Dealz owner Pepco warns trading environment remains challenging

The group noted disruption to Red Sea shipping continued to lead to some surcharges in freight rates and delays to container lead times.

Dealz owner and discounter Pepco Group on Thursday reported a 2.5% fall in underlying revenue based on like-for-like sales in its first-half reporting period and said the trading environment across Europe remains challenging.

The Warsaw-listed owner of the Pepco, Poundland and Dealz brands said group revenue was €3.2bn in the six months to March 31, a rise of 11% on a constant currency basis, which reflected the opening of 289 net new stores.

The group also announced the appointment of Stephan Borchert, the former chief executive of optical retailer GrandVision, as its CEO, effective from July 1.

It said Andy Bond will remain in his role as executive chair until October 1 when he will revert to the role of non-executive chair.

"The trading environment across Europe remains challenging, although we are encouraged by signs of an improved like-for-like sales performance in some of our core Central Eastern Europe markets during the second quarter," the group said.

It was also encouraged by year-on-year improvements in gross margins, which it said were being driven by easing input costs, including commodity and freight, an improvement in currency rates, and buying margins.

The group noted disruption to Red Sea shipping continued to lead to some surcharges in freight rates and delays to container lead times.

However, it said it was "managing" product availability and did not expect this to significantly impact gross margins in the second half.

"Overall, the group remains confident in delivering profitable growth in this financial year," it added.

Reuters.