By James Davey
LONDON (RockedBuzz via Reuters) – European discounter Pepco Group said trading had become more challenging in the current quarter as inflation gnaws at consumers’ purchasing power, dulling the former’s 11% rise in core earnings. semester.
Shares of the Warsaw-listed group, which owns the Pepco, Poundland and Dealz brands, fell 4.7% in morning trading on Tuesday after it said an uncertain trade backdrop continued from April to May, with sentiment consumers weaker regarding discretionary spending in response to high inflation, particularly in central Europe.
“Evidence of this is seen through lower frequency of visits and customers making different purchasing decisions,” he said.
It said that while demand for FMCG (fast-moving consumer goods) continued to strengthen across its businesses, it saw mixed performance in the apparel and general merchandise categories.
“It was a softer experience in a couple of categories in the second quarter and that continued,” finance chief Neil Galloway told RockedBuzz via Reuters.
European consumers have been under pressure for over a year as high inflation has outpaced wage growth.
During economic downturns, discount operators tend to do relatively better than more traditional competitors, as they have lower cost bases and shoppers become more price sensitive.
In food retailing, Aldi and Lidl are currently the fastest growing UK operators, while in air travel Ryanair is outpacing its competitors.
Pepco Group reported earnings before interest, taxes, and amortization (EBITDA) of 377 million euros ($405 million) for the six months ended March 31, compared to 347 million for the prior year.
Revenue rose 23% to 2.84 billion euros as the group’s discount offering hit cash-strapped consumers and it opened 166 net new stores, taking the total to 4,127. Like-for-like sales increased by 11.1%.
The group said it was confident of achieving its goal of at least 550 net new stores in the full year and maintained its guidance for annual revenue growth in the “tall teens” and core earnings growth in the “mid-2020s”. ‘adolescence”.
“We remain well positioned and will see an upward trend in gross margins in the second half as we benefit from favorable factors on some input costs, including raw materials and goods,” said CEO Trevor Masters.
($1 = 0.9320 euros)
(Reporting by James Davey; editing by Louise Heavens and Jason Neely)