Pepco Group reports decline in same-store sales, but profit margins recover

Pepco Group reports decline: Pepco Group, the owner of Pepco, Poundland, and Dealz brands, announced a 2.5 per cent fall in first-half same-store sales amidst a challenging trading environment across Europe. Despite this, the company stated that its profit margins were showing signs of recovery.

The Warsaw-listed company issued two profit warnings last September and October, leading to a slowdown in its store opening programme to focus on rebuilding profitability. In February, it also decided to exit the Austrian market.

For the six months ending March 31, the group reported a revenue of 3.2 billion euros ($3.4 billion), up 11 per cent on a constant currency basis, primarily due to the opening of 289 net new stores.

Pepco Group announced the appointment of Stephan Borchert, former CEO of GrandVision, as its new CEO, effective July 1. Current Executive Chair Andy Bond will continue in his role until October 1, after which he will become a non-executive chair.

Despite the challenging trading environment, Bond expressed optimism, citing an improved performance in some core markets during the second quarter. He expects a return to like-for-like sales growth by the end of the 2023–24 fiscal year.

The group highlighted year-on-year improvements in gross margins, driven by easing input costs, favourable currency rates, and better buying margins. However, disruptions in Red Sea shipping have led to surcharges in freight rates and delays in container lead times, though the group believes this will not significantly impact gross margins in the second half of the year.

Pepco Group remains confident in delivering profitable growth for the current financial year and plans to open at least 400 net new stores in 2023–24. Shares in Pepco were up 2.6 per cent in morning trading, reducing 2024 losses to 28.2 per cent.

(with Reuters inputs)