According to reports by Sky News, Poundworld is going to be announcing that it will pursue a Company Voluntary Arrangement (CVA) in May. This will be the latest in a long line of retailers that have made similar moves. Carpetright’s CVA is being voted on today.
If the CVA is accepted it is likely that it will close in the region of 100 shops resulting in hundreds of jobs losses. In total, Poundworld employs about 5,500 people.
Poundworld will no doubt look for rent cuts at many of its remaining stores in order to keep the chain going. Deloitte are expected to be the nominee and supervisors of the CVA with their rival KPMG doing many of the others
If it were to happened this would be the second time TPG Capital, the American private equity firm has sought to restructure its businesses with Prezzo Restaurants being the other.
Impairments on fixed assets and leases, as well as restructuring costs, saw Poundworld slip to a £17.1m pre-tax loss for the year to 31 March.
Poundworld was run by Mr Edwards who sold to TPG Capital for £75m and now runs Poundstretcher.
The company has opened a distribution centre in west Yorkshire which consolidated its logistics functions into a single 500,000 square foot facility.
Poundworld has also expanded its product range in a bid to keep pace with rivals.
Budget retailers have become popular with investors pricing competition has intensified. Aldi and Lidl have been expanding fast in the grocery sector and Primark has been doing very well in the clothes business.
The question remains really as to whether the landlords will start getting a bit fed up with all the requests to reduce rents and agree CVAs. What choice do they have?