European discount retailer Pepco Group (PCOP.WA) announced an 11% increase in first-half core earnings, with a 23% surge in revenue. However, the company highlighted tougher trading conditions in its third quarter.
The Warsaw-listed group, which owns brands like Pepco, Poundland, and Dealz, cited an uncertain trading backdrop that persisted from April into May. Weaker consumer sentiment due to high inflation, particularly in Central Europe, led to a decline in the frequency of customer visits and different purchasing decisions.
While demand for fast-moving consumer goods (FMCG) remained strong, clothing and general merchandise categories showed a mixed performance.
The prolonged high inflation in Europe has put pressure on consumers, as pay growth has not kept pace with rising prices.
Discount retailers tend to fare relatively well during economic downturns due to their lower cost structures and increased price sensitivity among shoppers.
Pepco Group reported underlying earnings before interest, tax, depreciation, and amortization (EBITDA) of €377 million ($405 million) for the six months ending March 31, compared to €347 million in the same period last year. Revenue stood at €2.84 billion, driven by the group’s discount offerings and the opening of 166 new stores, totaling 4,127. Like-for-like sales increased by 11.1%.
The company expressed confidence in achieving its target of at least 550 net new stores for the full year. It maintained its guidance of “high teens” revenue growth and “mid-teens” core earnings growth for the full year.
CEO Trevor Masters stated that Pepco Group remains well positioned, anticipating gross margins to improve in the second half due to favorable input cost trends, including commodities and freight.
($1 = 0.9320 euros)