Jun 23, 2020
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Pepco strong despite lockdowns, expansion continues

Jun 23, 2020

Pan-European value retailer Pepco Group has had a reasonably good first half, despite the coronavirus crisis, as many of its stores were able to operate during lockdowns due to them selling essential as well as non-essential goods.

Photo: Sandra Halliday

The company, which owns Pepco and Dealz stores in Europe and Poundland in the UK, said revenue rose 9.7% to €1.912 billion in the six months to the end of March. But in the five months to February (pre-lockdowns), revenue had risen 14.4% to €1.705 billion. Like-for-like sales rose 5% in the shorter period but only managed a 0.7% rise for the six months as a whole.

The company sells the Pep&Co budget fashion line and this wasn’t mentioned in the report, with it being likely that those stores that remained open were selling more essentials than anything else.

Pre-tax profit fell 16.3% to €89 million, but had been tracking up by nearly 22% in the five-month period.

The firm’s growth has been helped by the expansion of the Pepco brand in central Europe and new Dealz stores in Poland and Spain. In the shorter period, it saw strongly positive like-for-like sales at the Pepco brand (+8.1%), while Poundland and Dealz rose a more muted 2.2%.

However, in the full six months, the pandemic dented its performance with its lower profit reflecting the virus impact in March with significantly reduced store trading footprint and footfall.

Yet the group’s balance sheet remains strong and it said revenue is now returning to pre-Covid levels, with 99% of group stores currently trading, although like-for-likes are negative.

In a statement issued with the results, CEO Andy Bond highlighted the company’s ability to convert sales into profit while also investing in its infrastructure and keeping its prices low.

But while the company came through the coronavirus crisis in better shape than so many other retailers, he also admitted that “the consumer outlook remains uncertain and our plans reflect our expectation of a ‘new normal’ trading environment once we all emerge from the virus”.

Yet he knows it’s likely that “consumer demand for discount retailing will increase in a period of prolonged economic uncertainty and we are extremely well placed to take advantage of this trend”.

The company’s aim is to become Europe’s largest variety discount retailer and its store opening programme so far has put it on the road to achieving this. It had 2,844 sites at the end of the period, compared to 2,473 a year earlier.

Store numbers have risen 15% in the past year and the company is also expanding the size of and relocating other shops. 

But it's not all about spending money with the firm also negotiating reduced rents where it can, particularly in the UK where Poundland has been focused heavily on reducing its operating costs. Bond said that a further 76 Poundland store leases have been renegotiated successfully in the period with rent reductions continuing to be ahead of its 25% expectation.

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