,000 was in stock already delivered but not yet paid for; the rest was 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 a potential administration appeared “very advantageous” to Gordon Brothers because it came “at the busiest time of year when the warehouses are full of stock”. He said the break-up could leave millions of pounds’ worth of stock for an administrator to sell to repay loans held by Gordon Brothers.

Universal Toiletries had worked with Poundland for about a decade but stopped supplying stock in recent weeks amid concerns about payment. “We are unfortunately significantly exposed,” Shah said, adding that Poundland was the company’s biggest UK client and that “we are a family business, not a multinational that can afford to take a hit”.

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 of which had already been manufactured and were in transit for next spring. He said the task would be difficult because many products were made specifically for Poundland, with sizes and quantities other retailers would not want. “It is going to be a nightmare that will hurt me badly to deal with all that inventory,” he said.

Kay said only a relatively small amount of his stock sitting in Poundland remained unpaid, but 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 when the stores were filled with stock that had not been paid for. He said selling groups of stores to save retail jobs would not help suppliers.

Adam Turner, sales director at Bradford-based confectionery supplier Highcrest Retail Brands, said he was set to lose millions of pounds in payments on stock already supplied if Poundland went bust. Highcrest had found alternative buyers for some stock and had some insurance, but Turner said the company was likely to lose payments for stock already provided and investments in new products for Poundland. But “we can stomach it”, he said.

Shah, Turner and Kay said they were concerned about the future of their own suppliers if they missed Poundland orders. “This affects everyone in the supply chain,” Shah said. “Situations like this can wipe businesses out.” The Guardian’s report estimated that a Poundland collapse could affect up to 30,000 jobs when the supply chain was accounted for.

The Guardian said it had contacted Gordon Brothers for comment. The firm had previously said Poundland “faces multiple economic challenges, including rising inflation, increasing staffing costs and shrinkage from severe levels of shoplifting”.