Poundland owner Pepco Group said the retailer’s first half performance fell “behind expectations” following an overhaul of its general merchandise range.
The discount chain’s EBITDA dropped 6.5% in the six months to 31 March, as like-for-like sales slipped 0.7%.
The group attributed Poundland’s weaker performance to “challenges in implementing the significant range change to Pepco products”.
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Last month, it said the retailer’s positive FMCG performance for the half was wiped out by a weaker showing in clothing and general merchandise following a transition to new general merchandise ranges.
Despite the weaker UK performance, on Friday the group posted a 21% increase in pre-tax profits to £148m (€174m) thanks to strong trading in its Central and Eastern European business which it said was a “key engine driver”.
Total sales jumped 13% to £2.7bn (€3.2bn), however, on a like-for-like basis slipped 2.5%.
Pepco Group executive chair Andy Bond said the group’s “solid” performance reflected “good progress” against the strategic priorities it set out last autumn.
“The standout performer was Pepco’s Central and Eastern European business, the key engine driver for the Group. We have successfully rebuilt gross margin and store profitability in this region back towards pre-pandemic levels with further opportunities for improvement.
“Despite a positive FMCG contribution, Poundland’s performance was behind expectations due to challenges in implementing the significant range change to Pepco products, which we are addressing.
Bond added: “Across the Group, we made significant strides in improving gross margin in H1, which increased by 310 basis points to 43.1%. This improvement was driven by enhanced product purchasing, as well as a more normalised environment for commodity prices, foreign exchange and freight cost versus the prior year, notwithstanding some impact from the situation in the Red Sea.
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