Pepco Group Sees Growth; Poundland Trading Remains Challenging

Pepco Group, the fast-growing pan-European variety discount retailer, today reports interim results for the six-month period ended 31 March 2025.1 

SUMMARY 

• Executing at pace against new strategic framework, with strong focus on sustainable value creation

• Group H1 FY25 result reflects strong Pepco and Dealz performance against continued Poundland weakness
  
  
  • Pepco with good performance and growth in revenue of 9.3% and EBITDA IFRS 16 of 11.1%, driven by a year-on-year gross margin increase of 180bps and controlled cost management
    
    
  • Dealz with solid progress and growth in revenue of 13.8% and EBITDA IFRS 16 of 25.0%
    
    
  • As expected, Poundland continued to see challenging trading conditions with revenues falling by 6.5%. An action plan is in place to improve performance
    
    
• Pepco and Dealz positive trading momentum has continued into Q3 to date, with LFL revenue ahead of the 3.6% LFL rate achieved in Q2 FY25
  
  
• Pepco brand expects to deliver FY25 revenue and EBITDA growth in line with guidance of high single-digit growth; Poundland FY outlook weaker than expected
  
  
• Strong balance sheet; net debt (pre-IFRS 16) improved by €150m to €279m at end of H1 (0.6x pre-IFRS 16 leverage ratio)
  
  
• Group opened 101 net new stores during the period leading to a total of 5,049 stores in operation
  
  
• Board continues to actively explore separation options for Poundland business with an exit expected by end of FY25 

H1 FY25 – SEGMENT PERFORMANCE

H1 FY25 – GROUP FINANCIALS

• Group revenue of €3,338m grew +4.3% y-o-y
  
  
• Group LFL revenue declined by 0.7% during H1 FY25, with positive Pepco and Dealz LFL offset by continued challenges at Poundland
  
  
• Gross margin improved 30 basis points (“bps”) to 43.3% for the period, driven by Pepco (+180 bps y-o-y)
  
  
• Underlying EBITDA (IFRS 16) of €460m down 5.5% y-o-y, with strong Pepco EBITDA growth offset by a material decline in Poundland EBITDA
  
  
• Underlying PBT of €117m down 32.8% y-o-y
  
  
• Poundland non-cash impairment charge of €234m (primarily goodwill and brand asset related), following a continued deterioration in trading during the first half and weaker outlook for profitability
  
  
• Strong balance sheet and liquidity profile; net debt at end of H1 FY25 was €279m (pre-IFRS 16), representing 0.6x LTM EBITDA (pre-IFRS 16) leverage, well within the Group’s financial covenants 

Note:

• Numbers above based on continuing operations unless stated otherwise.
• Austria is classified as a discontinued operation following the Group’s exit of Pepco Austria in H1 FY24. 

Commenting on the results, Stephan Borchert, Chief Executive Officer, said:

“The Pepco brand continues to make good progress, delivering solid high single-digit revenue growth in H1 and a continued positive like-for-like sales trajectory. Pepco Western Europe’s double-digit LFL performance is an encouraging signal for the continued improvement of this region. We have started to implement our strategic initiatives outlined at the Capital Markets Day in March 2025 and we are pleased with delivering double-digit EBITDA growth at Pepco, reflecting disciplined margin management. Dealz Poland also continues to perform well with good growth across both FMCG and GM categories. 

“At Poundland, trading remains challenging, which is reflected in a profit outturn below expectations for H1 and a weaker outlook for the full year. Barry Williams, who was re-appointed as Poundland Managing Director in March 2025, and his team are actively driving a recovery plan to help turn around the business by refocusing on its traditional core strengths. We continue to undertake a process to separate Poundland from the Group, as part of a wider strategy shift away from FMCG, with a divesture expected before the end of FY25.

“Our core focus remains on Pepco as the single future format – and driving force – of the Group. I am encouraged by Pepco’s performance so far in FY25, with a strong uplift in gross margin. The business has delivered consistent LFL sales progress and this trading momentum has continued into Q3 to date. Our relentless efforts to strengthen our price leadership position and customer experience have driven a strong increase in transaction volumes.

“We are at an early stage of our value creation programme and there remains a lot to do. But our transformation is on track – and I am confident that the business has the right foundations to meet our ambitions of becoming one of Europe’s most successful discount retailers, focused on driving customer satisfaction, profitable growth and shareholder value.”

CURRENT TRADING

Pepco and Dealz are sustaining their strong performance, delivering positive LFL sales growth in the Q3 period to date (ahead of Q2), which although flattered by Easter timing, highlights good trading momentum for Pepco in particular which had already delivered positive LFL sales of +3.6% in Q2 FY25. Therefore, even accounting for Easter, which fully fell in April 2025, Pepco is maintaining good underlying progress in trading as we enter the second half of FY25. This performance is being driven by offering our customers unbeatable prices across a tighter range of products across clothing and GM, while improving both the quality and availability of the range of stock. 

Dealz continued to deliver positive like-for-like sales with a strong performance in both food and GM. In contrast, Poundland continued to experience a negative like-for-like sales performance, impacted by similar trends seen in the last financial year, with an underperformance of all categories. 

OUTLOOK 

The diverging performance of our Pepco and Dealz businesses, delivering strong momentum in line with objectives, against the continued challenges of Poundland is reflective of the Group outlook for FY25. At the Capital Markets Day in March 2025, we outlined an expectation that the Pepco business would see FY25 revenues and underlying EBITDA (IFRS 16) year-on-year growth in the high single digits, which remains unchanged. Similarly, Dealz is also expected to deliver in line with previous disclosure, with FY25 EBITDA (IFRS 16) of around €30 million. 

For Poundland, the business has continued to face further trading challenges since the CMD resulting in a revised outlook for the current financial year. Poundland now expects to deliver underlying FY25 EBITDA (IFRS 16) of around €0m to €20 million, compared to previous guidance of €50m to €70m. The downgrade relates to highly challenging trading conditions, which have been further impacted by clearance of old stock and product availability issues. A turnaround plan is underway to rebuild on our core heritage category strengths, particularly in GM, while focusing on a simpler in-store offer and price points. 

In terms of store numbers in FY25, we are now targeting to open approximately 250 net new stores across the Group, with new stores principally focused on the Pepco brand and primarily in the CEE region.

Source : Pepco Group

Image : Grand Warszawski / 1181271973 / shutterstock

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