Pepco powers ahead in Europe, despite slower UK sales
Budget-focused European retail group Pepco said on Wednesday that demand remains strong at its Pepco, Poundland and Dealz chains, despite the tough economic backdrop.
The company -- which owns the Pep&Co clothing label -- also said that underlying core earnings (EBITDA) for the year that ended in September should be between €730 million and €750 million on a constant currency basis, as expected. On an actual currency basis, the figures will be €720 million to €735 million.
It added that constant currency group revenue rose 17.4% to €4.82 billion as it opened 516 new stores, which was more than it had originally planned.
But it wasn’t all about costly space expansion as the business also said like-for-like (LFL) sales rose 5.2% during the period with a 15.5% rise in September alone.
It seems that not only is the company not suffering from the tough times at the moment, it's actually benefiting as cash-strapped shoppers seek cheaper products.
Not that all markets are equally strong. The retailer said the European Pepco chain saw 28.7% revenues growth with a 7.4% LFL rise, while the Poundland Group unit (which includes Dealz) was up ‘only’ 5% with a smaller 2.6% LFL increase. Poundland is heavily focused on the UK and Ireland, while Dealz is present in Ireland and Poland. It’s currently converting Dealz to the Pepco banner in Spain and trialling the same process in the Irish market.
As mentioned, the group said demand is holding up well, although inflation is an issue. That said, in the core markets of Poland, Hungary and Romania, inflation in clothing and footwear is running at only around a third of the headline inflation rate.
Both clothing and food remain resilient categories in the Polish and wider CEE retail sector.
The retailer said the outlook across the UK “remains challenging as constraints on consumers’ disposable income continue. That said, our value-led proposition becomes even more relevant in these challenging times and continues to drive new customers to our stores, expanding our target market, across Europe”.
It also said that “supply side conditions in retail have been more positive recently; the price of cotton has fluctuated but remains below recent peaks. There has also been some easing of freight costs, which continue to fall from peak but remain high against historical levels, while supply chains are not yet fully recovered from the pandemic”.
So overall, the business is doing well and continues to expand. It’s launching the Pepco brand in Greece and Portugal in FY23. And it’s trialling its broadest offering of clothing, general merchandise and FMCG under the Pepco banner in a handful of stores in Ireland.
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