A month on from when Pepco Group sold its Poundland chain, new figures highlight the troubles of the struggling discounter.
During Pepco Group’s third quarter to 30 June, Poundland’s revenues plummeted 10.3% to €347m, with like-for-likes falling 7.1%. The chain was sold to investment firm Gordon Brothers for a headline figure of €1 on 12th June.
Since then, it has been revealed that the discounter will be closing at least 68 of its nearly 800 stores as part of a turnaround plan to revive its fortunes. Two distribution centres have also been earmarked for closure, and Poundland is seeking rent reductions from landlords. It also plans to stop selling frozen food and reduce its chilled food offer, while ceasing its e-commerce operations.
Excluding Poundland, Pepco Group’s operations in Europe saw third-quarter revenue increase by 7.7% to €1.1bn, with like-for-like growth of 2.6%.
The company opened 45 new Pepco and Dealz stores during the period, largely representing Pepco openings in the CEE region. Overall, the ‘New Pepco Group’ now operates 4,276 stores.
The Poland-based company stated that the sale of Poundland “improves the group’s revenue growth and drives higher profitability and margins, with stronger cash generation”.
For the full year, it expects the Pepco chain to deliver revenue and underlying EBITDA growth in the high single digits and an EBITDA of around €30m for its Dealz fascia.
Pepco Group Chief Executive, Stephan Borchert, commented: “Our results in Q3 reflect our continued strategic execution across ‘New Pepco Group’ and actions we have taken to drive more consistent performance.
“This outstanding performance at Pepco – the engine of the group’s earnings potential – was driven by improved availability, a focus on price leadership of its best-selling items and improved product ranges, which supported our continuous improvement of LFL sales and volume growth in the period.
“The group’s continued momentum, its compelling underlying earnings potential, strong cash generation and the board’s belief that the current share price materially undervalues its future prospects underpins today’s decision to commence a share buyback programme of up to €50m, to further enhance shareholder returns.
“Having completed the sale of Poundland in June 2025, New Pepco Group now has a simpler structure and we look forward with confidence to capitalising on the numerous growth opportunities for the Pepco brand, as part of our ambition to become one of Europe’s most successful discount retailers.”
NAM Implications:
- Having sold Poundland, Pepco can focus on optimising its residual assets.
- Meanwhile, Poundland’s new owners will cut-to-fit given its diminishing sales.
- i.e. Sell off sufficient shops and physical support to a point where what remains is breaking even.
- Providing a basis for increasing sales and thus providing a base for driving profitability.
- But the fact remains that the business model that relies on £1 shelf prices has been sidelined by inflation.
- In that, what was £1 at Poundland day 1…
- …now needs to be priced at £3+, to reflect market realities.
