DESPITE rising inflation, war in Ukraine and supply constraints, Steinhoff’s subsidiary, Pepco Group, the owner of the Pepco and Dealz brands in Europe and Poundland in the UK, posted robust interims.
In the wake of the easing of Covid restrictions across all of its key operating territories, with its Pepco brand the star performer, Pepco for the six-months ended March 31, 2022 made a profit of €95 million (R2bn) from €68m the prior corresponding period, an increase of 39.7 percent.
“This improvement has taken the group’s same store performance above pre-Covid trading levels, when comparing same store sales performance with that for the equivalent period in FY19 (full-year 2019),” it said.
It posted a record first half in new store openings with 235 net new stores opened, ahead of guidance, excluding closure of 43 Fultons stores. Pepco grew its store footprint by 13.9 percent to 3696.
Like-for-like (LFL) sales growth was at 5.3 percent.
In its new stores in Western Europe, Pepco was installing self-scan tills using its EPOS software from Oracle to enable faster throughput of its customers through the check-out process, thus enhancing customer satisfaction as well as improving efficiency.
Trevor Masters, the chief executive of Pepco Group, said: “We are proud of the group’s performance in the first half of this year and the strategic progress made across the business. Despite a challenging macro environment, we accelerated our strategy, including our store opening programme, which remains the key driver of value creation for the business.
“As pandemic restrictions progressively eased, it was also encouraging to see the strong return of customers and the continuation of this into Q3 (quarter three) resulted in the group’s like-for-like sales rising above pre-Covid levels for the comparable period three years ago.”
Revenue was up 18.9 percent to €2.37bn and underlying earnings before interest, taxes, depreciation and amortization rose 7.3 percent to €347m.
Underlying earnings per share were at 20.2 euro cents up 25.5 percent year on year.
Pepco said while the absolute levels of inflationary pressure were greater in Central and Eastern European markets, the degree of wage inflation was substantially offsetting this in the short term.
However, in Western European markets the acute spike in inflation in a stagnant wage growth environment had quickly resulted in absolute lower spending by consumers.
“Specifically in the UK, the cost-of-living crisis has impacted customers’ disposable income as they scale back even on essential purchases in the short term. Our continued focus on reducing the costs of doing business means that we are able to offset some of our input inflation, allowing us to protect prices for all of our cost-conscious customers whilst also absorbing some of the input inflation ourselves as evidenced by the decline in our gross margins,” it said.
Pepco said the invasion of Ukraine, a country which bordered three of its largest operating territories, continued to create volatility, albeit with some trading upside driven by the influx of people to core Pepco markets. However, this was offset to some extent by the invasion exacerbating existing supply chain disruption and inflationary headwinds.
Looking ahead, the group said it remained on track to meet guidance for the full year in the absence of any further significant deterioration in the macro environment.
Steinhoff’s shares leapt 3 percent to R2.75 near noon yesterday.
BUSINESS REPORT