Following today’s release of The Pepco Group’s figures for the six months ending 31st March 2023; Sophie Mitchell, retail analyst at GlobalData, a leading data and analytics company, offers her view: “FY2022/23 looks bright for the Pepco Group, ending H1 with a strong set of results as it continues to make progress on its bullish expansion plans. The group opened 166 new stores in the period, contributing to its 22.8% revenue growth and it remains on track to meet its target of a minimum of 550 net new stores for the full year. However, the group’s like-for-like (l-f-l) revenue growth was less than half that of the total sales growth at 11.1%, indicating the stiff competition it faces from other discounters. The group has continued to benefit from consumers trading down as they seek out discounters as inflation cuts their discretionary incomes. In the UK, 6.4% of consumers switched to Poundland for their beauty shopping and a further 8.8% switched to the retailer for toiletries, according to GlobalData’s March Consumer Views report. Despite this, Poundland’s l-f-l growth was comparatively low at 4.9%, which could be due to the group’s focus on expansion in mainland Europe.
“Despite benefitting from the cost-of-living crisis in terms of sales, the group’s margins have been affected by cost inflation, resulting in its gross margin falling 0.9ppts from 41.0% to 40.1%. However, with inflation set to ease and due to disintermediation through its in-house direct sourcing arm, the group has not revised its EBITDA outlook for the full year, anticipating growth in the mid-teens.
“The group’s appeal across Western Europe has been reflected in its store openings across the continent. Most recently, the Pepco brand launched in Portugal in May with two stores in the Algarve and it plans to expand across the country over the year including opening stores in Porto and Lisbon. The group also opened its 100th store in Italy, with both Italy and Spain being the fastest-growing Western European territories due to its combined clothing, general merchandise and FMCG offer. The economic conditions look favourable for the retailer for the full year as falling inflation starts to reduce costs, but incomes remain squeezed with mortgage rates, for instance, remaining high. This economic climate combined with its expansion plan across Europe look to be a winning mix for Pepco.”
