Pepco reshuffles management team amid difficult trading conditions

Pepco has experienced an increasingly challenging trading environment over recent weeks within its core markets of Central and Eastern Europe, with weaker consumer demand for our key clothing and general merchandise categories. As a result, the company has decided to reshuffle its management team, with managing director Anand Patel stepping down from his role with immediate effect. He will be replaced by Barry Williams, the managing director of Poundland. Austin Cooke, who is currently chief operating officer of Poundland, will now assume the role of managing director. Pepco has also established a new group executive committee which will undertake a strategy review to place greater focus on addressing costs and initiatives that are likely to generate appropriate returns in the near term, accelerate the transformation into a single business and refocus on our core markets. During August, Pepco experienced lower revenues than anticipated, worsening in September, with negative like-for-like sales and weaker than expected performance from new stores. Related to a slower rate of sales, the group has said to not have seen the expected recovery in gross margins as it continues to work through inventory from earlier in the year bought at a higher cost. In addition, the timing of its autumn/winter collection landing in stores has coincided with persistent record warm weather in our core CEE markets, resulting in weaker customer demand at this time. The weaker sales along with continued inflationary pressure on costs, and the drag from investment in new stores, has resulted in a further downward revision to Pepco’s forecast for the full year 2023. It now expects to deliver underlying FY23 EBITDA of approximately €750m (£650m) compared to the FY22 EBITDA of €731m (£633m). Notwithstanding the weaker profit outturn, the group has a strong balance sheet with access to over €400m (£346m) in liquidity from cash and credit facilities and continues to generate strong cash flow from its operations. The full Q4 FY23 trading update will be released on 12 October 2023. Andy Bond, executive chairman, said: “We remain confident in the opportunity of building Europe’s leading variety discount retailer offering great value to consumers across a range of FMCG, clothing and general merchandise products. However, it is clear that we need to refocus on delivering for our customers in our core business while delivering more measured growth. “We need to improve profitability and cash generation in our established business alongside a more targeted growth plan in markets where we have an existing presence.”