Somebody bought Poundland’s £30m ($40m) loan for a pound ($1.30). Then, by most accounts, they wanted the full £30m back before anyone was allowed to rescue the business.
That’s the short version of how Poundland, a chain with around 12,000 staff, ended up heading into administration after filing on 29 October. Gordon Brothers turned down a solvent offer from Martin Property Group, and the loan was said to be one of the sticking points. The protection from creditors runs out on Thursday. Sales were reportedly up 8.4% in the three weeks to mid-October, with Christmas round the corner. You don’t need to be a turnaround specialist to find that timing a bit odd.
The suppliers certainly do. Plenty of them suspect the warehouses were filled to the rafters just before the filing. It’s only a suspicion, but once your suppliers think like that, the trust has gone. One of them has said he won’t ship to anything owned by Gordon Brothers or Modella again unless he can insure it. MPs have summoned Gordon Brothers to explain themselves next week. I’d buy a ticket.
Now look at Japan.
Toys “R” Us Japan filed for civil rehabilitation on 1 October, owing about ¥13.2 billion ($90m) after years of losses and a birth rate that won’t stop falling. The same day, the owner of Don Quijote agreed to take the lot, with more than 150 stores, the brand and most of the debt. Bridging finance was already in place, so the shops could keep buying stock and paying staff while the court did its job. The plan is to triple the range and go after young adults and tourists, instead of waiting for families who aren’t having children.
Anyone who has walked into a Don Quijote knows it’s organised chaos, stacked to the ceiling. Whether that works for toys, I honestly don’t know. But somebody looked at a failing toy chain and saw a business worth running, not a carcass to pick over.
I’m paid on commission. When a retailer goes bust owing money, the factory loses its stock, I lose my fee, and nobody at the creditors’ meeting asks how the agent is getting on. I also know what it’s like to watch people with spreadsheets decide the future of a business I built. So forgive me if I’m not entirely neutral on this one.
Same industry, same autumn. In Japan the shops stay open and the orders keep coming. In the UK, the people who made and shipped the goods are queuing behind an owner who paid a pound for the debt.
If you supply UK discount retail, check who owns your customer before you celebrate the order. Some people’s idea of a rescue is worth exactly what they paid for the loan.
