European discounter Pepco Group today reported a 2.5% fall in first-half same-store sales in a challenging trading environment but said margins were recovering.
Pepco, which also operates Poundland and Dealz, issued two profit warnings in September and October saying it would slow down its store opening programme.
It said at the time it was switching focus to rebuilding profitability.
Pepco announced it was leaving the Austrian market in February of this year.
'Signs Of An Improved Performance'
The company said on Thursday group revenue was €3.2 billion in the six months to 31 March. This indicated a rise of 11% on a constant currency basis, and reflected the opening of 289 net new stores.
The group also announced the appointment of Stephan Borchert as chief executive effective from 1 July.
It reported that Andy Bond will remain in his role as executive chair until 1 October, after which he will become non-executive chair.
Speaking about the report, Bond said, “While the trading environment remains challenging, we are encouraged by signs of an improved performance in some of our core Pepco Central and Eastern Europe markets – a key geographical region for the group – during the second quarter.”
He told Reuters that he was confident of a return to like-for-like sales growth by the end of the 2023/24 financial year.
Encouraged
Pepco was encouraged by year-on-year improvements in gross margins, which it said were driven by easing input costs.
This included commodity and freight, more favourable currency rates and better buying margins.
It noted that disruption in the Red Sea continued to impact surcharges in freight rates and shipping delays.
However, it said it was “managing” product availability and did not expect much impact on gross margins in the second half.
Shares in Pepco were up 2.6% in early trading.
The group has maintained its plan to open 400 net new stores in 2023/24.
