Discounter Pepco revenue rises as new store openings exceed target

GDANSK (Reuters) – Pepco Group on Thursday reported a 12.5% jump in its fourth-quarter revenue to 1.44 billion euros ($1.53 billion) on a constant currency basis, as the European discount retailer opened more than expected new stores during the year.

The group opened a record 343 new stores in the fourth quarter ended Sept. 30, with 668 openings in total during the full year, exceeding the group’s minimum target of at least 550 net new openings.

The Warsaw-listed group, which owns the Pepco, Poundland and Dealz brands, confirmed that annual underlying earnings before interest tax, depreciation and ammortisation (EBITDA) on constant currency basis is expected to reach about 750 million euros from 731 million euros last year.

The company’s shares were up 12% as of 1120 GMT.

“We perceive this as a rebound after the very poor performance of the stock in recent months and the better-than-expected sales reading and the much faster pace of the chain’s roll-out in the fourth quarter”, Trigon DM analyst Grzegorz Kujawski said.

“The sales data published today (…) showed that sales in comparable PEPCO stores (like-for-like sales) are better than the market expected (…) It seems that the recent reduction in full-year EBITDA guidance was partly under the pressure of the very dynamic network roll out in the fourth quarter”, he added.

Last month, Pepco shares posted a record drop after it downgraded its profit outlook twice within a couple of weeks. However, the group is still set to report its highest-ever EBITDA.

“Group performance over the past year has been mixed against a challenging market backdrop. We opened a record number of new stores and delivered strong double-digit revenue growth resulting in record group revenues,” Executive Chair Andy Bond said in the statement.

The fourth-quarter like-for-like revenue growth came in at 0.2%, with annual growth at 6.0%.

For the full year, the group’s revenue rose 17.7% to a record 5.65 billion euros, driven by Pepco’s growth of 24.8% and 8.4% for Poundland.

($1 = 0.9406 euros)

(Reporting by Adrianna Ebert; additional reporting by Mateusz Rabiega Editing by Christian Schmollinger, Rashmi Aich and Chizu Nomiyama)