Poundland pays the price for 99p Store debacle

The companies' shares crashed by 20 per cent to 222.7p

The 99p Store business was on the verge of bankruptcy when Poundland finally took it over two months ago, according to the discounter’s chief executive.

Jim McCarthy revealed that the £55m takeover of 99p Stores’ delay by the Competition and Markets Authority meant the previous owners stopped paying rent, lost their credit insurance leaving shelves empty and had unpaid goods sitting unclaimed on shipping containers.

The retailer has been forced to change 99p Stores into Poundlands at breakneck speed and hopes to have converted more than 200 by April next year. Around 30 stores will shut down.

Mr McCarthy said: “When they decided to sell, the eye came off the ball. They came into a doom look because they thought it would go through very quickly. 99p never paid their bills on time and to the end were just not paying anyone.”

The decision by the previous owners means 99p Stores are unlikely to have virtually any Christmas stock this year and will leave Poundland nursing a £6m to £8m loss on the business. Around £14m will need to be spent to upgrade the stores.

He added: “It was in a mess and as we expected it to be. We don’t think there’s any value in the 99p Stores fascia.”

However, the boss insisted that the new acquisition would be profitable within three years and would eventually net the business around £25m.

Investors were unimpressed, with shares crashing 20.07 per cent to 222.7p. They were also unhappy at a 2.8 per cent fall in like-for-like sales, and a 26.3 per cent drop in pretax profits for the six months to the end of September to £9.3m.

Sales rose 6.2 per cent to £561.1m. However, high costs in its Spanish Dealz business and wild currency fluctuations also hampered the company.