Fashion boosts Poundland as Pepkor Europe sales rise in Q1

By

Sandra Halliday

Published
Mar 1, 2019

Retail group Pepkor Europe saw its sales rising strongly in the three months to December 29 with its PepCo operation driving the increase, even though Poundland sales were just about flat.

Overall company sales rose 14.6% to £852.2 million but that divided down into very different performances from its UK and mainland Europe operations. It owns PepCo in Europe and the brand’s sales soared nearly 37% to €477 million, partly helped by a 20%+ rise in store numbers during its fiscal first quarter (it now has almost 1,600 locations). The smaller European Dealz chain also “continued to develop very positively”.

But the UK budget chain Poundland’s sales edged up just a tiny 0.6% to £457.6 million, with like-for-like sales up only 0.4%, although management said that it was pleased with the outcome at both divisions given how tough the comparisons were and how weak UK retail is at present.

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Of course, Poundland might have been even weaker had it not been for its major move into fashion. The chain now has fashion in over a third of its Poundland stores (in around 300 of them) and clothing contributed to its growth.

Andy Bond, chief executive of Pepkor Europe, said of all this: “A further quarter of strong revenue growth in each of the group’s brands is a reflection of our clear growth strategy, centred currently on PepCo, an unwavering focus on execution and our market leading positions within a core discount retail segment that’s increasingly attractive to a wide range of customers. Our positive early progress in Dealz provides further growth potential.

"With a clear strategy in place and a strong financial base we remain excited about our prospects for continued growth across Europe in the balance of the financial year and beyond.”

But analysts weren’t particularly impressed by the Poundland figures, with GlobalData’s Hannah Thomson pointing out that the company benefited from the collapse of British pound shop rival Poundworld last summer, “which paved the way for Poundland to open stores in 13 new locations [and] makes these results appear slightly underwhelming.”

She also said that even weaker consumer confidence in the UK should “play to Poundland’s strengths, as it stands to benefit from consumers trading down.”

But it seems that with Poundland’s comp sales up only a little and rival B&M’s down 1.6% in the same period, “consumers appear to have traded up or shopped less with the discounters, at least for the festive season.”

She was also less impressed with the Pep&Co fashion performance, noting that its figures weren’t broken out separately and that its “rollout appears to have slowed.” She said: “Though Pep&Co ‘shop-in-shops’ are now in approximately 300 Poundland stores, this is an increase of only 25 stores since June last year.”