Discounter Pepco's first half earnings boosted by new store openings, margin uplift
First half core earnings up 28%
Driven by Pepco in Central and Eastern Europe
Poundland in UK 'behind expectations'
Forecasts full year core earnings up 20%
Adds executive chair comments paragraphs 5 to 8
LONDON, May 23 (Reuters) -European discount retailer Pepco Group PCOP.WA on Thursday reported a 28% rise in first-half core earnings, reflecting new store openings and an improved gross margin, and forecast growth for the full year.
Publication of the results from the Warsaw-listed owner of the Pepco, Poundland and Dealz brands, which issued two profit warnings last year, was delayed by a technical issue in Poland.
It said underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 487 million euros ($527 million) in the six months to March 31, on revenue up 13.8% to 3.2 billion euros.
Gross margin increased 310 basis points to 43.1% and the group opened a net 289 new stores in the period, mainly in Central and Eastern European (CEE) markets.
While Executive Chair Andy Bond cautioned that "consumer sentiment in some of our key markets remains challenging", he forecast underlying EBITDA for the 2023/24 year in the region of 900 million euros, up from 753 million euros in the previous year.
Bond said the standout performer in the first half was Pepco's CEE business, where gross margin and store profitability was rebuilt back towards pre-pandemic levels.
But he said Poundland's performance in the UK "was behind expectations", reflecting challenges in changing ranges to Pepco products, "which we are addressing".
Bond said the margin uplift partly reflected a more normalised environment for commodity prices, foreign exchange and freight costs versus the prior year, notwithstanding some impact from disruption to shipping in the Red Sea.
In February, Pepco said it would exit the Austrian market and also reported its Hungarian business had lost about 15.5 million euros in a phishing attack.
Last month, the group announced the appointment of Stephan Borchert, the former CEO of optical retailer GrandVision, as CEO effective from July 1.
The group's shares are down 16% so far this year.
($1 = 0.9236 euros)
Reporting by James Davey; Editing by Jan Harvey and Chris Reese
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