Fri, 27 Apr 2018 | ADMINISTRATION
Budget retail chain Poundworld could shut around one third of its stores as it considers pursuing insolvency.
According to the discount retailer, it is now considering a Company Voluntary Arrangement (CVA), a form of insolvency, to allow it to reduce its rent payments and close around 100 of its 355 stores.
Currently owned by private equity company TPG Capital, Poundworld is expected to reveal more information about its insolvency in May after which landlords will be required to vote on whether they agree or disagree with the proposal.
Poundworld was originally set up by Chris Edwards in the 1970s, who is believed to have made around £75 million from selling the firm to TPG. Now the company is forced to compete with rivals including Poundland and Poundstretcher, and has expended its range of products in a bit to remain a market leader.
The proposals put forward by TPG mirror those it used in at attempt to save another of its companies, Prezzo. The Italian-themed restaurant chain recently received backing from 88 per cent of its creditors for a CVA. A total of 94 of Prezzo's stores are set to close as a result of the insolvency.
Commenting on the announcement, Richard Lim, chief executive of Retail Economics, suggested that Poundworld is suffering from the same issues plaguing many other highstreet names, many of which have recently entered administration or been sold as a result.
"The toxic mix of rising costs, softer consumer demand and the acceleration of seismic structural shifts are pushing many business models to breaking point," he said.
"Stuck with too many stores, inflexible leases and spiralling operating costs, the business is in desperate need of restructuring."
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