Pepco Group (PCO) Q3 2024 TU earnings summary

Executive summary

• New CEO Stephan Borchert introduced, with a formal transition period underway and a focus on seamless leadership change.

• Group revenue for Q3 FY24 reached €1,481m, up 8% year-on-year on a constant currency basis, with YTD 9-month revenue at €4,681m, growing 10% year-on-year.

• Like-for-like (LFL) revenues declined 4.3% in Q3, impacted by earlier Easter, supply chain disruptions, and slower-selling older stock.

• Net new store openings totaled 326 for the nine months, with 37 in Q3, focusing on core Central and Eastern Europe (CEE) markets.

• Strategy emphasizes more measured growth, prioritizing profitability and free cash flow over rapid expansion.

Financial highlights

• Q3 revenue: Pepco €929m (+12.6% YoY), Poundland €480m (-2.7% YoY), Dealz €72m (+23.3% YoY).

• Group revenue grew 8% year-over-year on a constant currency basis.

• Group LFL revenue in Q3: Pepco -2.7%, Poundland -6.9%, Dealz -7.3%.

• Gross margin improved significantly both quarter-on-quarter and year-over-year, especially in Pepco.

• Same store cash profit per store has returned to pre-COVID levels and is expected to surpass them by year-end.

Outlook and guidance

• Guidance for full-year profit reiterated at €900 million, implying roughly 20% year-over-year profit growth at group level.

• Management confident in delivering FY24 underlying EBITDA of ~€900m and improved LFL sales trajectory in core Pepco business by year-end.

• Improving sales trend expected in Q4, with business anticipated to exit the year in a stronger like-for-like position.

• Inventory mix improving as older stock is cleared, supporting higher-margin sales.

• Availability issues from supply chain disruptions expected to ease in Q4 as mitigation measures are implemented.