Dealz and Poundland parent group Pepco raises caution about sales challenges 

Profit margin outlook improving as business costs ease

Dealz operates about 100 stores in the Republic.

European discount stores group Pepco, which owns Dealz and Poundland in Ireland, has cautioned "short-term sales challenges" would continue into 2024 for retailers, although the profit margin outlook was improving.

Shares in Pepco are listed on the Warsaw stock exchange and the company had warned on the outlook twice in September. 

It reported an increase of over 3% in core earnings for the financial year to the end of September, in line with its latest guidance. 

However, trading in its new financial year from the start of October had been mixed, with like-for-like revenue down in the period. The shares extended their losses for 2023 to 42%. 

Pepco reported underlying earnings of €753m for the latest financial year on revenue of €5.6bn, which was up by 17.7%, after opening a net 668 new stores, taking the total to 4,629 at the end of the period.

Pepco did not break down the results, but the UK and Ireland is its single largest market, generating €2bn in revenues, while Poland, where it trades under both the Pepco and Dealz names, accounts for €1.4bn, and the stores across a number of countries in the rest of Europe generate €2.2bn in revenues. 

Dealz operates about 100 stores in the Republic and has about 30 Poundlands in the North. 

It said the economic and consumer backdrop was particularly challenging in central and eastern Europe, where customers remained cautious on discretionary spending and sales were slightly lower than anticipated. 

In the UK, Poundland's like-for-like sales were slightly above the same period last year, reflecting a strong performance in consumer packaged goods and a weaker performance in clothing.

Executive chairman Andy Bond, however, said he was "cautiously encouraged" by recent third-party data pointing to an expected easing of some pressures on household budgets. 

In October, Pepco said it would slow down its opening programme to focus on rebuilding profitability. It still plans to open at least 400 net new stores and is stepping-up Poundland's expansion. 

• Reuters and Irish Examiner