Pepco Group, the owner of European discount chains Poundland, Dealz, and PEPCO, has posted robust first-half results and said it is winning market share across all its markets as shoppers seek value amid inflationary pressures.
Over the six months to 31 March, the group’s revenue climbed 18.9% to €2.37bn with like-for-like growth of 5.3% following a second-quarter jump of 12.1%.
Underlying EBITDA was up 7.3% to €347m, whilst pre-tax profit rose 28.5% to €144m.
Performance was helped by a record 235 new store openings and a further 586 renewals of existing stores. At the end period, the group operated 3,696 stores across 17 countries, with it now set to open around 450 net new stores over the full year.
The core PEPCO unit was the main growth driver, with sales up 7.2% on a like-for-like basis. Like-for-like sales in the Poundland/Dealz division rose by 3.3%, with the company noting that the cost of living crisis has led some UK consumers to scale back even on essential items.
“Despite a challenging macro environment, we accelerated our strategy, including our store opening programme, which remains the key driver of value creation for the business,” said Trevor Masters, the group’s new Chief Executive.
“As pandemic restrictions progressively eased, it was also encouraging to see the strong return of customers and the continuation of this into Q3 resulted in the group’s like-for-like sales rising above pre-Covid levels for the comparable period three years ago.”
Meanwhile, interim CFO Mat Ankers noted that it was seeing switching into the value discount channel across its markets.
“We’re growing our price gap to market, that’s what’s happening at the moment,” he said.
By reducing operating costs to offset some of the input inflation, Ankers highlighted that the group had invested €35m to keep a lid on price rises in its first-half period. However, this still dented its gross margin by 137 basis points. “This is a very meaningful and very considered investment that we’re making,” he said.
Masters added: “We have maintained our market-leading position on prices, and through our continued focus on reducing the cost of doing business, we have been able to shield customers from price rises on some of our products at a time of significant inflationary pressure on household budgets.”
The group concluded that it remains on track to meet its guidance for the full year in the absence of any further significant deterioration in the macro-environment.
NAM Implications:
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