Poundworld adds to retail gloom
Discount retailer Poundworld is looking at closing about 100 of its 355 stores, putting up to 1,500 jobs at risk.
Poundworld is considering the move under an insolvency process called a Company Voluntary Arrangement (CVA). Like many retailers Poundworld has been hit by falling consumer confidence, rising overheads and the weaker pound. Meanwhile, Carpetright's creditors and landlords have approved the company's CVA plan for about 80 closures, putting hundreds of job at risk. CVA's have become a popular among retailers because they allow firms to offload underperforming stores and reduce rents while avoiding administration. A number of retailers have chosen to go through a CVA, including New Look and Carpetright while last week House of Fraser said it was considering this measure as part of a number of options. Earlier this year, both Toys R Us UK and electronics chain Maplin went into administration. Poundworld is owned by private equity firm TPG Capital, which also controls the restaurant chain Prezzo whose landlords agreed to a CVA last month. Prezzo is also closing 94 branches. 'Toxic mix' Poundworld is expected to announce the terms of the CVA next month. As well as closing stores it would try to get agreement from landlords to reduce rents. The chain imports a lot of its stock and is having to pay more for it because of the fall in the value of the pound. Poundworld employs about 5,500 staff and has its headquarters in West Yorkshire. The company was formed in 2004, but it says it can trace its origins "back to 1974 and a market stall in Wakefield, West Yorkshire". Carpetright closures Richard Lim, chief executive of Retail Economics, said news of Poundworld's troubles "signals just how much distress bricks and mortar retailers are under". "The toxic mix of rising costs, softer consumer demand and the acceleration of seismic structural shifts are pushing many business models to breaking point. "Stuck with too many stores, inflexible leases and spiraling operating costs, the business is in desperate need of restructuring." The developments at Poundworld's emerged as Carpetright's creditors voted on the retailer's restructuring plan. Carpetright has earmarked 81 stores for closure under its CVA, which allow the firm to shut loss-making outlets and secure rent reductions. At the meeting, Carpetright won the backing of more than 75% of creditors to push ahead with the plan, which puts about 300 jobs at risk. Meanwhile, upmarket department store chain Fenwicks, which has nine branches in England and employs about 2,000 staff, is looking at ways to restructure. A company spokeswoman said the process would involve shaking up the marketing, human resources, finance and IT functions within the stores.