Pepco retailer maintains its guidance; hopes for positive LFL trend to continue (interview)

"We keep our fiscal year 2025 guidance, with a high single-digit revenue and EBITDA growth for Pepco," CEO Stephan Borchert told PAP Biznes.

He assessed that the group's situation ahead of the fourth quarter is good.

In the third quarter of the 2024/25 financial year, Pepco Group posted revenues of EUR 1,424 million, which represents an increase of 2.7 percent year on year, assuming a constant exchange rate. Excluding the Poundland chain, sold on June 12, the group's sales increased by 7.7 percent to EUR 1,078 million.

Cumulatively, after three quarters, the group's sales (Pepco and Dealz Poland) amounted to EUR 3,431 million, up by 8.7 percent year on year.

The group's LFL revenue for the third quarter increased by 2.6 percent for the 'new Pepco group' (Pepco and Dealz Poland), while rising cumulatively by 2.4 percent.

The Pepco chain recorded a 2.4 percent increase in LFL revenue in the period. Pepco's LFL sales result, excluding FMCG, increased by 4.8 percent. Dealz's LFL sales increased by 5.8 percent.

As reported, the gross margin of Pepco and Dealz Poland improved by 180 basis points year on year.

"We are really pleased with the third quarter. We continue our strategic progress. It's the third consecutive quarter with increasing like-for-like. We see positive momentum in new Pepco Group after the Poundland sale," CEO Borchert told PAP Biznes.

"I have always been confident that sale of Poundland is justified. We wanted to create a much simpler group and to go after very high potential in Pepco," he added.

On June 12, 2025, the group announced that it had completed the sale of Poundland to Gordon Brothers as part of a strategic simplification of its structure and to increase shareholder value. According to the announcement, the divestment of Poundland has a positive impact on revenue growth and contributes to higher profitability and margins, as well as stronger cash generation.

"Around EUR 1 billion this quarter in Pepco sales and improvement of gross margin show that efforts we have done have started to do real work. (...) We worked very hard on improving availability, improving ranges. We are pleased with the first results of our transformation programme, which is reflected in volume growth. We hope to continue this going forward," the CEO said.

"I don't want to guide on LFL but our ambition is to increase LFL sales. We are working very hard on improving the dynamics and hoping to continue this positive trend," he added.

According to Borchert, the group is currently focusing on the accelerated transformation of Pepco, on development in Europe, but also on strengthening its supply chain.

In the third quarter, the net number of new Pepco and Dealz stores opened was 45.

At the end of June, the 'new group' chain, excluding Poundland, had 4,276 stores.

"We continue to expect to open approximately 250 net new stores across 2025 financial year," he told PAP Biznes.

"When it comes to CAPEX, we continuously apply a very strict capital allocation discipline," he added.

On Thursday, the group announced that it is launching a share buyback programme worth up to EUR 50 million. The programme is scheduled to run until September 10, 2025. The maximum price, excluding costs, that the company may pay for each share purchased is up to 110 percent of the market price.

"Our priority is further growth, but we decided that any surplus of cash will return to shareholders. In addition to the regular dividend that we have paid, we decided about the buyback," CEO Borchert said.

"We started the initial share buyback of up to EUR 50 million. It reflects the confidence the group has in its earnings potential, the cash generation we are seeing, but also our opinion that there's an undervaluation of our share price, given the future prospects," he added.

pel/ ao/