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Discounter Pepco’s Quarterly Sales Fall As Supply Chain Disruption Weighs

Discounter Pepco's Quarterly Sales Fall As Supply Chain Disruption Weighs

European discount retailer Pepco Group reported a worse-than-expected 4.3% fall in third-quarter underlying revenue, which it said partly reflected a delay in summer stock hitting store shelves due to shipping issues in the Red Sea.

The Warsaw-listed owner of the Pepco, Poundland and Dealz brands, did, however, maintain its profit guidance for the full year.

“The group remains confident that availability issues that have impacted like-for-like sales will ease through the fourth quarter, as we mitigate the Red Sea impact by shipping product earlier and channelling stock through different shipping routes,” it said.

Disruption to shipping through the Suez Canal, due to attacks by Iran-aligned Yemeni Houthi militants in the Red Sea, has continued through 2024.

Like-For-Like Sales

The group, whose shares are down 44% year-on-year, said like-for-like sales in the quarter to June 30 fell 2.7% at the main Pepco business, reflecting the earlier timing of Easter this year, slower selling of old stock that is having to be marked down, and the supply chain issues impacting availability of new summer stock.

At Poundland in the UK like-for-like sales fell 6.9%, which the group said reflected challenges related to the introduction of new Pepco-sourced clothing and general merchandise, which are being addressed.

Dealz’s like-for-like sales fell 7.3%, also impacted by the transition to Pepco-sourced general merchandise, as well as a highly competitive market.

Full-Year Expectations

The group said it still expected 2023/24 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of about €900 million, up from €753 million in 2022/23.

It said a strong year-on-year recovery in gross margin had continued into the third quarter and it was confident of exiting the financial year with an improved like-for-like sales trajectory in the core Pepco business.

After issuing two profit warnings last September, the group said it would slow down its store opening programme to focus on rebuilding profitability. In February it said it would exit the Austrian market.

It opened 37 net new stores in the quarter, taking the total to 4,882.

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