Pepco delivers record revenues as it warns on possible Red Sea disruption

In the first financial quarter ending December 31, the value group posted revenues of €1.9bn (£1.63bn) and a constant currency revenue growth of 10.8% year on year.

Group like-for-like revenues declined by 2.3%, while Pepco’s like-for-like revenue declined by 3.7% against a “tough comparative period”.

Poundland’s like-for-like revenue increased by 0.9%, with a “strong peak Christmas performance” boosted by demand for fast-moving consumer goods (FMCG) but offset by weaker performance in clothing.

Pepco opened 203 net new stores during the first quarter, which included 54 Wilko conversions for Poundland.  

The group is “cautiously optimistic” for 2024 but noted that the Red Sea situation is leading to “elevated spot freight rates and delays to container lead times”.

It explained that the majority of its freight costs are contracted until the end of Q3, but it is facing “additional surcharges from carriers in relation to the longer shipping routes being taken.”

It notes that a prolonged issue could impact supply in the coming months. 

Pepco Group executive chair Andy Bond said: “The group delivered record revenue in its first quarter. 

“While the Pepco brand saw like-for-like revenues down across the quarter against a tough comparative period last year, it was encouraging to see the like-for-like trend improve over the three months in its core Central and Eastern Europe markets. 

“Poundland continued to perform robustly in Q1, boosted by strong sales of FMCG.

“I am pleased that we achieved a 200 basis-point year-on-year improvement in gross margin during Q1, and this positive trajectory is expected to continue over FY24, notwithstanding the potential impact of external factors beyond our control, such as industry-wide supply chain disruption.

“We are making good progress against our renewed strategy, as outlined in October last year, to improve profitability and cash generation in our core established business, while delivering more measured profitable growth. 

“We are acting decisively at pace – we have initiated a more targeted store-opening programme, paused the new-look refit programme and stopped activities that will not produce appropriate returns.

“Looking ahead, the group has a market-leading customer proposition, strict focus on returns and proven profitable store model that makes the leadership team confident in delivering future success across our core European markets.”