PEPKOR EUROPE Q1 TRADING UPDATE

Strong peak trading performance in all territories


European discount retail group, Pepkor Europe, owner of the PEPCO and Dealz brands in Europe and Poundland in the UK, today reports a trading update for the first trading quarter ended 29th December 2018.


Revenue

The first quarter, which represents approximately a third3 of full year revenue, saw continued strong total revenue growth, with an increase of 14.6 per cent driven primarily by continued expansion of the PEPCO format in Central Europe.


When set against challenging comparatives and a weak UK consumer backdrop, both the strong like-for-like growth4 in PEPCO and a broadly flat performance in Poundland are pleasing. PEPCO’s growth reflects the continued investment in the customer offer, particularly through a strengthened seasonal and toy offer, and has been achieved despite the disruption caused by the phased introduction of the Polish Sunday trading ban. Poundland continues to outperform the wider UK high street driven primarily by the successful introduction of clothing ‘shop-in-shops’, now present in approximately 300 stores, and measured product range extension to support a broader range of price points.


Store Expansion

At the close of the quarter the Group traded from 2,451 stores, an increase of 12.4 per cent over the year. PEPCO expanded its store portfolio by over 20 per cent year-on-year opening 70 new stores in the quarter. Poundland continues to rationalise its store portfolio in the UK. However, it took the opportunity presented by the failure of a competitor business in summer 2018 to introduce its offer to new catchments through the opening of 13 new stores in the UK and improving the existing offer through three relocations to larger stores. These stores are performing well and delivering strong returns on invested capital.

Reflecting the strong returns on invested capital being achieved, disciplined store expansion will continue in each of our trading formats, including PEPCO’s entry to the Bulgarian market through an initial 10 stores this financial year.


Dealz

The European Dealz business continues to develop very positively and based on confidence from our initial trading performance we intend to open 35 new stores in FY19 increasing the portfolio to approximately 60. Reflecting the Group’s established knowledge of the market, the Polish business, which now operates from 14 stores, shows encouraging early signs and new stores will focus on this territory. Spain continues to perform well delivering positive like-for-like performance, benefitting from a full PEPCO branded fashion offer in six stores.


Commenting on the results, Andy Bond, CEO Pepkor Europe, said:

“A further quarter of strong revenue growth in each of the Group’s brands is a reflection of our clear growth strategy, centred currently on PEPCO, an unwavering focus on execution and our market leading positions within a core discount retail segment that’s increasingly attractive to a wide range of customers. Our positive early progress in Dealz provides further growth potential.

With a clear strategy in place and a strong financial base we remain excited about our prospects for continued growth across Europe in the balance of the financial year and beyond.”


Explanatory Notes:

1. Revenues are unaudited at this point. Foreign currency revenues are translated at the average rate for the month in which they are made.

2. Year-on-year revenue growth on a constant currency basis.

3. Q1 sales as a proportion of the last twelve months of sales, based on Q1 FY19 like-for-like sales and Q2 to Q4 FY18 total sales, in order to minimize the distortion from new store growth.

4. Like-for-like sales growth is defined as year-on-year sales growth for stores open beyond their normal trading anniversary. Reflecting the varying maturity of the Group’s brands and differing trading dynamics between markets this varies between twelve and fourteen months from opening.

5. The PEP&CO clothing brand is now present in approximately 300 stores across the UK and Republic of Ireland and has established Poundland as a top 20 UK volume fashion retailer less than three years after PEP&CO was launched.

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