Poundland owner says prices will stay the same despite supply chain chaos

The owner of British discount retailer Poundland will not raise prices despite higher costs from global supply chain disruptions, it pledged on Thursday.

Pepco Group, which also owns the PEPCO and Dealz brands in Europe and trades from 3,504 stores, said it had faced higher shipping costs since the final quarter of its financial year to September 30.

But despite that, CEO Andy Bond said prices on the vast majority of the group’s merchandise would not be increased in its new financial year.

“The pressure that that will put on us from a margin point of view will be substantially offset by ... cost initiatives in our own business,” he said without giving details of savings planned.  

“We feel confident that we will navigate this issue and still deliver on our financial goals as well as doing the Right thing for customers,” Bond said.

Poundland has been moving away from its traditional single price point of one pound ($1.37) since 2017, with just less than 64% of its products sold at that level in 2020-2021. PEPCO is a multiprice operator. The group makes over 80% of its profit outside Britain.

Bond said stores across the group have as much stock as they had this time 2020 and he was confident that by the end of October they would have more stock than at the same point 2020.

“We’re very well set for a good Christmas,” Bond said.

Pepco, which listed on the Warsaw stock market in May with a valuation of €5bn, forecast core profit for 2020-2021 at the upper end of market expectations after revenue rose 19.4%, helped by its rapid store opening programme.

Full-year revenue was €4.1bn, with like-for-like sales up 6.5%. Pepco’s like-for-like sales rose 10.2% in the fourth quarter and  Poundland/Dealz’s 1.0%.

Net new store openings over the year were 483, including the first PEPCO stores in Austria, Serbia and Spain.

Bond said the group would probably enter Germany this financial year.

“Germany is Europe’s biggest consumer market, so the opportunity there is vast,” he said.

The group expects to create 13,000 jobs over the next three years.

Pepco forecast 2020-2021 underlying earnings in a range of €640m-€655m, up 45% growth at the midpoint from the Covid-19-hit previous year.

The group's shares, priced at 40 zlotys at the IPO, were trading at nearly 49 zlotys on Thursday.

Also on Thursday British home furnishings group Dunelm reported an 8.3% rise in first-quarter sales.

Reuters