Discounter Pepco says Poundland sales slide in Christmas quarter

By James Davey

LONDON (Reuters) -European discounter Pepco Group said on Thursday the performance of its struggling Poundland business in Britain deteriorated in the Christmas quarter, with underlying revenue falling 7.3%.

The Warsaw-listed retailer, which also owns the Pepco and Dealz brands, said group like-for-like revenue fell 1.1% in the three months to Dec. 31, its fiscal first quarter, narrowing from 3.5% in the prior quarter.

Like-for-like revenue rose 1.4% at the Pepco fascia and 6.6% at Dealz.

The group said Poundland's decline was largely caused by continued weakness in the clothing and general merchandise segment, alongside previously flagged challenging market conditions.

Pepco said last month it was considering strategic options for the 825-store chain after it booked a 775 million euro impairment charge, plunging the group to an annual net loss of 662 million euros.

It said the charge reflected Poundland's weaker performance in its 2023/24 year, along with slower growth prospects, increased competition and a higher cost outlook in the UK following the new Labour government's tax raising budget in October.

"Getting Poundland back on track is a key priority – we are undertaking a comprehensive assessment of the business and taking immediate measures on improving our cash performance and strengthening the customer proposition," group CEO Stephan Borchert said.

He said Poundland would not open any net new stores during the year.

In Britain, major retailers, including Next, Tesco and Marks & Spencer, have reported decent Christmas trading but all have flagged concerns about rising costs, the strength of the economy and the consumer in 2025.

Borchert said he was pleased with the momentum of the Pepco and Dealz businesses.

The group, whose shares have fallen 30% over the last year, said total revenue in the quarter was 1.93 billion euros, a rise of 3.1% on a constant currency basis that reflected the opening of 63 net new stores, taking the total to 5,011. Group gross margin improved over 140 basis points.

Borchert plans to say more on strategy at a Capital Markets Day on March 6.

($1 = 0.9723 euros)

(Reporting by James Davey; Editing by Varun H K, Kirsten Donovan)