Poundland owner Pepco Group warned that the ongoing disruption in the Red Sea could lead to supply issues in the coming months.
Pepco flagged that the Red Sea situation is leading to “elevated spot freight rates and delays to container lead times”.
It explained that most of its freight costs are contracted until the end of June, but that it is facing “additional surcharges from carriers in relation to the longer shipping routes being taken”.
The retailer said while it had seen “limited impact” on product availability currently, “a prolonged issue in the region could also impact supply in the coming months”.
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It comes as group sales jumped 10.8% to £1.63bn on a constant currency basis in the three months to 31 December, however, on a like-for-like basis, revenue fell 2.3%.
Poundland sales edged 3.1% to £511m – up 0.9% on a like-for-like basis – boosted by a “strong peak Christmas” driven by demand for fast-moving consumer goods (FMCG), which helped to offest a weaker performance in clothing.
Poundland opened 203 net new stores during the golden quarter, largely reflecting 54 conversions of ex-Wilko stores.
Pepco Group executive chair Andy Bond said: “The group delivered record revenue in its first quarter.
“We achieved a 200 basis point year-on-year improvement in gross margin during Q1, and this positive trajectory is expected to continue over FY24 – notwithstanding the potential impact of external factors beyond our control, such as industry-wide supply chain disruption.
“We are making good progress against our renewed strategy, as outlined in October last year, to improve profitability and cash generation in our core established business, while delivering more measured profitable growth.”
Bond said the business was “acting decisively at pace” and had initiated a more targeted store opening programme, paused the new look refit programme, and stopped activities that it deemed would not produce “appropriate returns”.
He added: “Looking ahead, the group has a market-leading customer proposition, strict focus on returns, and proven profitable store model that makes the leadership team confident in delivering future success across our core European markets.”
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