Poundland Suppliers Face Millions in Losses as Owner Weighs Breakup

Universal Toiletries alone faces about £1.5m in losses if Poundland collapses — and its director says the chain's US owner should not profit from it. "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," Karan Shah told the Guardian.

Shah's company supplied fragrance and toiletries to Poundland for about a decade. The exposure breaks down to almost £700,000 in stock already delivered but unpaid, with the rest in undelivered stock and components. "We are unfortunately significantly exposed," he said, noting Poundland was the firm's biggest UK client. "We are a family business, not a multinational that can afford to take a hit."

What is happening to Poundland?

Poundland filed a notice of intention to appoint administrators at the high court last Thursday. The filing leaves the 600-store chain, its 12,000 staff and roughly 2,000 suppliers in limbo.

Gordon Brothers, the US restructuring specialist that bought Poundland for £1 last summer, is in talks with at least two possible buyers. One bid comes from Northern Ireland's Martin Property Group, and Poundland's management team backs that offer.

Politics is now in the room. Gordon Brothers executives are understood to be meeting business secretary Jonathan Reynolds on Wednesday, while Poundland's management meets Kate Dearden, the minister for the future of work, alongside the shop workers' union Usdaw. The pressure is on to land a rescue deal.

Why does the owner prefer a breakup?

The answer sits in a £30m shareholder loan. Gordon Brothers is understood to prefer breaking up Poundland, selling off its stock and parceling stores to other retailers — including Tesco and the owner of Poundstretcher — because that route repays more of the loan.

That path could save some retail jobs. It would leave suppliers with unpaid debts and millions of pounds' worth of stock with no retailer to sell it to.

Shah said the timing of a potential administration looked "very advantageous" to Gordon Brothers, coming "at the busiest time of year when the warehouses are full of stock". An administrator could sell that stock to pay back Gordon Brothers' loans if the chain is broken up.

What do other suppliers stand to lose?

Andrew Kay, chief operating officer of the Oldham-based toy ball supplier John Leisure, said he would have to "rehome" more than a million products — many already manufactured and in transit for next spring. He said that would be difficult because many items were 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," Kay said. While he has only a relatively small amount of unpaid stock sitting in Poundland, he argued Gordon Brothers had questions to answer about its treatment of suppliers. He felt the firm seemed to be "making money off the back of others" by attempting administration when the chain was filled with stock that had yet to be paid for. Selling off groups of stores, he said, would not help suppliers.

Adam Turner, sales director at Bradford confectionery supplier Highcrest Retail Brands, said he was set to lose millions of pounds in payments on stock already supplied if the retailer went bust. Highcrest has found alternative buyers for some stock and carries some insurance, but it is likely to lose payment for goods already provided and for investments in new Poundland products. "We can stomach it," he said.

All three suppliers worry about their own suppliers if Poundland orders disappear. "This affects everyone in the supply chain," Shah said. "Situations like this can wipe businesses out."

How far could the damage spread?

Estimates put the potential job losses at up to 30,000 once Poundland's supply chain is counted, not just its own payroll.

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".

Wednesday's meetings with Reynolds, Dearden and Usdaw will show whether political pressure can force a solvent sale ahead of the more lucrative breakup.