Poundland parent Pepco’s profits drop as it ramps up European expansion

Pepco Group reported a 30.8% decline in underlying EBITDA to €229m (£198.2m) in the year to September 30, which the business attributed to Covid-19-related closures across Central Europe as its Pepco fascia, which sells clothing and homewares, did not qualify as an essential retailer.

The retail group’s revenue rose 3% year on year to €3.5bn (£3bn) during the period.

Group chief financial officer Nick Wharton hailed the group’s resilient performance in the year, noting that 1,200 stores, accounting for more than 40% of Pepco’s global estate, had to be shuttered at some point over the financial year due to various local lockdowns.

In the five months to the end of February, prior to the start of lockdowns as a result of the pandemic, Pepco’s underlying EBITDA was up 17.8% year on year, while revenue was up 14.4% and 5% in total and like-for-like terms respectively.

On this basis, Wharton said the group is confident that its discount proposition will continue to resonate with shoppers strongly in the post-pandemic landscape.

Pepco has recently launched in Italy, marking its first foray into Western Europe, and plans to launch the fascia in Spain later this year.

“We can sell products that are of a standard Western European shoppers expect, but at prices that are astonishing to those customers – so far, Italians are spending twice as much per shop as they do in Central Europe currently,” says Wharton.

The retail group, which also recently launched its Dealz fascia in Poland, aims to open 400 stores per year across the two brands.

Although there are no plans to expand its store estate in the UK, Wharton says Poundland is rapidly adapting its proposition to incorporate a greater offer for frozen and chilled food following its acquisition of Fultons Foods last year.

The brand has added a frozen and chilled grocery section to 100 of its shops to date, with a further 300 set to be converted in the coming months.

Pepco Group chief executive Andy Bond said: “With a strengthened proposition and more customers than ever across Europe being attracted to the discount sector, we believe that our future growth opportunity is now greater than a year ago. 

“We now view our addressable market as being the entirety of Europe and having entered Italy and Serbia – our first Western European market and non-EU country respectively – we will also launch Pepco in Spain later in 2021, having identified a significant opportunity there after extensive due diligence. 

“We anticipate that the consumer backdrop will remain challenging in the short term. However, with our strong financial base and established growth strategy within a structurally advantaged discount retail segment, we remain confident about our long-term prospects for continued growth across Europe.”