Pepco Group Navigates Q1 Challenges with 2.3% Drop in Like-for-Like Sales
In the face of persistent challenges, Pepco Group disclosed its first-quarter revenues, revealing constant currency revenue growth of 11%, reaching 1.9 billion euros compared to the previous year. However, the group reported a 2.3% decline in like-for-like (LFL) revenues.
Within the portfolio, the Pepco brand experienced a 3.7% drop in LFL revenue, while Poundland showcased a more positive performance with a 0.9% LFL growth. Poundland’s resilience was attributed to a robust Christmas season driven by strong demand for fast-moving consumer goods (FMCG), although the clothing segment faced challenges. Dealz reported a 4.6% decline in LFL revenues.
Despite challenges, the company achieved a notable 200 basis point recovery in gross margin, primarily influenced by Pepco.
Andy Bond, the Executive Chair of Pepco Group, commented on the results, stating, “While Pepco brand LFL revenues faced challenges in the quarter, we observed an encouraging improvement in LFL trends over the three months in its core Central and Eastern European (CEE) markets. Poundland continued its robust performance in Q1, buoyed by strong FMCG sales.”
Looking ahead, the company remains cautiously optimistic about the trading conditions for the remainder of 2024, acknowledging the persistently challenging landscape across Europe. Bond highlighted the positive trajectory with a 200 basis point year-on-year improvement in gross margin during Q1, expressing confidence that this trend will persist throughout FY24. However, external factors such as industry-wide supply chain disruption could potentially impact these positive developments.
During the first quarter, Pepco Group expanded its footprint by opening over 200 net new stores. Notably, 54 Wilko conversions in the UK contributed to this growth. The company is set to open at least 400 net new stores in FY24, excluding the one-off Wilko conversions.
Pepco brand led the expansion with 127 new store openings, primarily in the CEE region, including 39 net new stores in Poland. Poundland opened 77 gross new stores, mainly reflecting the 54 Wilko conversions. Dealz Poland contributed by opening 26 new stores in the period, bringing its total store count to 309 across Poland.