Pan-European discounter Pepco Group has cut its profit guidance for Poundland, its UK operation, ahead of a possible sale of the retailer.

Pepco’s interim results for the six months to 31 March, released today (22 May), show strong performance from the Pepco and Dealz brands, but weak sales from Poundland.

Revenues at Poundland fell by 6.5% during the period, compared to a 9.3% increase at Pepco and a 13.8% increase at Dealz. Sales at Poundland were £830.8m in the six months to 31March. It closed 20 stores during the period.

Poundland is now expected to deliver underlying EBITDA of between £0 and £16.8m, compared to previous guidance of £42.1m to £59m, for the full year.

The group blamed the downgrade on “highly challenging trading conditions, which have been further impacted by clearance of old stock and product availability issues.”

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Pepco is in the process of conducing an auction to sell of Poundland and hopes to complete this by the end of September. It is understood that private equity firms Gordon Brothers, Hilco Capital, Endless and Modella Capital are among shortlisted bidders.

Pepco chief executive Stephan Borchert said, “At Poundland, trading remains challenging, which is reflected in a profit outturn below expectations for H1 and a weaker outlook for the full year.”

He said that Barry Williams, who was reappointed at Poundland managing director in March this year, is driving a recovery plan to focus on the brand’s traditional core strengths.

“We continue to undertake a process to separate Poundland from the group, as part of a wider strategy shift away from FMCG, with a divesture expected before the end of FY25,” said Borchert.