Poundland & Dealz Owner Reports 'Resilient Peak Trading'

The fast-growing pan-European variety discount retailer, Pepco Group, owner of the PEPCO and Dealz brands in Europe and Poundland in the United Kingdom (UK), today reports a trading update for the first quarter ending December 2020.

Group Overview

Pepco Group continued to trade resiliently and make strong strategic progress in the first quarter – which represents approximately one third[1] of full year revenue and contributes a more significant proportion of earnings – despite the impact of significant Covid related lockdown restrictions on consumer behaviour impacting many key operating territories. Trading stores[2] performed strongly delivering 5.5% like-for-like (“LFL”) growth, similar to recent historic levels, clearly demonstrating both the continued strength of the business and proposition and its ability to rebound quickly when Covid related restrictions were previously lifted and will eventually be in the future.

Strategic progress included increasing the size of the store portfolio while strengthening the customer proposition in all brands. PEPCO added 87 new stores in both Central and Eastern Europe (CEE) and Western Europe (WE) and enlarged or relocated a further 18 stores, including opening further new stores in Italy, its first Western European market, and opening the first stores outside the EU in Serbia. Each of these countries is trading measurably ahead of expectation. The roll-out of the Dealz format continued in Poland, Republic of Ireland and Spain.

318 existing stores were updated through store conversion programmes in both PEPCO and Poundland, including 38 refits in Poundland which serve to introduce both a chilled and frozen proposition alongside the roll out of new price points to all categories. The acquisition and integration, in the quarter, of Fultons Foods adds significantly to Group capability in this key expansion category of frozen food.

Trading Stores: Like-for-Like Revenue

Trading stores, that were open for the full duration of any week, performed positively in the quarter delivering LFL growth of 5.5% against a challenging comparative of 3.9% in 2019. 

PEPCO

As a non-essentials retailer, PEPCO was most impacted by Covid related closures with 3,273 (c 12%) of trading weeks across the quarter lost to full closure and with periods of full country closure, primarily in November and late December impacting Czechia (six weeks) and Slovenia (seven weeks). Stores not impacted by Covid closure, traded strongly delivering LFL growth of 6.6% consistent with that delivered in the first quarter of FY20, underpinned by continued investment to strengthen the customer offer.

Poundland / Dealz

As an essential retailer, Poundland was able to trade throughout the quarter, albeit experiencing significantly reduced footfall as our customers sought to both consolidate their shopping activity and avoid shopping centre or high street locations, where the majority of our stores are located. In the context of a volatile trading environment, trading store LFL growth of 4.3% is considered likely to have resulted in market share gains in the UK, providing further evidence of the successful change programme the Poundland brand is undertaking.

All Store Revenue Performance

Group Summary

Revenue growth, on a constant currency basis of 9.1% (reported 3.9%), reflects the ongoing expansion of the Group’s PEPCO and Dealz formats where, at the close of the quarter, the Group traded from 3,218 stores, an increase of 14.6% over the year and LFL of -2.1% impacted by store closures, enforced in Europe and voluntarily in the UK, which primarily fell into November and late December.

PEPCO

PEPCO expanded its store portfolio by over 15% year-on-year, opening 87 net new stores in the quarter with an expectation of opening around 300 stores in the full financial year. In addition, it upsized or relocated a further 18 stores. Recognising the significant future store capacity in all the territories that it operates, PEPCO opened stores in the quarter in all of its’ 12 existing territories, with these stores trading collectively ahead of expectation.

Poundland / Dealz

Poundland’s revenue benefited from the continued strong performance of the PEP&CO clothing brand, which is present in 342 stores, and the continued extension of product ranges to price points above and below the £1 anchor price point. This included the successful launch of a widened Homewares proposition, under the PEPC&CO brand. Multi-price participation increased to 23.2% of revenue (FY20: 14.1%).

The mainland European Dealz business continues to develop positively, having built the necessary confidence in both the customer proposition and the business model economics to accelerate the store roll-out programme. In the quarter, 18 Dealz stores were opened, increasing the portfolio by 19% versus the year-end position to 114. Our intention remains to open up to 70 new stores in the full financial year.

Cash and Net Debt

The Group continues to be strongly cash generative and maintained all of its targeted growth investments across the quarter. Closing cash of €548m (FY20: €392m) and net debt of €187m (FY20: €332m) reflect continued underlying business growth and actions agreed with key suppliers that enhance the Group’s working capital cycle.

Commenting on the results, Andy Bond, CEO Pepco Group, said:

“It is pleasing that once again our disciplined adherence to our clear growth strategy combined with a focus on day-to-day retail execution has allowed us to successfully navigate a turbulent trading environment. Our revenue performance clearly signals the strength of each of our retail brands and customer offers and our resilience to short-term Covid disruption.

“We anticipate that the consumer backdrop will remain challenging in the short-term. However, with our established growth strategy, centred on significant future store expansion within a structurally advantaged discount retail segment, and strong financial base, we believe that our future growth opportunity is greater than a year ago. Accordingly, we remain confident about our prospects for continued growth across Europe in the balance of the financial year and beyond.”

Source : Pepco Group

Image : nrqemi / Shutterstock.com 1223281819

For all the very latest news and intelligence on the UK's largest home improvement and garden retailers, sign up for the Insight DIY weekly newsletter.