European discount retailer Pepco Group has today reported an 11% rise in first-half core earnings as revenue surged 23% but said trading has been tougher in its third quarter.
The Warsaw-listed group owns the Dealz, Pepco and Poundland brands.
It said an uncertain trading backdrop had continued from April into May, with weaker consumer sentiment around discretionary spend in response to high inflation, particularly in Central Europe.
"Evidence of this is being seen through lower frequency of visits and customers making different purchasing decisions," it said.
It said demand for FMCG (fast moving consumer goods) continues to strengthen across its businesses, while it was seeing a mixed performance from clothing and general merchandise categories.
European consumers have been under pressure for over a year from high inflation that has outstripped pay growth.
In economic downturns, discount operators tend to do relatively better than more mainstream peers, as they have lower cost bases and shoppers become more price sensitive.
Pepco Group said it made underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €377m for the six months ended March 31, up from €347m in the previous corresponding period.
Revenue was €2.84 billion, as the group's discount offer chimed with cash-strapped consumers and it opened a net 166 new stores, taking the total to 4,127. Like-for-like sales rose 11.1%.
The group said it was confident of meeting its target of at least 550 net new stores in the full year and kept its guidance for full-year revenue growth in the "high teens" and core earnings growth in the "mid-teens".
"We remain well positioned and in the second half will see gross margins trending upwards, as we benefit from the tailwinds on certain input costs, including commodity and freight," said CEO Trevor Masters.
