Poundland unable to buy new stock as fears over collapse grow

Poundland is unable to restock its shelves due to its owners blocking access to cash in their bank accounts. The discount retailer is in dire financial straits, with one insider describing it as "running on fumes." It has until Thursday to secure a rescue deal. Gordon Brothers, the American owner, has frozen £50 million, leaving its 600 stores out of stock.

Pressure is mounting on Gordon Brothers, which purchased Poundland for £1 in June, following their rejection of a takeover bid that could have saved thousands of jobs at risk. Poundland has filed a notice to appoint administrators, protecting it from creditors until Thursday. Access to funds was limited due to tension over Gordon Brothers' dual role as both creditor and shareholder.

However, they anticipate funds will ease within the next two days. Despite this, Poundland's boss reported strong sales growth of 11.4% last week, including Halloween, and a profit of £18.1 million in the year to September, a significant recovery from the previous year's £68 million loss. The latest accounts have not been audited.

Gordon Brothers claims the chain remains "challenged and vulnerable to any potential downturn." They have provided £18 million in funding to support the company's trading. Gordon Brothers executives will face the Business Select Committee on Wednesday to probe whether they are pursuing a solvent rescue for the business, employing 11,000 workers.

An observer noted that if Gordon Brothers appears before the committee, they should avoid giving the impression of closing the business. Even if a sale is agreed, there's no guarantee the new owner wouldn't reduce the number of stores. Suppliers prefer an outcome that protects jobs over a piecemeal sale.