Dealz discount stores owner likely to be sold

The boss of Pepco Goup —which operates the Dealz, Poundland and Pepco discount stores across Europe — said it was “inevitable” that its troubled South African owner Steinhoff would put it up for sale.

Steinhoff, which owns the Pepco stores in continental Europe and the Dealz-Poundland stores in Ireland and the UK, has been struggling to recover from a 2017 accounting scandal.

Dealz owns around 70 stores in the Republic, while the discount group retailer has been growing rapidly by opening stores in Poland, as well as expanding in Spain, and driving the Pepco name into Europe.

“The restructuring arrangement that Steinhoff has with its creditors means it’s almost inevitable we’ll be sold,” Pepco chief executive Andy Bond told Reuters, as it issued a trading update covering the Christmas period.

Earlier this week, Sky News reported that three private equity firms - Advent, Hellman and Friedman, and Mid Europa Partners - had teamed up for a possible bid for Pepco that could value it at more than €4.5bn.

In the update, Pepco said Dealz-Poundland boosted market share helped by its clothing brand, Pep&Co, which sells in over 300 stores in the UK and the Republic, and by selling more health and beauty, household, and grocery items. It also expects to open around 300 Pepco stores in the year.

“The group continued to make strong strategic progress through increasing the size of the Pepco store portfolio in central and eastern Europe, commencing the roll-out of the Dealz format in both Poland and Spain, and reducing operating costs within Poundland, including the successful renegotiation of a further 36 store leases,” the company said.

“The mainland European Dealz business continues to develop positively, building the necessary confidence in both the customer proposition and the business model economics to commence a store roll-out programme,” it said.

Revenue in the three months to the end of December increased 13.3% to over €1.14bn, reflecting a 14.8% increase in stores to 2,809, along with a rise in like-for-like revenue of 3.9%.