Pepco Group receives interest from potential Poundland buyers

By James Davey

LONDON (Reuters) -European discounter Pepco Group has received interest from potential buyers of its struggling 825-store Poundland business in Britain, its boss said on Thursday.

"There are definitely interested parties for this business," CEO Stephan Borchert told Reuters after Pepco Group said it was evaluating all strategic options to separate Poundland from the Warsaw-listed group, including a potential sale.

He declined to comment on the type of interest, what stage talks had reached, or what Poundland was worth, but said he was confident its future would be decided by September this year.

Shares in Pepco Group were up 7.2%.

Ahead of its Capital Markets Day, the group, which also owns the Pepco and Dealz brands, said although Poundland had turnover of over 2 billion euros ($2.16 billion) last year, it was operating in an "increasingly challenging" UK retail landscape "that is only intensifying".

It said higher employer taxes announced in the Labour government's October budget will add further pressure to Poundland's cost base.

Pepco said in December it was considering options for the chain after it booked a 775 million euro impairment charge.

The group said it would focus on the Pepco brand "as the single future format and engine driver of group earnings". It will also consider the separation of the well-performing Dealz Poland business over the medium term and the future of its 63-store Pepco Germany business.

The group said it was moving away from fast-moving consumer goods to focus on Pepco's higher-margin clothing and general merchandise business and "white space" opportunities in Central, Eastern and Western Europe. It sees scope for a further 1,800 stores in Central and Eastern Europe.

Borchert will assume responsibility for running Pepco, while Barry Williams has been made the permanent managing director of Poundland.

Group like-for-like sales were up 1.5% in the eight weeks to March 2, with growth at Pepco and Dealz offset by negative like-for-like sales at Poundland.

It forecast profitable growth in its 2024/25 year, though it said Poundland's EBITDA would dip to 50-70 million euros from 153 million euros in 2023/24.

The board has authorised a share buyback capability of up to 200 million euros.

($1 = 0.9258 euros)

(Reporting by James Davey; Editing by Kim Coghill and Jan Harvey)