The low-cost products and diversified offering of Poundland’s owner, Pepco Group, resonated well with shoppers in FY21, as group revenue rose by 19.4% year-on-year (YoY) to €4.1bn and 20.7% on a two-year basis. This was driven by its PEPCO fascia, whose revenue jumped by 29.2% YoY to €2.2bn and 33.1% on a two-year basis. The group achieved like-for-like (LFL) growth of 9.8%, which includes temporary store closures due to Covid-19, signifying its appeal. Poundland Group, which consists of Poundland and Dealz, was aided by a post-lockdown boost; revenue declined by 0.5% in its H1, but by the end of the year, revenue had grown by 9.8% YoY to almost €2bn and 9.4% on FY19. This now represents almost half (47.5%) of Pepco Group’s total revenue.
Poundland Group’s positive full-year performance could have been better, but its lack of a transactional website during the peak of the pandemic and lockdown periods diverted a portion of shoppers to its competitors. This has driven the Poundland fascia to trial a transactional website in the UK, where it now delivers a range of homewares, electricals, food and drink and more to 11 UK cities. Many of these products are priced at more than £1 in an attempt to increase basket sizes and margins, which would mitigate the problems that value retailers have in making e-commerce profitable.
Pepco Group has, unsurprisingly, been affected by global supply chain issues. This was particularly apparent in its fourth quarter, wherein shipping costs increased significantly due to limited container capacity. The group credits its ‘unique Far East direct sourcing operation’ and changes to its operating model as having alleviated a degree of this pressure, but the group’s reliance on branded products, which is high but reducing given the rollout of own-brand PEPCO products, leaves it vulnerable to these ongoing issues.
Pepco Group ended the year with a closing net debt of €1.2bn compared to €1.24bn the previous year, while its full-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to be between €640 and €655m (with both calculated on a post-IFRS 16 basis). This is despite its considerable store expansion throughout the year, which saw the group open 424 net stores, 60 of which were Poundland or Dealz stores.