Poundstretcher will likely have no choice but to file for administration if a restructuring plan is not approved, the High Court has heard. The discount retailer, which operates nearly 300 stores and employs 3,000 staff across the UK, was acquired by US investment firm Fortress in 2024 for an undisclosed sum. Fortress also owns Majestic Wine.
Financial difficulties and restructuring plan
In March, the company announced plans to ask landlords for significant rent reductions across its store estate to secure its long-term future. However, it insisted there would be no store closures or job cuts. At a hearing on Wednesday, lawyers for the company stated that without approval of the restructuring plan, Poundstretcher would have insufficient funds to meet its £2.8 million funding requirement due in the week beginning June 28. This sum is expected to rise to £9.7 million in the week commencing July 26.
Tom Smith KC, representing Poundstretcher, submitted to the court: "In those circumstances, the directors of the plan company will likely have no choice but to file for administration. In the administration, the administrators are anticipated to continue trading for a limited period while available liquidity is used to support a sale of the stock."
Restoring financial stability
Smith explained that the restructuring plan aims to restore Poundstretcher to financial stability and enable the implementation of a turnaround business plan. He noted that since 2020, the group's performance has deteriorated due to subdued customer confidence, rising operating costs, and inflationary pressures. The company has engaged Teneo as financial advisors to prepare the turnaround plan, which includes shifting the product mix to include more well-known household brands and optimising the store portfolio by opening stores selectively in higher-footfall locations.
Court proceedings and next steps
The hearing in London was a convening hearing, where the judge was asked to permit meetings of creditors to vote on the restructuring plan. Mr Justice Hildyard ruled that he was content for the matter to proceed to creditor meetings on May 26. If creditors vote in favour, the plan will return to the High Court for final approval at a sanction hearing scheduled for June 4.
