Pepco Q1 revenues hit €1.9bn as it warns on Red Sea disruption
On a brand basis, Poundland LFL grew by +0.9%, with a strong peak Christmas performance driven by demand for FMCG, offset by a weaker performance in clothing
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The Pepco Group has posted record Q1 revenues of €1.9bn (£1.63bn) up 10.8% and boosted by new openings.
It comes despite group like-for-like (LFL) revenues declined 2.3% in Q1, but with an improving trend during the quarter.
Pepco LFL revenue declined 3.7% against a tough comparative period where LFL sales were up by +20% in Q1 FY23.
On a brand basis, Poundland LFL grew by +0.9%, with a strong peak Christmas performance driven by demand for FMCG, offset by a weaker performance in clothing. Meanwhile, Dealz LFL declined by 4.6% driven by planned lower stock availability in general merchandise (GM) categories ahead of a transition to Pepco-sourced GM.
Looking ahead warned that while it continues to have line-of-sight on potential further gross margin improvements over the coming quarters, it notes that the current situation in the Red Sea is leading to “elevated spot freight rates and delays to container lead
times”.
It added that the majority of its freight costs are contracted until the end of Q3, but the business is facing “additional surcharges” from carriers in relation to the longer shipping routes being taken.
Andy Bond, executive chair of Pepco Group, said: “The group delivered record revenue in its first quarter. Whilst the Pepco brand saw LFL revenues down across the quarter against a tough comparative period last year, it was encouraging to see the LFL trend improve over the three months in its core CEE markets. Poundland continued to perform robustly in Q1, boosted by strong sales of FMCG.
“I am pleased that we achieved a 200 basis point year-on-year improvement in gross margin during Q1, and this positive trajectory is expected to continue over FY24 – notwithstanding the potential impact of external factors beyond our control, such as industry-wide supply chain disruption.”
He added: “We are making good progress against our renewed strategy, as outlined in October last year, to improve profitability and cash generation in our core established business, while delivering more measured profitable growth. We are acting decisively at pace – we have initiated a more targeted store opening programme, paused the new look refit programme, and stopped activities that will not produce appropriate returns.
“Looking ahead, the group has a market-leading customer proposition, strict focus on returns, and proven profitable store model that makes the leadership team confident in delivering future success across our core European markets.”
