Poundland’s theft clampdown was hinted at in its results. What else is on the way?

Poundland is getting tough on thieves, deploying more undercover guards, giving security the backing to detain suspects and rolling out body cameras.

It is its “biggest ever investment” in tackling retail crime, Poundland said as it announced the measures on Monday. However, it is also an investment the retailer needs to make, and one that could be seen coming in its annual results, which revealed the cost of shrinkage had risen 30% in two years, to over £40m.

It is not the only thing that could be seen coming from the results, which also revealed a “weak performance” had led to a £650m writedown for Poundland, driving a £560m loss for parent Pepco Group in the year to 30 September.

“Swift action to get Poundland back on track” would focus on “a return to Poundland’s strengths”, said Pepco Group CEO Stephan Borchert as the results were announced in December. Less than a month later, Poundland started the new year by dramatically increasing the number of products costing £1 or less, in a reminder of how it got its name.

It’s not the first time since the cost of living crisis that Poundland has made some noise about more lines costing £1 or less, but this time it seems more serious: the number last week rose from 1,500 to 2,400, about half of its total core range, from batteries to bleach and even general merchandise such as table mats. It had already reduced everyday essentials like bread and milk in December.

The latest move comes after eight years of steadily shifting away from the £1 price point, and inflation means it is not an easy route to take, as newly appointed commercial director CJ Antal-Smith reminded us. “According to the Bank of England, Poundland should be £2.42-land today, based on the way inflation has risen since it opened its first store 35 years ago,” she said.

So, given Poundland seems willing to tear up the script to get back on track, what can else can we see coming from the detail of the annual results?

No more big Poundland stores

This is a dramatic u-turn for Poundland, which been making larger stores in retail parks a pillar of its retail transformation strategy for about five years now. Since the pandemic, announcement has followed announcement of Poundland’s “biggest ever store”, at 15,000 sq ft, then 18,000 sq ft, then 19,000 sq ft, as it moves in on retail parks after the collapse of retailers such as Topshop.

Around this time last year, a Poundland spokesman told The Grocer it was particularly pleased with the performance of its larger stores, and on the lookout for more, as part of its biggest-ever store opening programme.

Not any more. “It has become clear, however, that larger stores are not where Poundland delivers best performance, and we will be much more focused on any future store openings being of a size of around 700 sq m (7,500 sq ft), which is optimal for the offer,” said the results.

Fewer openings, closures and refits

We can also expect no more talk of ‘biggest ever store opening programmes’ or ‘estate transformation’ for the time being.

It’s an area where Poundland has been very busy – too busy, it seems. Having agreed to take the leases to about 70 former Wilko units in 2023, Poundland opened 84 stores during in its 2024 full year. It also closed 71 stores in the period, including a number that were near the newly acquired Wilkos.

It was a “a higher-than-normal store opening programme”, driven by the conversion of 46 former Wilkos in the period, said the results. But the performance of the Wilko conversions was “mixed”, with “some stores operating above expectations” and “others requiring further investment in order to bring the look and feel and product proposition in line with the Poundland offer”.

As revealed by The Grocer last April, Poundland closed nine former Wilko stores within months of opening them, as part of what it called a “constant review” of its estate.

The results make clear a more cautious approach to store rotation and refits is in the offing. “There will be greater scrutiny of new Poundland store openings, given the reduced profitability the business has faced during 2024. New stores will be opened only where we are confident of delivering an appropriate return on investment through delivery of our core offer to our customers.”

A ‘fundamental rethink’ and ‘significant’ changes in stores 

The biggest drag on Poundland’s performance has been a transition to sourcing clothing and general merchandise at group level, a process that completed early last year.

“It became clear as the year progressed that both the planning and execution of this implementation had shortcomings, with gaps in clothing and GM product for the UK customer,” said the results.

The whole point was to deliver economies of scale and lower prices – but this made it even harder to match previous revenues.

“While customer reaction to the new Pepco clothing ranges saw positive feedback – notably around value – the product offer did not fully replicate the previous breadth or depth of Poundland’s men’s and women’s ranges and coverage across sizes, leading to lower like-for-like revenues,” said the results.

A “fundamental rethink of approach is underway”.

Poundland stores are this week already clearing out unsold clothing in a 70%-off sale, but bigger moves are on the way.

“While we have taken remedial steps to correct sizing and some of the other range issues… it is clear that Poundland will need to take significant steps in order to recover performance and meet customers’ needs and expectations.”

In December, Borchert said: “We will also closely evaluate Poundland’s overall competitive positioning and requirements for future success as an fmcg-led format.” 

More information on the “significant steps” may come in the quarter one trading update on Thursday.

But it seems reasonable to expect we will see a simplification process, in which only products and ranges that can align with Poundland’s early concept – and price point – are safe.