Poundland’s Drop Deepens
Poundland’s performance came amid lower deliverers by Pepco Group on Thursday. The business in Britain struggled in the Christmas quarter. Underlying revenue fell 7.3%. That made things worse for the discount chain. Pepco also owns the Pepco and Dealz brands. Group LFL sales fell 1.1%. It covered the quarter ended Dec. 31. This is their first fiscal quarter. It was the first decline since the previous quarter when it fell 3.5%.
Stronger performance from Pepco and Dealz
At Pepco, like-for-like sales rose 1.4%. Dealz represented even stronger growth at 6.6%. Poundland’s decline was due to clothing weakness. General merchandise was also among the laggards. Sales also were affected by challenging market conditions. Pepco had already signaled these problems.
Impairment Charge and Strategic Review
Pepco said last month it was exploring strategic options for Poundland. The chain has 825 stores. This came on the heels of a 775 million euro impairment charge. With this charge, the group plunged into a net loss of 662 million euros. This was over an annualised period. The charge weighed on Poundland’s weaker performance in 2023/24. Weaker prospects for growth played a role. Competition was part of the story. Concerns over a costlier outlook in the UK were also at play. The Angela Rayner October tax budget of the new Labour government.
Recovery and customer proposition prioritization
“Revitalising Poundland is one of our key priorities,” said group chief executive Stephan Borchert. “We are evaluating the business. We are implementing rapid action.” They are measures designed to enhance cash performance. They also aim to enhance the customer value proposition. None of Poundland’s plans at this stage involve opening any net new stores this year.
Wider Retail Context and Pepco’s Results Overall
Other big British retailers posted solid Christmas trading. They include Next, Tesco and Marks & Spencer. All of them were worried about soaring costs. They also feared the economy and consumer spending in 2025. Borchert said she was pleased with the momentum Pepco and Dealz have built. Pepco’s stock is down 30 percent in the past year. Quarterly total revenue was 1.93 billion euros. On a constant currency basis, it was a 3.1% increase. This accounts for 63 net new store openings. The chain now counts 5,011 stores. The group’s gross margin rose by more than 140 basis points.
Guidance on Future Approach
Borchert will discuss strategy in more detail. On March 6, it will do so at a Capital Markets Day.
