Poundland Group’s foray into e-commerce will help reduce its reliance on stores, says GlobalData

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail

Following today’s release of Pepco (Poundland)’s figures for FY2020/21; Georgina Sreeves, retail analyst at GlobalData, a leading data and analytics company, offers her view: “The low-cost products and diversified offering of Poundland’s owner, Pepco Group, resonated well with shoppers in its FY2020/21 as group revenue rose 19.4% year-on-year (y-o-y) to €4.1bn and 20.7% on a 2-year basis. This was driven by its PEPCO fascia where revenue jumped 29.2% y-o-y to €2.2bn and 33.1% on a 2-year basis. The group achieved like-for-like (l-f-l) growth of 9.8%, which includes temporary store closures due to COVID-19, signifying its appeal. Poundland Group, which consists of Poundland and Dealz, was aided by a post-lockdown boost; revenue declined 0.5% in its H1, but by the full year revenue grew 9.8% y-o-y to almost €2bn and 9.4% on FY2018/19. This now represents almost half (47.5%) of Pepco Group revenue.

Poundland Group’s positive full-year performance could have been even better, but its lack of transactional website during the peak of the pandemic and lockdown periods diverted a portion of shoppers to its competitors. This has driven the Poundland fascia to trial a transactional website in the UK, where it now delivers a range of homewares, electricals, food & drink and more to 11 UK cities. Many of these products are more than £1 in an attempt to increase basket sizes and margins which mitigate the problems value retailers have making e-commerce profitable.

Unsurprisingly, Pepco Group is affected by the global supply chain issues. This was particularly apparent in its fourth quarter where shipping costs increased significantly due to limited container capacity. The group hails its ‘unique Far East direct sourcing operation’ and changes to its operating model as factors which have alleviated a degree of this pressure, but the group’s reliance on branded products (which is high but reducing given the rollout of own-brand PEPCO products) leave it vulnerable to these ongoing issues.

Pepco Group ended the year with closing net debt at €1.2bn compared to €1.24bn the previous year, and full-year underlying EBITDA is expected to be €640-€655m (both on a post-IFRS16 basis). This is despite its considerable store expansion throughout the year which saw the group open 424 net new stores, 60 of which were Poundland/Dealz stores.”