Poland: Pepco Group constant growth and progress in its strategy
Updated: Aug 31, 2022
Discount Retail Chain PEPCO Group (WSE listed and owned by South African Steinhoff International) a dynamically developing Pan-euro European network of non food discount stores of multi-stores, owner of Pepco and Dealz brands in Europe and Poundland in Great Britain, today published selected operational results for the third quarter of the financial year ended on June 30, 2022.
The most important achievements in the third quarter
The group's revenues in the third quarter amounted to EUR 1,210 million (US$ 1,221 mio), reaching EUR 3,582 million (US$ 3,613 mio) accumulated, which means an increase from the beginning of the year by 17.4%, assuming a permanent exchange rate.
A strong increase in the group's revenues in the third quarter by 17.1% y/y assuming a permanent exchange rate, powered by the results of the Pepco network, which recorded an increase of +28.5% y/y. Particularly good results were achieved by Pepco in Hungary, the Czech Republic and Serbia.
Group revenue growth dynamics in the third quarter in comparable conditions ("LFL") at 4.9% total:
- Pepco: +7.3% LFL
- Poundland group: +2.0% LFL
All group brands continued the opening program of new stores, this year 350 new stores have arrived (not counting the closing of 59 Fultons stores)
Implementation of priority strategic goals
The group continued the program of accelerated expansion of stores, which is the largest factor in the creation of values in the group, and remains on the right track to achieve the updated goal, which is the opening of 450 new stores in the 2022 financial year:
- Pepco Group: 115 new stores open during the third quarter (not counting the closing of 16 Fultons stores)
- Pepco: 109 newly opened net stores, including 40 stores in Western European markets, i.e. in Austria, Italy, Spain and Germany.
In the third quarter, the modernization of 82 stores was completed, a total of 668 modernizations were carried out from the beginning of the year, thanks to which they gained a new schedule and surroundings, which contributed to the increase in LFL sales and improving the perception of stores by customers. In March 2022, a pilot in Spain began, offering a full range of Pepco clothing, general purpose and quickly transferable goods in selected stores. The pilot was extremely successful, and the first customer reactions, taking into account the significant increase in their satisfaction, were very encouraging. In connection with the above, it was decided that this new format is the best solution for the group's clients on the Spanish market. The existing Dealz stores in Spain will therefore be transformed into Pepco stores, and where the available space will allow it to be supplemented with FMCG goods.
Continuation of good commercial results
In the third quarter, the turnover remained at a high level, mainly due to the Pepco network, with the support of solid results of the Poundland/Dealz network. Pepco revenues in the third quarter of the 2022 financial year increased by +28.5% y/y assuming a permanent exchange rate and by +7.3% in LFL. In the Poundland group, the increase in revenues in the third quarter of the 2022 financial year was +3.8% y/y by assuming a permanent exchange rate and by +2.0% in LFL.
Compared to the period before the Covid-19 pandemic, i.e. with the 3rd quarter of the 2019 financial year, the average sales in PEPCO stores during the quarter increased by +9.2% in LFL. In the Poundland group, the average sales for the third quarter of the 2022 financial year increased by +5.6% in LFL approach compared to the period before Pandemic, i.e. the 3rd quarter of the 2019 financial year.
In the face of the inflationary pressure on the entire market, the group invests in its price offer and maintaining a different discount offer on the market. The continuous concentration of the group on reducing operating costs allows them to maintain the position of the price leader.
In addition, in this context it is the fact that the discount market throughout Europe is currently much larger than in 2007-08, during the previous financial crisis, which means that many more customers know this format of stores and is more often shopping in them.
Although trade conditions are still difficult, the group is convinced that constant development is possible. Unless there is a significant deterioration in the macroeconomic environment, the group remains on the right track to include another good year, as expected.
Commenting on the results, Trevor Masters, the General Director (CEO) of Pepco Group, said: The group has another quarter of development and solid commercial results, possible thanks to the further implementation of our successful, proven strategy. We are pleased with the implementation of our expansion plans in Spain, which is the first step on the road to providing the best offer of a group of more customers than before. In this way, we can use the advantage of our wide offer of the entire Pepco group, thanks to which we are even more effective and effective. I would like to take this opportunity and thank all our colleagues in the entire PEPCO group for hard work and constant commitment to work for our clients. Despite the difficult market environment, PEPCO continues to speed up and implements an effective growth strategy based on our four key pillars: the pursuit of to be a larger, better, simpler and cheaper one. We remain sure of the forces of our proposal for customers, market positioning and our ability to create values long.'
