Pepco Group's H1 results: revenue up 5 percent, profit after tax jumps 52.3 percent

Pepco Group N.V., which is based in the Netherlands, has reported its unaudited interim results for the six-month period ended March 31, 2026, revealing substantial profit growth and an expansion of its retail footprint.

The pan-European variety discount retailer delivered revenue of 2.47 billion euros (2.87 billion dollars), representing a reported increase of 5 percent. Underlying profit after tax, or PAT, jumped by 52.3 percent to 198 million euros.

Commenting on the results, chief executive officer Stephan Borchert stated: “Beyond the revenue performance, our profitability has stepped up significantly. Strong gross margin expansion of 250 basis points, and the improved operational leverage of our Pepco business, have driven underlying EBITDA growth of 17.5 percent.”

Strategic pivot to core apparel and general merchandise lines

The positive results reflect the ongoing implementation of a transformation plan introduced at the capital markets day in March 2025. A key pillar of this strategy involved simplifying the group structure by exiting the FMCG segment to focus resources on higher-margin clothing and general merchandise categories.

Excluding the impact of the FMCG exit, group like-for-like revenue growth was plus 3.6 percent for the half year. The flagship Pepco brand recorded an apparel-driven LFL revenue growth of 4.6 percent when excluding FMCG, marking six consecutive quarters of positive LFL performance for the banner.

Accelerated expansion plans for brick and mortar network in Western Europe

Improved store economics in Western Europe, particularly across Iberia and Italy, have prompted management to significantly upgrade its regional expansion target. The group now plans to open at least 600 new brick and mortar stores in its existing Western European markets between financial year 2027 and financial year 2030, which will effectively double its regional presence.

During the first half, the group opened 61 net new stores across its portfolio, bringing the total European network to 4,420 locations. While expansion continues rapidly in southern Central and Eastern Europe, the group is also planning a carefully managed trial of new stores in select areas of Ukraine by the end of the 2026 calendar year, leveraging existing brand awareness among repatriated citizens.

Enhanced capital return framework and structural changes

The group reconfirmed its full year financial year 2026 guidance, expecting revenue growth of 6 percent to 8 percent and net underlying earnings growth of at least 50 percent. Supported by a robust balance sheet and pre-IFRS 16 net debt of 139 million euros, Pepco Group announced a refreshed capital allocation framework to upgrade shareholder distributions.

The retailer intends to complete a special one-time capital return of up to 400 million euros in financial year 2026 via a pro-rata tender buyback. From financial year 2027 onwards, the group will return all excess prior-year levered free cash to shareholders through a mix of buybacks and dividends, with a target to progressively increase the regular dividend payout ratio to 40 percent over time.

Divergent performances across portfolio brands and senior personnel appointments

The group performance was driven entirely by the core Pepco banner, which generated 2.30 billion euros in revenue and an underlying EBITDA of 505 million euros. Trading at the Dealz Poland banner remained challenging, with revenues declining by 6.6 percent to 170 million euros and LFL revenues falling by 8.3 percent. The group remains committed to separating the Dealz business by the end of financial year 2026.

To reinforce this strategic direction, the group completed several appointments during the period. Sabine Zantis-Moeller, who previously held senior marketing leadership positions at Deichmann, joined as chief customer director in March 2026. Additionally, Robert Pernak was appointed as head of pricing and Sławomir Nitek was appointed as country manager for Poland.