European discount retailer Pepco Group reported an annual net loss of €662 million, citing a non-cash impairment charge of €775 million for its Poundland business in the UK on a weak performance and outlook.
The Warsaw-listed group, whose shares have fallen 39% this year, said on Tuesday that the Poundland impairment charge was primarily goodwill.
It followed a slump in its performance in the 2023/24 year and a weaker profit outlook for the British variety store chain amid “increasing competitive and cost challenges.”
Poundland saw its like-for-like sales fall 3.6% in the year to 30 September, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 21.5% to €153 million.
It ended the period with 836 stores.
According to the new Pepco Group CEO, Stephen Borchert, Poundland was “impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.
“We are taking swift action to get Poundland performance back on track.”
The group also reported underlying EBITDA – its preferred profit measure – as a whole of €944 million in 2023/24, in line with guidance €900 million and up from €754 million in 2022/23.
Revenue was a record €6.2 billion – up 10.2% – driven by 392 new stores.
It also announced an inaugural full-year dividend of 6.2 euro cents per share.
'Every Strategic Option'
Borchert said that the Group will examine “every strategic option” for its struggling Poundland business to get the retailer “back on track.”
He added that Poundland “continued to face headwinds” in its new financial year, following the stock transition.
He said in an interview, “With the transition to the Pepco ranges, I think the business lost a bit of its DNA, so we are working now as a team there to bring this back.”
Borchert highlight the reintroduction of more products priced at one pound, which reflected a return to Poundland's heritage.
He added that the Labour government's tax-raising budget in October would mean additional costs in the “lower double digit” millions of pounds for the group.
