Pepco Group, the owner of the Pepco, Poundland and Dealz formats, has reported a slowdown in underlying sales growth in its latest quarter after facing a “challenging” trading environment.
In the three months to 30 June, group sales rose by 12.5% to €1.37bn, although like-for-like sales were up only 2.6% in the third quarter period, having increased 8.5% in the previous quarter.
The Pepco format saw its total rise 15.3% to €831m, driven by a rapid store opening programme. However, like-for-like sales slipped 1.2% after particularly weak trading in April and May. Chief Executive Trevor Masters commented: “The macro-economic climate continues to be challenging, particularly in Central Europe, due to elevated levels of inflation.
“In addition, Pepco’s Q3 growth reflected a period where the business benefited from trading upside in the prior year driven by the influx of people from the Ukraine war into its core markets.”
The group did reveal that trading had recovered in recent weeks, with a positive like-for-like performance in June and the start of its fourth quarter.
Meanwhile, Poundland’s total sales rose 8.6% to €539m, with like-for-likes up 9%. The group noted that this was due to a strengthening FMCG performance after rolling a wider food and drink offering to hundreds of its stores in a bid to compete with the traditional supermarkets.
During the period, the group opened 141 Pepco stores and 18 Poundland/Dealz outlets as part of plans to launch 550 net new stores during its current financial year. It ended the quarter with 4,286 stores.
The group maintained its financial guidance for the full year, with core earnings (EBITDA) growth expected to be in the “mid-teens”, assuming no further significant deterioration in the trading environment.
Masters concluded: “We remain committed to supporting our customers in this challenging environment by maintaining our market-leading pricing. We continue to seek improvements in the cost of doing business and leveraging our in-house direct sourcing arm, PGS, which is a key competitive advantage for the Group. Our focus remains on building a bigger, better, cheaper and simpler business, and we are well positioned to deliver future success as inflationary pressures ease.”
NAM Implications:
- Key that businesses in the New Norm focus on volume growth and like-with-like comparisons…
- …to track realistic and actionable change in performance.
- Retailers adding growth via increases in outlet numbers works if they are realising genuine potential (with the support of stakeholders…)
- That said, discounters are, in the main, best placed for growth in the New Norm.
- And this Pepco Group performance provides a clear indication of how tough conditions are.
- Worth checking whether you are getting your fair share of Pepco’s business…
