Steinhoff’s European discount retailer Pepco, which recently listed in Warsaw, is expanding into new markets and bulking up its frozen food service offering.
The group, established in 2014 as a subsidiary of Pepkor, has grown to more than 3,000 stores across 15 territories, primarily in eastern and central Europe.
But under the leadership of CEO Andy Bond, a former CEO of supermarket group Asda, the company has made a push into Western Europe with entry into markets including Spain and Italy in recent years.
Despite the disruptive effects of the pandemic, the owner of Poundland in the UK added 225 new stores during its first-half to end-March, with its store portfolio up 14.4% year on year.
Besides Poundland, the group operates three other discount chains in the form of Pepco, Dealz and PGS. Pepco’s frozen food offering was bolstered in 2020 by the acquisition of Fulton’s Frozen Foods.
The group expects the environment to remain changeable and challenging in the short term, but more normal patterns are expected as Covid-related restrictions affecting consumers’ confidence to shop are further relaxed, Bond said.
“However, as these results show, we have a clear and winning customer offer, a long-term growth strategy delivering stores in existing and exciting new markets, as well as a number of key initiatives to drive our sales and margin,” he said. “As such, we remain confident about our prospects for continued profitable growth in the balance of the financial year and beyond.”
The group was hit by store closures and disruptions, but said customers at its Pepco stores demonstrated their willingness to wait for a short period of closure, leading to strong footfall and sales on reopening.
Pepco grew its first half revenue to end-March by 9% on a constant-currency basis, while in reported terms it rose 4.4% to €1.99bn (R34bn).
Group underlying earnings before interest, taxation, depreciation and amortisation (ebitda) grew 16.8% to €324m, benefiting from continued store expansion, tightly managed operating costs, as well as support from the UK government.
Discount brands are growing in popularity globally as consumers come under pressure. In its listing prospectus, Pepco described its customer as being “a mum on a budget” who buys everyday household products and clothing “at the lowest price”.
It has 3,246 stores across Europe, and brands include UK discount retailer Poundland and Dealz in Ireland and Spain, which sell cheap homeware, cosmetics and stationery.
Pepco listed in Warsaw in May, saying on Thursday it has kept its guidance unchanged, and it has said it wants to open at least 70 new Dealz stores a year.
The group expects to fund a substantial part of this growth through cash generation, but has said it may also look to the market for additional financing.
Steinhoff received proceeds of about €1bn from the sale of shares in the initial public offering (IPO) of Pepco, and still holds more than three quarters of the group.
Steinhoff is also saddled with legal claims, amounting to more than R130bn, stemming from the precipitous decline in the value of its share price in late 2017 when news of an accounting scandal came to light, prompting the resignation of then CEO Markus Jooste.
Steinhoff has proposed $1bn (R14.2bn) to settle legal claims worth more than R130bn from shareholders who sued on grounds that they had been misled into buying almost worthless shares.
Pepco’s IPO was 40 Polish zloty per share (R150) — giving it a market value of about €5bn — and its shares have risen about 17% since listing. /With Warren Thompson
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.