Poundland's decline in Britain weighs on Dealz owner

The Warsaw-listed retailer said group like-for-like revenue fell 1.1% in the three months to December 31, its fiscal first quarter, narrowing from 3.5% in the prior quarter

The group said Poundland’s decline was largely caused by continued weakness in the clothing and general merchandise segment, alongside previously flagged challenging market conditions. File Picture: Danny Lawson/PA

European discounter Pepco Group said on Thursday that the performance of its struggling Poundland business in Britain deteriorated in the Christmas quarter, with underlying revenue falling 7.3%.

The Warsaw-listed retailer, which also owns the Pepco and Dealz brands in Ireland, said group like-for-like revenue fell 1.1% in the three months to December 31, its fiscal first quarter, narrowing from 3.5% in the prior quarter. Like-for-like revenue rose 1.4% at Pepco and 6.6% at Dealz.

The group said Poundland’s decline was largely caused by continued weakness in the clothing and general merchandise segment, alongside previously flagged challenging market conditions.

Pepco said last month it was considering strategic options for the 825-store chain, after it booked a €775m impairment charge, plunging the group to an annual net loss of €662m.

It said the charge reflected Poundland’s weaker performance in its 2023/24 year, along with slower growth prospects, increased competition, and a higher cost outlook in Britain following the new Labour government’s tax-raising budget in October.

Improve cash performance

“Getting Poundland back on track is a key priority — we are undertaking a comprehensive assessment of the business and taking immediate measures on improving our cash performance and strengthening the customer proposition,” group CEO Stephan Borchert said.

He said Poundland would not open any net new stores during the year.

In Britain, major retailers including Next, Tesco, and Marks & Spencer, have reported decent Christmas trading, but all have flagged concerns about rising costs, the strength of the economy, and the consumer in 2025. Mr Borchert said he was pleased with the momentum of the Pepco and Dealz businesses.

The group, whose shares have fallen 30% over the last year, said total revenue in the quarter was €1.93bn — a rise of 3.1% on a constant currency basis that reflected the opening of 63 net new stores, taking the total to 5,011. Group gross margin improved by over 140 basis points.

Mr Borchert added: “We continue to see a divergence of performance across our brands. We are pleased with the momentum we are seeing in our Pepco and Dealz businesses, with a return to LFL sales growth in the first quarter.

“We remain confident that Pepco will deliver profitable growth during the year.”