Trading momentum maintained 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 second quarter and for the half year ended 31st March 2019.
The Group continued to deliver strong total revenue growth, increasing 14.2% year-on-year in the half, driven primarily by continued expansion of the PEPCO format in Central Europe. Recognising the later Easter in 2019, momentum established in the first quarter was broadly maintained with total revenue growth of 12.5% in the second quarter.
PEPCO’s growth reflects continued store expansion and investment in the customer offer both through improved product ranges but also the refurbishment of 34 existing stores in the first half. The strong sales growth has been achieved despite the disruption caused by the extension of Polish Sunday trading restrictions and any impact from the growth in the brands’ store footprint. Poundland continues to outperform the wider UK high street driven primarily by the competitive differentiation from the 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.
At the half year the Group traded from 2,473 stores, increasing, in both the half year and second quarter by, 11.9% as our disciplined but confident roll-out plan continues. PEPCO expanded its store portfolio by 19.3% year-on-year opening 99 new stores in the half including its first two stores in Bulgaria’s second city, Plovdiv. Bulgaria represents PEPCO’s 11th territory and the business remains on track to open 10 stores there by the end of the financial year.
Poundland continues to rationalise its store portfolio, balancing the exit from stores in weaker catchments with carefully selected new store opportunities in stronger locations. In the half year, benefitting from locations released by the failure of a competitor business, Poundland opened 20 new stores in the UK and improved the portfolio further through five relocations to larger stores. These stores continue to deliver strong returns on invested capital.
The mainland European Dealz business continues to trade well and is developing towards the ambition to trade from around 60 stores by the end of the financial year, representing a trebling of stores in the 12 month period. The proposition continues to strengthen in both markets, with a full apparel offer successfully added to seven stores in Spain and a three-category offer (FMCG, general merchandise and apparel) now the preferred model for this territory. The Polish offer has benefitted from the introduction of key local brands that can now be accessed because of the business’ growing scale.
As planned, Pepkor Europe completed the closure of its legacy French operation during the second quarter, allowing the Group to focus resources on the exciting growth opportunity in Spain and Poland.
The development of the infrastructure to support the Group’s future growth ambition continues with construction commencing in the period of a further distribution centre in Hungary to support PEPCO’s continued store expansion.
Commenting on the results, Andy Bond, CEO Pepkor Europe, said:
“Pepkor Europe is rapidly developing into a strong, geographically well balanced pan European variety discount retailer.
The strength of the Group’s trading performance in the first half year reflects our market leading positions within a core discount segment accessed by an increasing number of customers. With the benefit of scale leverage in PEPCO and targeted efficiency improvements within Poundland, profit growth in the half year will be stronger than the revenue growth reported today.
Our trading progress has been matched by our strategic development. We continue to confidently expand PEPCO and our belief that the Dealz format in mainland Europe can provide an exciting additional source of growth is increasing.
Our planned investments in scaleable infrastructure across the Group to secure the growth opportunity available to us, may slow our rate of earnings growth in the second half year, but with a focused strategy in place and a strong financial base, the opportunity for long-term growth across Europe is clear.”
Revenues are unaudited. Foreign currency revenues are translated at the average rate for the period in which they are made.
Pepkor Group total revenue comprises revenue from PEPCO, Poundland Group and Flash, a subsidiary of Pepkor Europe which provides local domestic and international mobile top-up, pre-paid mobile SIM cards, digital content vouchers and gift cards to consumers.
Year-on-year revenue growth for the operating companies is on a constant currency basis.
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.