Pepco steps up Western Europe expansion to capture value-seeking consumers
Pepco's Growth Strategy and Market Position
By Alicja Surdy
May 21 (Reuters) - Pepco is accelerating its expansion in Western Europe, aiming to double its presence in the region by 2030, the discount retailer said on Thursday, after its underlying half-year core profit grew 17.5%.
Expansion Plans and Profitability
The Warsaw-listed discounter, which last year sold the struggling Poundland chain in Britain, expects to open at least 600 new stores in its existing Western European markets between 2027 and 2030, encouraged by strong profitability seen in its Spanish and Italian stores.
Targeting Value-Seeking Consumers
Pepco is "perfectly positioned" to capitalize on value-seeking shoppers in an uncertain consumer environment, CEO Stephan Borchert told Reuters after the earnings publication.
New Market Entry: Ukraine
The group will also launch a small trial of stores in Ukraine, starting in the western part of the country.
"It's serious, it's not just dip a toe," Borchert told Reuters, saying Pepco wanted to help develop the war-torn country.
Financial Performance and Strategic Reset
Pepco reported an underlying core profit of €516 million ($600 million) for the first half of its financial year and confirmed its recently raised full-year guidance.
Brand Focus and Divestments
This year's results are a key test for Pepco's strategic reset after it sold Poundland to focus on its namesake brand. It said the divestment of its Dealz brand would also be completed this year.
Supply Chain Resilience Amid Geopolitical Tensions
Avoiding Iran War Impact
Asked about the impact of the Middle East conflict on the group's supply chains, Borchert reiterated that the hit was "minimal", partly thanks to forward contracts that shielded Pepco from the spike in fuel prices and other costs in the near term.
Adapting Shipping Routes
Pepco also benefits from the standard routes of its Asian shipments, 95% of which have been going around the Cape of Good Hope since the Red Sea shipping disruptions dented sales in 2024.
Future Uncertainties
But while Borchert expressed confidence for the short- to medium-term performance, he warned that "nobody knows what happens next year" if the war continues.
($1 = €0.8605)
(Reporting by Alicja Surdy, editing by Milla Nissi-Prussak)
