Poundland Owner Commits to Stable Prices Despite Challenges

By James Davey

LONDON (Reuters) -The owner of British discount retailer Poundland won’t raise prices despite facing higher costs from global supply chain disruptions, it pledged on Thursday.

Pepco Group, which also owns the PEPCO and Dealz brands in Europe and trades from 3,504 stores, said it had faced significantly higher shipping costs since the final quarter of its financial year to Sept. 30.

But despite that, Chief Executive Andy Bond said prices on the vast majority of the group’s products would not be increased in its new fiscal year.

“The pressure that that will put on us from a margin point of view will be substantially offset by … cost initiatives in our own business,” he told Reuters, without giving details of the savings being planned.

“Therefore, we feel confident that we will navigate this issue and still deliver on our financial goals as well as doing the right thing for customers,” Bond said.

Poundland has been moving away from its traditional single price point of 1 pound ($1.37) since 2017, with just under 64% of its products sold at that level in 2020-21. PEPCO is a multi-price operator.

The group makes over 80% of its profit outside Britain.

Bond said stores across the group currently have as much stock as they had this time last year and he was confident that by the end of the month they would have more stock than at the same point last year.

“We’re very well set for a good Christmas,” Bond said.

Pepco, which listed on the Warsaw stock market in May with a valuation of 5 billion euros ($5.8 billion), forecast core profit for 2020-21 at the upper end of market expectations after revenue rose 19.4%, helped by its rapid store opening programme.

Full-year revenue was 4.1 billion euros, with like-for-like sales up 6.5%. PEPCO’s like-for-like sales increased 10.2% in the fourth quarter, while Poundland/Dealz’s rose 1.0%.

Net new store openings over the year were 483, including the first PEPCO stores in Austria, Serbia and Spain.

Bond said the group would likely enter Germany this financial year.

“Germany is Europe’s biggest consumer market, so the opportunity there is vast,” he said.

The group expects to create 13,000 jobs over the next three years.

Pepco forecast 2020-21 underlying earnings in a range of 640-655 million euros, up 45% growth at the mid-point from the COVID-hit previous year.

The group’s shares, priced at 40 zlotys ($10.1) at the IPO, were trading at nearly 49 zlotys on Thursday.

Separately on Thursday British home furnishings group Dunelm reported an 8.3% increase in first quarter sales.

($1 = 0.8630 euros)

($1 = 3.9447 zlotys)

($1 = 0.7291 pounds)

(Reporting by James Davey Editing by Amy Caren Daniel and Mark Potter)