Poundland is planning a financial overhaul of the business in a bid for survival, which could see mass store closures and steep rent cuts imposed.

The discount chain has identified hundreds of stores for rent reductions and possible closures ahead of a possible sale, The Telegraph reported.

The retailer was put up for sale in March and the auction has since been narrowed down to distressed investors Hilco and Gordon Brothers.

It is understood that Poundland’s new owner will inherit a radical turnaround plan, spearheaded by managing director Barry Williams.

Under its new plans, the chain is thought to have earmarked between 150 and 200 stores for immediate closure and up to 500 sites for rent cuts. The retailer currently operates over 800 stores and employs around 16,000 people.

It is understood that Poundland plans to impose rent reductions on landlords anywhere between 10% and 50%, while pulling out of agreements on other locations via a court-sanctioned restructuring scheme. Such proposals will need approval from a judge.

The retailer’s new owners are expected to pump between £70m and £100m to stabilise the company as it continues to battle declining sales.

Poundland’s owner Pepco downgraded the chain’s full-year profit guidance last month after “highly challenging trading conditions” led to sales dropping 6.5% to £830.8m in the six months to 31 March.

The company is now expected to deliver an underlying EBITDA of between £0m and £16.8m, compared to the previous guidance range of £42.1m to £59m.

A Pepco Group spokesman told the publication: “The focus of the group and advisers is currently on a potential sale of Poundland. This is an ongoing process and no final decisions have been taken.”

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