Pepco Group, the fast-growing variety discount retailer, which owns the Pepco and Dealz brands in Europe and Poundland in the UK, today reports a trading update for its third financial quarter of FY24 ending 30 June 2024.
SUMMARY
• Year to date ("YTD") 9-month Group revenue of €4,681m with constant currency growth of 10% on last year
• Q3 Group revenue of €1,481m, up 8% year-on-year on a constant currency basis
• Group like-for-like ("LFL") revenues down 4.3% in third quarter:
- Pepco: -2.7% LFL reflecting the earlier timing of Easter, slower-selling older stock that is being traded out through markdown, and supply chain issues impacting availability of new summer stock
- Poundland: -6.9% LFL due to challenges related to the introduction of new Pepco-sourced clothing and general merchandise ("GM") ranges, as previously disclosed, which are being addressed
- Dealz: -7.3% LFL impacted by the transition to Pepco-sourced GM and a highly competitive FMCG market
• Strong year-on-year recovery in gross margin continued into the third quarter, driven by Pepco
• Net new store openings of 326 in nine months to date (37 in Q3); the Group remains on track to open around 400 net new stores overall in FY24
• The Group maintains its previous guidance on the full year EBITDA outlook of around €900m, representing EBITDA growth of c.20% over prior year (FY23: €753m)
The Group continues to make tangible strategic progress towards the objectives set out at our CMD last October including rebuilding profitability in our core Pepco CEE business, with store profitability back at pre-Covid levels, and delivering stronger cost focus and higher cash generation through disciplined capital investment.
Commenting on the results, Andy Bond, Executive Chair of Pepco Group, said:
"We have continued to execute against our strategy to deliver more measured growth - doing less, to achieve more - with a greater focus on improving profitability. The improved gross margin trajectory we flagged at the half-year results has continued strongly into the third quarter, and disciplined capital investment is driving strong cash generation. In line with our strategy, we opened a lower number of net new stores in the third quarter (37), largely focused in our core Pepco Central and Eastern Europe markets where we are delivering the highest returns.
"Group like-for-like revenues in Q3 were below our expectations, partly due to macro factors, such as ongoing supply chain disruption, and company-specific issues, including slower-selling older stock which is being removed through markdown, as well as the transition to Pepco-sourced clothing and general merchandise in Poundland and Dealz. We are actively improving the availability and breadth of our ranges, and expect to benefit from these actions in the new financial year.
"Looking ahead, the Group remains confident of delivering underlying EBITDA of around €900m this financial year and exiting the year with an improved trajectory in LFL sales in our core Pepco business. Our strong customer proposition and market-leading pricing leaves us well placed for future success as Europe's leading variety discount retailer."
SUMMARY
• Year to date ("YTD") 9-month Group revenue of €4,681m with constant currency growth of 10% on last year
• Q3 Group revenue of €1,481m, up 8% year-on-year on a constant currency basis
• Group like-for-like ("LFL") revenues down 4.3% in third quarter:
- Pepco: -2.7% LFL reflecting the earlier timing of Easter, slower-selling older stock that is being traded out through markdown, and supply chain issues impacting availability of new summer stock
- Poundland: -6.9% LFL due to challenges related to the introduction of new Pepco-sourced clothing and general merchandise ("GM") ranges, as previously disclosed, which are being addressed
- Dealz: -7.3% LFL impacted by the transition to Pepco-sourced GM and a highly competitive FMCG market
• Strong year-on-year recovery in gross margin continued into the third quarter, driven by Pepco
• Net new store openings of 326 in nine months to date (37 in Q3); the Group remains on track to open around 400 net new stores overall in FY24
• The Group maintains its previous guidance on the full year EBITDA outlook of around €900m, representing EBITDA growth of c.20% over prior year (FY23: €753m)
The Group continues to make tangible strategic progress towards the objectives set out at our CMD last October including rebuilding profitability in our core Pepco CEE business, with store profitability back at pre-Covid levels, and delivering stronger cost focus and higher cash generation through disciplined capital investment.
Commenting on the results, Andy Bond, Executive Chair of Pepco Group, said:
"We have continued to execute against our strategy to deliver more measured growth - doing less, to achieve more - with a greater focus on improving profitability. The improved gross margin trajectory we flagged at the half-year results has continued strongly into the third quarter, and disciplined capital investment is driving strong cash generation. In line with our strategy, we opened a lower number of net new stores in the third quarter (37), largely focused in our core Pepco Central and Eastern Europe markets where we are delivering the highest returns.
"Group like-for-like revenues in Q3 were below our expectations, partly due to macro factors, such as ongoing supply chain disruption, and company-specific issues, including slower-selling older stock which is being removed through markdown, as well as the transition to Pepco-sourced clothing and general merchandise in Poundland and Dealz. We are actively improving the availability and breadth of our ranges, and expect to benefit from these actions in the new financial year.
"Looking ahead, the Group remains confident of delivering underlying EBITDA of around €900m this financial year and exiting the year with an improved trajectory in LFL sales in our core Pepco business. Our strong customer proposition and market-leading pricing leaves us well placed for future success as Europe's leading variety discount retailer."
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