Pepco Group has reported a £675m impairment charge on its Poundland stores due to declining performance and increasing competition.
- Despite a challenging year, revenue at Poundland slightly increased by 0.2% year-on-year, though profitability took a hit.
- Pepco Group’s overall performance showed resilience, with a 10.2% increase in total revenue to £6.2bn, driven by other divisions.
- The group’s underlying EBITDA rose significantly by 25%, indicating strong performance despite macroeconomic pressures.
- Strategic adjustments are in place to enhance Poundland’s performance and refocus on core strengths and faster growth avenues.
Pepco Group has announced a substantial £675 million impairment charge related to its Poundland stores, attributing this to significant performance challenges and a weaker outlook for future profitability. This financial setback primarily reflects the goodwill from the initial Poundland acquisition. Recent data showed like-for-like sales increased by 3.6% for the year ending 30 September 2024; however, total revenue at Poundland only edged up by 0.2%.
The company’s CEO, Stephan Borchert, explained that rising competition and costs have notably impacted Poundland, particularly following the transition to Pepco-sourced products earlier in the year. The integration of these new product lines led to declines in clothing and general merchandise sales, contributing to a 21.5% drop in Poundland’s EBITDA, which stood at €153 million (£126.6 million).
Despite these challenges, Pepco Group achieved a notable increase in its underlying EBITDA across the board, marking a 25.2% rise year-on-year to €944 million (£781 million). This growth was fuelled by the strong performance of other divisions, including Dealz, and continued expansion, especially in Central and Eastern Europe where Pepco added 331 new stores.
In response to Poundland’s difficulties, the group is taking direct action to address these issues and is committed to restoring its competitiveness. Stephan Borchert noted the focus on leveraging Poundland’s strengths and recalibrating its future strategy to prioritise its FMCG-led format, with more updates expected by mid-2025.
The overall positive performance of Pepco Group is reflected in its total revenue reaching a record £6.2 billion, a 10.2% increase year-on-year. However, like-for-like revenue across the group saw a decline of 3.2%, highlighting ongoing macroeconomic challenges. The declaration of Pepco’s first-ever dividend further indicates confidence in its financial future.
Pepco Group remains optimistic about addressing current challenges and leveraging its strengths for continued growth.
