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Poundland owner Pepco Group has posted a drop in like-for-like sales in its third quarter, amid a sharp drop in organic sales at Poundland.
Overall group sales in the three months to 30 June were up 8% on a constant currency basis to €1.41bn.
However, like-for-like sales were down 4.3% in the quarter, with growth instead driven by new store openings.
In particular, Poundland like-for-like sales were down 6.9% due to challenges related to the introduction of new Pepco-sourced clothing and general merchandise ranges, which the group said are being addressed.
Pepco organic sales were down 2.7% reflecting the earlier timing of Easter, slower-selling older stock that is being traded out through markdown, and supply chain issues impacting availability of new summer stock
Dealz was down 7.3% due to issues with Pepco-sourced GM and a highly competitive fmcg market.
The group saw net new store openings of 326 in nine months to date (with 37 in Q3 itself) and remains on track to open around 400 net new stores overall in its 2024 financial year.
A strong year-on-year recovery in gross margin continued into the third quarter and the group maintained its previous guidance on the full year EBITDA outlook of around €900m, representing EBITDA growth of around 20% over prior year.
Andy Bond, executive chair of Pepco Group, said: “We have continued to execute against our strategy to deliver more measured growth – doing less, to achieve more – with a greater focus on improving profitability. The improved gross margin trajectory we flagged at the half-year results has continued strongly into the third quarter, and disciplined capital investment is driving strong cash generation. In line with our strategy, we opened a lower number of net new stores in the third quarter (37), largely focused in our core Pepco Central and Eastern Europe markets where we are delivering the highest returns.
“Group like-for-like revenues in Q3 were below our expectations, partly due to macro factors, such as ongoing supply chain disruption, and company-specific issues, including slower-selling older stock which is being removed through markdown, as well as the transition to Pepco-sourced clothing and general merchandise in Poundland and Dealz. We are actively improving the availability and breadth of our ranges, and expect to benefit from these actions in the new financial year.
“Looking ahead, the group remains confident of delivering underlying EBITDA of around €900m this financial year and exiting the year with an improved trajectory in LFL sales in our core Pepco business. Our strong customer proposition and market-leading pricing leaves us well placed for future success as Europe’s leading variety discount retailer.”
Morning update
On the markets this morning, the FTSE 100 is up another 0.2% to 8,207.5pts.
Risers include SSP Group, up another 1% to 174.4p, Diageo, up 1.1% to 2,529p and Sainsbury’s, up 1.2% to 264p.
Fallers include Hilton Food Group, down 1.4% to 896p, PZ Cussons, down 1.2% to 103.4p and Naked Wines, down 0.8% to 60.6p.
Yesterday in the City
The FTSE 100 rebounded 0.7% yesterday to rise to 8,193.5pts.
SSP Group jumped 10.4% yesterday to 172.6p after it said it had benefitted from fewer railway strikes in the UK to boost trading in its third quarter.
Other risers included Kerry Group, up 5.3% to 81p, Ocado, up 4% to 362.7p, Bakkavor, up 3.8% to 151.5p, THG, up 3.5% to 68.7p, McBride, up 2.6% to 137.5p and Sainsbury’s, up 2.5% to 260.8p.
The day’s fallers included Naked Wines, down 2.6% to 61.1p, Hilton Food Group, down 1.4% to 909p, DS Smith, down 1.1% to 415.2p, Coca-Cola Europacific Partners, down 0.6% to €66.80 and Britvic, down 0.4% to 1,257p.
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