Pepco Group reports strong Q3, announces share buyback program

Pepco Group N.V., the variety discount retailer, today released its trading update for the third financial quarter of FY25, ended June 30, 2025. The report highlights robust performance, particularly from the 'New Pepco Group' (comprising Pepco and Dealz Poland) following the completed sale of Poundland on June 12, 2025.

The 'New Pepco Group' achieved third quarter revenues of 1.1 billion euros, demonstrating a constant currency revenue growth of 7.7 percent compared to the previous year. Like-for-like (LFL) revenues for the company increased by 2.6 percent in the quarter, with positive growth observed across both the Pepco and Dealz brands.

Stephan Borchert, chief executive officer of Pepco Group, commented on the results: "Our results in Q3 reflect our continued strategic execution across 'New Pepco Group' and actions we have taken to drive more consistent performance. The Pepco brand delivered a strong performance in the third quarter, registering record revenue of over €1 billion, a third consecutive quarter of like-for-like sales growth and a further uplift in gross margin."

Pepco and Dealz brands record positive momentum in Q3

Pepco, the core brand, delivered a strong performance with LFL revenue up 2.4 percent, marking its third consecutive quarter of LFL growth. This was attributed to improved availability, a sharper price focus on best-selling items, and enhanced product ranges, which collectively drove volume growth. Notably, Pepco's LFL performance, excluding Fast-Moving Consumer Goods (FMCG) as the company reaffirms its strategy to exit FMCG by the end of FY25, grew even more strongly by 4.8 percent.

Dealz also reported a robust quarter, with LFL sales increasing by 5.8 percent, driven by strong demand in both food and general merchandise.

Furthermore, the 'New Pepco Group' gross margin improved by 180 basis points year-on-year in Q3 FY25, reflecting continued strong progress within Pepco.

During the quarter under review, the company saw net new openings of 45 Pepco and Dealz stores, primarily Pepco openings in the Central and Eastern European (CEE) region. Overall, the group operated 4,276 stores at the close of the third quarter.

Pepco Group announces share buyback program

The company's Board also confirmed its decision to commence an initial share buyback program of up to 50 million euros, underpinned by the belief that the current share price materially undervalues the Group's future prospects and intrinsic earnings potential, aiming to further enhance shareholder returns.

Regarding the share buyback, Borchert noted, "The Group's continued momentum, its compelling underlying earnings potential, strong cash generation and the Board's belief that the current share price materially undervalues its future prospects underpins today's decision to commence a share buyback programme of up to €50 million, to further enhance shareholder returns."

The sale of the Poundland business, completed on June 12, 2025, to Gordon Brothers, aligns with the Group's strategy to simplify its structure and enhance shareholder value. This deconsolidation is expected to improve the company's revenue growth, drive higher profitability and margins, and strengthen cash generation.

In terms of outlook, the Pepco and Dealz businesses are anticipated to maintain strong momentum. The Group reiterates its expectation for Pepco business to achieve high single-digit year-on-year growth in FY25 revenues and underlying EBITDA (IFRS 16). Similarly, Dealz is expected to deliver FY25 EBITDA (IFRS 16) of approximately 30 million euros. The Group continues to project approximately 250 net new store openings across FY25.

During the quarter, the company's non-executive directors Paul Soldatos, Andy Bond and Neil Brown stepped down from the Board, while Dirk Van den Berghe was appointed as a board observer, who joins as a director nominee of IBEX Group, the company’s majority shareholder. Dirk brings deep experience to the Board through his prior senior leadership roles at multiple large retail businesses, including at Walmart and Delhaize Group.