Poundland has helped boost margins by reducing store rents, according to a trading update from owner Pepkor Europe.
Group EBITDA rose 29.1% to €151m (£136m), leading to a further expansion of EBITDA margin of 110bps, according to the updated half-year trading statement.
The growth ‘in both absolute and margin terms’ had been contributed to by ‘initial traction within Poundland to reduce store rents in line with prevailing market conditions and to return shrinkage to historic levels’, according to the statement.
Group revenues rose 13.3% to €1.7bn (£1.5m) in the period, covering the half year to 31 March. Poundland’s own revenues rose by 1.6% to €920m (£830m) amid an ongoing estate rationalisation programme, which has seen poorly performing stores closing and 20 new ones opened in ‘stronger locations’. Overall, the estate grew by 0.5% to 875 stores in the period.
Poundland’s sales growth, which ‘continues to outperform the wider UK high street’, was attributed primarily to the rollout of Pep&Co clothing ‘shops in shops’ to 300 stores, along with ‘measured product range extension to support a broader range of price points’.
A spokesman said more products were being introduced at £2 and £5, giving the example of a new, better-quality £2 hammer, replacing the old £1 one in the range. “Customers get this. The new hammer is selling better than the old hammer,” he said.
He said the store rationalisation programme was “actively managing the estate” and seeking new sites big enough for the full range, including Pep&Co. “On shrink, we’re just working hard to make sure we keep on top of it,” he added.
Pepkor Europe CEO Andy Bond warned investment in expansion across the group, including Pepco and Dealz, Poundland’s sister retailers in Europe, could slow earnings growth in the second half. He also announced the appointment of new Pepkor Group CFO Nick Wharton, who previously held the same post at Superdry.
“The foundation of the group’s continuing strong performance remains our ability to provide exceptional value to our millions of customers every week within a core discount segment which is being accessed by an increasing number of consumers across Europe,” he said.
“As we continue to grow we are building a strong senior management team across Europe, and I am pleased to announce the appointment of Nick Wharton, a hugely experienced and respected retailer who has joined as our group CFO to further strengthen our board.
“Our trading progress has been matched by our strategic development. We continue to confidently expand Pepco and our belief that the Dealz format in mainland Europe can provide an exciting additional source of growth is increasing. Quality, scalable infrastructure across the group is necessary to secure the growth opportunity available to us, and while such investment may slow our rate of earnings growth in the second half-year, with a focused strategy in place a strong financial base and three trading brands all performing well, the opportunity for long-term growth across Europe is clear.”
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