By James Davey
LONDON (Reuters) – European discounter Pepco Group said it was considering options for its struggling Poundland chain in Britain after it booked a 775 million euros ($816 million) charge for the business, plunging the group to an annual net loss of 662 million euros.
Warsaw-listed Pepco said on Tuesday the Poundland non-cash impairment charge was primarily related to goodwill and reflected a weaker performance in its 2023/24 year, along with slower growth prospects, increased competition and a higher cost outlook in the UK following the recent budget.
Poundland trades from 836 stores and contributes about 30% to the group’s total revenue.
Its like-for-like sales fell 3.6% in its fiscal year ended Sept. 30, while underlying earnings slumped 21.5% to 153 million euros.
CEO Stephan Borchert said Poundland “continued to face headwinds” with its recent performance impacted by sales declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.
“With the transition to the Pepco ranges, I think the business lost a bit of its DNA,” he told Reuters in an interview.
He highlighted the reintroduction of more products priced at one pound ($1.28), which reflected a return to Poundland’s heritage.
“It is important to look at every strategic option for this company to bring it back on track,” he said.
Asked if Poundland will stay in the group, Borchert said he would say more on strategy at a Capital Markets Day on March 6.
Despite the Poundland charge, shares in the group, which also trades as Pepco and Dealz, rose 14%, paring 2024 losses to 31%, as underlying earnings for the year beat expectations and it announced an inaugural dividend of 6.2 euro cents.
The group as a whole reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA), its preferred profit measure, of 944 million euros for 2023/24, up from 754 million in 2022/23.
Revenue was a record 6.2 billion euros, up 10.2%, driven by 392 net new stores.
“Within the group, I see the Pepco concept itself as our key engine for future strategic and financial growth, particularly in Pepco’s Central and Eastern Europe heartland,” said Borchert.
The group plans 300 net new stores in 2024/25.
($1 = 0.9494 euros)
($1 = 0.7839 pounds)
(Reporting by James Davey.
Editing by Jason Neely, Bernadette Baum and Mark Potter)
