Discount retailer Poundland is expanding into Europe to build on its UK success / Credit: photocritical via Shutterstock

GlobalData, a leading data and analytics company, highlighted the divergent performance of Poundland and Pepco in recent analyst’s comments. While Poundland achieved strong growth, Pepco faced challenges in Central Europe. What follows is an overview of the insights shared by Mei Law, a Retail Analyst at GlobalData.

Pepco’s modest growth amidst rising inflation

Pepco Group, known for its budget-friendly offerings, experienced only modest like-for-like (LFL) revenue growth of 2.6% in the three months ending June 30, 2023.

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This was in contrast to the double-digit growth it had previously enjoyed. The company cited increased operational costs due to EU inflation, which reached 8.1% in June.

However, Poundland, a part of the Group, performed well with a 9.0% LFL revenue growth, as consumers prioritised spending on fast-moving consumer goods (FMCG).

Despite weaker growth in Q3, the Group reported signs of recovery in June and early July. The Group’s commitment to refits and store openings has resulted in a total growth of 19.3% for the year-to-date.

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Pepco struggles with changing consumer habits

Although Pepco’s LFL revenue grew by 19.7% in Q1 and an additional 10.7% in Q2, it experienced a dip of 1.2% in Q3.

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The Group attributed this decline to a decrease in store visits and changing consumer purchasing habits, as people reduced spending on non-essential items.

The proposed refits of all 2,500 stores in Central and Eastern Europe under the “New Look” program, which began in January 2023, have not progressed as quickly as expected.

However, Pepco remains confident that ongoing refits and the opening of 141 new stores will drive revenue growth in the upcoming quarter.

Poundland’s revival and expansion

Poundland, including its subsidiaries Poundland and Dealz, witnessed accelerated growth after slower recent quarters.

Its LFL revenue increased by 9.0%, attributed to a “range revolution” that introduced a wider selection of frozen food, fresh produce, and alcoholic beverages in 570 out of its 850 stores during the summer months.

Poundland is set to further strengthen its position as a one-stop-shop by sourcing clothing and general merchandise from Pepco starting in the autumn.

“As Pepco Group’s infrastructure across its three fascias becomes increasingly centralised, it should consider streamlining the website, decreasing the minimum spend and shipping fees and offering a click-and-collect option which would further appeal to customers on grounds of convenience,” Mei Law concluded.