The group's financial statements were prepared based on the auditor unexplored for the period three months completed on June 30, 2022. In this context, the Pepco segment offering products at various prices and with the leading participation of clothing presents results based on calendar months as part of a three-month period ended on June 30, 2022, while the segment of the Poundland group with unified price levels of quickly transferable products gives results mainly based on commercial weeks and the 13-week period ended on June 26, 2022.
Revenues were not examined by an auditor, with foreign currency revenues over the average exchange rate from the month in which they were generated. The increase in revenues is reported based on the establishment of a permanent exchange rate.
The increase in LFL revenues is defined as an increase in revenues year -on -year for open stores for more than a year and is presented based on the establishment of a permanent exchange rate. Absolute revenue in LFL and LFL growth is not corrected by the impact of pandemic in both current years.
The PEPCO Group has existed since 2015 and consists of two strong, independent discount retail networks - Pepco and Poundland - the latter operates in the international arena under the Dealz brand. These networks are supplied by the global PGS company, also belonging to the Pepco group. Pepco and Poundland operate on the markets of many strongest European economies. The PEPCO Group currently has about 3,800 stores in 17 countries, including in Great Britain, the Republic of Ireland, Spain and in the region of Central and Eastern Europe, employing about 38,000 employees.
After more than 14 years of continuous development, PEPCO currently serves over 20 million customers per month, offering clothing for the whole family, household and toys at the lowest prices. The brand's headquarters is located in Poznań. The company employs approximately 20,000 employees in 15 European countries, and is the most present in Poland, Romania, Hungary and the Czech Republic.
The first 14 Pepco stores were opened in Poland in 2004. In 2013, Pepco expanded its activity to the Czech Republic and Slovakia, and in 2015-2017 opened shops in Croatia, Hungary, Lithuania, Romania and Slovenia. Since 2018, the company has stores in Latvia, Estonia, Bulgaria, Italy, Serbia and Spain and Austria. In the period of the analyzed three months, the company opened a total of 140 new stores under the Pepco banner.
Pepco is widely recognized as one of the strongest brands and the most dynamic companies in Poland. He regularly wins the Forbes Diamond Award as one of the fastest growing companies in the country and the Superbrands award for quality and trust among Polish consumers. Recently, Pepco has been recognized as one of the best employers in Poland in 2021.
Poundland and Dealz
Since the opening of the first store in Burton-Upon-Trent, towns north of London, Poundland has built a network of almost 900 stores in Great Britain and the Republic of Ireland, offering goods of the best brands and excellent quality own brand products. Awarded by the magazine Retail Week with the title "Value Discounter of the Year 2019", the network currently employs approximately 18,000 employees who serve over seven million customers every week.
Poundland offers thousands of high quality products, over 1,000 known brands in 17 categories of articles, including food and drinks, health and beauty, household, gardening, DIY, pets, stationery, books, DVD and toys. Most articles in Poundland stores cost one pound, but the network has also expanded the range at prices above and below one pound.
In Great Britain in about 450 larger stores, Poundland offers a clothing brand Pep & Co. The PEP & CO brand has been present on the market since 2015, a full range of women's, male and children's fashion, introducing a new style to Poundland with a simple, low prices of products from the Family Fashion category, which is difficult to find on local shopping streets. From August 2020, the PEP&CO brand also includes home articles that quickly found customers' recognition as their style and quality. Pep & Co Home is a modern, fashionable, unique decorative articles and home products. Their introduction to the offer coincided with a thorough change in the method of exhibition and sales in Poundland stores. Over 250 Poundland stores are also currently offered cooling and frozen products. The number of facilities in which they will be sold will increase over the next two years to over 645. This is the result of taking over the Fultons Foods network and investments in the amount of 25 million pounds (US$ 30 million). PEP & Co was nominated by Retail Week for the own brand award for 2019. Since the launch of the first store in 2011, the Dealz brand has created a network of over 200 stores in Ireland, Spain and Poland, offering customers a wide selection of over 1,000 products of well-known brands and own private label brands. Dealz offers customers a simple and direct price model known from Poundland, offering a unrivaled value for money.
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