Discounter Poundworld Files for Insolvency as Woes DeepenBy
TPG Capital-owned chain appoints Deloitte as administrator
Stores to stay in business while accounting firm seeks a buyer
U.K. discount chain Poundworld Retail Ltd. has filed for protection from creditors, adding to the list of casualties in the British retail industry.
The retailer, owned by TPG Capital, has appointed accounting firm Deloitte as administrator, according to a statement Monday. Poundworld employs about 5,100 people and operates 335 stores.
“The retail trading environment in the U.K. remains extremely challenging,” Clare Boardman, restructuring partner at Deloitte, said in the statement. “We still believe a buyer can be found for the business or at least part of it.”
The rise of Amazon.com Inc. and other e-commerce outlets, who account for nearly one-fifth of the U.K.’s retail sales, has sucked demand away from stores in Britain. That’s been compounded by a jump in sourcing costs after the Brexit-induced drop in sterling, as well as increases in staffing costs and commercial property taxes.
TPG bought a majority stake in Poundworld in 2015 and financed an acceleration of store openings amid a boom in demand for discount retailers. But Poundworld, which sells about 8,000 products -- from cans of deodorant to boxes of teabags -- for 1 pound, has been acutely hurt by increased sourcing costs after the Brexit vote.
“Despite investing resources to strengthen the business, the decline in U.K. retail and changing consumer behavior affected Poundworld significantly,” a TPG representative said by email.
Poundworld will remain in business while Deloitte tries to sell all or part of it, the company said in the statement.
The company reported a 17.1 million-pound ($22.9 million) loss before taxes for the year ended in March 2017, according to its latest public financial statement. It had 46.6 million pounds of trade payables and 12.7 million pounds of bank loans, the document showed.
Toys “R” Us Inc.’s U.K. unit and electronics retailer Maplin both collapsed in February, while department-store chain House of Fraser Ltd. announced last week it’s seeking to shut 31 of 59 outlets to stay afloat. The company is following in the footsteps of fashion retailer New Look Retail Group Ltd., baby and childrens-wear retailer Mothercare Plc and floor-coverings seller Carpetright Plc, which have all announced store closures through an insolvency procedure known as a company voluntary arrangement.
— With assistance by Luca Casiraghi