Poundland owner Pepco Group has posted a record full year revenue of £4.8bn in the year to 30 September despite mounting profit problems.
The sum marks a 17.7% increase on a constant currency basis on the previous year, driven by respective growth of 24.8% and 8.4% at Pepco and Poundland, as demand for budget goods surged amid the cost-of-living crisis.
For the full year, the discount group said underlying EBITDA was largely flat growing just 3.1% to £645m.
Underlying pre-tax profit was also down 33.7% year-on-year to £174m at constant currency, following investment in the group’s store estate, expansion and related supply chain costs.
Executive chair Andy Bond said “our overall performance was mixed with a disappointing profit outturn.
“We are acting decisively to address this, reaffirming our strategy to deliver more measured growth – doing less, to achieve more – with a greater focus on improving profitability and cash generation.”
Subscribe to Retail Gazette for free
Sign up here to get the latest news straight into your inbox each morning
But the company said it sees strong growth in the UK discount space in the year to come.
Throughout the year, Pepco Group opened 668 net new stores, including 53 for Poundland in the UK, although 51 underperforming Poundland stores were closed as part of the retailer’s long-term estate management plan.
Back in September 2023, Poundland agreed to take control of up to 71 Wilko store leases following the retailer’s collapse into administration.
“The integration of Wilko stores into the Poundland brand provides the group with an exciting opportunity to accelerate the new store pipeline in the UK, with no additional central cost base increase,” Pepco said.
In its new financial year, the group is expecting to open at least 400 net new stores across all formats, with the Pepco brand accounting for the highest number.
Despite the mixed results, Pepco said it is “cautiously optimistic” about the year ahead.
The board said: “While we expect the challenging trading conditions outlined above to continue in the near term, we are cautiously optimistic as we enter 2024. “
“More disciplined control on operating costs and line-of-sight on easing input costs, including commodity and freight, is aimed at rebuilding our margins back to pre-pandemic levels.“
“We are increasingly confident of the gross margin opportunity in FY24, evidenced by the 100 basis point improvement seen year-to-date versus the quarterly exit rate achieved at the end of FY23.“
Click here to sign up to Retail Gazette‘s free daily email newsletter
