Pepco has strong first half as new stores prove a hit with consumers
Pepco unveiled its first-half results on Thursday and said that the six months to the end of March saw its core earnings rising 7.3% as new store openings boosted its bottom line.
The pan-European value stores operator – which owns the Poundland/Dealz and Pepco chains – said underlying EBITDA met expectations at €347 million. Profit before tax was up 28.5% at €144 million.
That came as its revenue rose 18.9% to €2.3 billion on the back of 192 new stores for a total of almost 3,700 locations in 17 countries.
Of course, it wasn't all about adding new locations as the company also said that its like-for-like sales growth was strong at 5.3%, supported by a marked improvement in the second quarter when like-for-like sales rose 12.1%.
Yet those new stores were the big story and if we take the closure of 43 Fultons locations out of the mix, the company actually opened 235 of them. Some of these were massive megastores such as the new Poundland locations that it has been opening in the UK, which are particularly significant because they have an enhanced Pep&Co budget fashion offer, with much more space dedicated to clothing and accessories, as well as to beauty.
In Italy, its new stores almost doubled its store footprint in the country by the end of the first half and it’s seeing bigger average basket sizes in that market than in its more mature Central/East Europe markets.
This gives it confidence for other western European countries. For instance, it opened its first Spanish store in April last year and now has 40 locations there with performance ahead of budget. And this April it also opened its first German store with initial trading having been positive.
The company remains on track to meet its guidance for the full year.
Pepco, which is listed on the Warsaw Stock Exchange, said that since the easing of Covid restrictions across all of its key operating territories, its strong performance led by the Pepco chain has continued into Q3.
This was supported by “a positive Easter performance, effective promotional campaigns and customers returning to stores”.
And importantly, this has taken the company’s same-store performance above pre-Covid trading levels.
Tracking performance for a cohort of stores in an eight-week period post-Covid shows average weekly sales at the Pepco chain up by 13.7% on pre-Covid levels. Over the same period, Poundland average weekly sales are up by 4.3%.
The company said that the cost of living crisis is already driving changing shopping behaviour in its markets and with consumers increasingly price-conscious, the company has been working to protect prices while absorbing some of the inflation it's seeing in its own supply chain. This has dented its gross margins somewhat, although it has also found efficiencies within its operations to offset this to a certain extent.
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