European discount retailer Pepco Group has reported a 28% rise in first-half core earnings, reflecting new store openings and an improved gross margin, and forecast growth for the full year.
Publication of the results from the Warsaw-listed owner of the Pepco, Poundland and Dealz brands, which issued two profit warnings last year, was delayed by a technical issue in Poland.
It said underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were €487 million ($527 million) in the six months to 31 March, on revenue up 13.8% to €3.2 billion.
Gross margin increased 310 basis points to 43.1% and the group opened a net 289 new stores in the period, mainly in Central and Eastern European (CEE) markets.
'Challenging' Consumer Sentiment
While executive chair Andy Bond cautioned that "consumer sentiment in some of our key markets remains challenging", he forecast underlying EBITDA for the 2023/24 year in the region of €900 million, up from €753 million in the previous year.
Bond said the standout performer in the first half was Pepco's CEE business, where gross margin and store profitability was rebuilt back towards pre-pandemic levels.
But he said Poundland's performance in the UK "was behind expectations", reflecting challenges in changing ranges to Pepco products, "which we are addressing".
Bond said the margin uplift partly reflected a more normalised environment for commodity prices, foreign exchange and freight costs versus the prior year, notwithstanding some impact from disruption to shipping in the Red Sea.
In February, Pepco said it would exit the Austrian market and also reported its Hungarian business had lost about €15.5 million in a phishing attack.
Last month, the group announced the appointment of Stephan Borchert, the former CEO of optical retailer GrandVision, as CEO effective from 1 July.
