Polish discounter Pepco targets 9% core profit growth in 2026 financial year

GDANSK, Poland, ‌Dec 17 (Reuters) - European discount retailer Pepco Group on Wednesday guided ‍for underlying ‌core profit growth of at least 9% and 250 store openings ⁠in the 2026 financial year, signalling ‌confidence in its strategy after the sale of Poundland in Britain.

For the year that ended on September 30, the Warsaw-listed group reported a 10.3% rise in its underlying ⁠earnings before interest, taxes, depreciation and amortization to 865 million euros ($1 billion).

The annual results were ​the first to be published since the company ‌reset its strategy in March to ⁠focus on its main Pepco brand.

"2025 was a real turning point for the group," CEO Stephan Borchert said in a statement, adding ​that strong results on gross margin and free cash generation reflected the success of the new strategy.

The group's gross margin improved by one percentage point to 48% in the 2025 financial year, which it attributed ​to ‍its exit from the ​lower-margin fast-moving consumer goods segment and a renewed focus on offering competitively low prices in clothing and general merchandise.

Pepco said it would increase its dividend payout ratio to 25% of underlying net profit, against 20% previously. This led to a 57% rise in its annual dividend to 9.6 ⁠euro cents per share.

The retailer also raised its free cash flow target to 250 million euros, having previously ​aimed to generate more than 200 million euros annually.

The group said like-for-like sales at the Pepco brand were up 3.9% so far in the first quarter, excluding food items. However, performance ‌for the whole group was weighed down by weakness at its Dealz business, it added.

($1 = 0.8530 euros)

(Reporting by Alicja Surdy, editing by Milla Nissi-Prussak)