Following today’s release of the Pepco figures for the year ending 30 September 2023; Oliver Maddison, retail analyst at GlobalData, a leading data and analytics company, offers her view: “The Pepco Group stumbled in the final quarter of its FY2022/23, with negative like-for-likes (l-f-l) in August and September putting a dampener on its 17.7% group revenue growth for the full year. These full year growth figures are indicative of the strong year that Pepco Group had been experiencing up until Q4, with this leading to the retailer revising down its EBITDA expectations to €750m earlier in the month (although this still represents a 2.6% increase on last year). This relatively poor Q4 performance prompted the resignation of group CEO Trevor Masters and Pepco managing director Anand Patel, as well as broader changes to the senior management structure.
“The slowdown in Q4 was felt most acutely in the group’s Pepco fascia, which saw l-f-l revenues fall by 2.4%, in comparison to a 4.1% rise in Q4 l-f-l revenues for the Poundland Group. Across the year, the opening of a net 556 new stores (which surpasses the whole group’s aim of opening at least 550 new stores) contributed to Pepco’s full year revenue growing by 24.8%, but its full year l-f-l sales saw a more muted increase of 6.3%. Although these new stores buoyed its overall sales figures, they underperformed the group’s expectations, while its core business in Central and Eastern Europe faltered due to a combination of weak demand and persistently low margins resulting from higher costs. Sales of autumn and winter clothing were dampened by the warmer than expected weather across Europe, which has stifled the sales of many fashion retailers. While this could not have been anticipated, the group entered its Q4 with higher than necessary inventory levels with stock bought at higher costs earlier in the year, leading to poorer margins.
“The Poundland Group’s performance has been more consistent, experiencing 5.6% l-f-l revenue growth over the full year, outperforming rival discounter B&M’s UK l-f-l sales growth of 0.7% in the year to 25 March 2023, although it is worth noting that B&M’s Q1 results (ending 24 June) saw significantly stronger l-f-l sales growth of 9.2%. Having opened a net 112 locations in the year, Poundland has expanded its reach, with its total revenue rising by 8.4%. This was supported by the expansion of the retailer’s range across its store portfolio to incorporate a wider FMCG offer and its Pep&Co clothing line, whilst the relaunch of Poundland’s website on 20 September offering low-cost home delivery should boost future sales. Poundland’s aim to reopen all the 71 former Wilko locations it purchased by the end of the year looks likely to be met, with 20 already having been reopened as Poundlands and a further nine being scheduled to be reopened on 14 October. This will set it up well to attract ex-Wilko shoppers and gain market share.”
