Pepco Group encounters substantial financial hurdles with Poundland due to market pressures and strategic transitions.
- A £675 million impairment charge affects Poundland following performance declines in the fiscal year 2024.
- The retailer faces increased competition and heightened costs, impacting profitability and sales.
- Poundland transitions to Pepco-sourced products, contributing to challenges in clothing and merchandise ranges.
- Despite difficulties, Pepco Group achieves a record £6.2 billion revenue, with Central and Eastern Europe operations expanding.
In 2024, Pepco Group registered a significant impairment charge amounting to £675 million on its subsidiary, Poundland, primarily due to a notable downturn in performance. This financial write-down was attributed to a “significant decline in performance in FY24 and weaker outlook for profitability amid increasing competition and cost challenges.” This move was further exacerbated by the sluggish growth in like-for-like sales reported at just 3.6% for the value retailer by the end of September 2024.
Poundland’s revenue experienced a marginal rise of 0.2% year-on-year, yet the EBITDA suffered a substantial decrease of 21.5%, totalling €153 million (£126.6 million). This was a stark contrast to the group’s overall net loss of £548 million for the period, driven largely by the impairment charge. Across the group, however, underlying EBITDA improved by 25.2% year-on-year to €944 million (£781 million).
The performance of the UK discounter was significantly hampered by increased competition, rising costs, and specific difficulties in its clothing and general merchandise sectors after a shift to Pepco-sourced products earlier in the year. The CEO of Pepco Group, Stephan Borchert, remarked on the challenging scenario stating, “At Poundland, recent performance has been very challenging, impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.”
Despite these setbacks, Pepco Group recorded a revenue of £6.2 billion, reflecting a 10.2% increase year-on-year, predominantly driven by growth in other divisions like Dealz. The group’s underlying EBITDA rose by 25% to £824 million, meeting earlier forecasts. The Pepco division also spearheaded an expansion campaign in Central and Eastern Europe, inaugurating 331 new stores throughout the year, in sharp contrast to the 13 and 48 new outlets opened by Poundland and Dealz Poland respectively.
Moreover, Pepco Group announced their first-ever dividend, indicative of their confidence in the outlook and possible future cash returns, which might include share buybacks. While the group enjoyed robust overall growth, a 3.2% drop in like-for-like revenue across the group reflected wider macroeconomic pressures and specific market difficulties. Non-executive chair Andy Bond acknowledged the year’s objectives, including profitability restoration in Central and Eastern Europe markets, gross margin recovery, targeted investment growth, and improved cash generation. Borchert added notable remarks about the group’s outlook, focusing on Pepco’s strategic and financial growth particularly in Central Eastern Europe, “Within the Group, I see the Pepco concept itself as our key engine for future strategic and financial growth…”
Pepco Group remains focused on addressing challenges while capitalising on growth opportunities in strategic markets.
