Poundland owner Pepco cites Red Sea shipping issues for delayed summer stock and sales slump

Pepco, the owner of Poundland, has reported a decline in sales for the latest quarter, partially due to delays in summer stock reaching its stores as a result of shipping disruptions in the Red Sea.

The retail group, which also operates the Pepco and Dealz brands across Europe, is among the retailers affected by instability in the region, with many shipping companies having to reroute cargo around Africa following attacks by Houthi rebels.

This resulted in a delay in "summer stock hitting store shelves" in the quarter ending 30 June. However, the company remains confident that availability issues impacting like-for-like (LFL) sales will ease through the fourth quarter, as it mitigates the Red Sea impact by shipping product earlier and channelling stock through different shipping routes.

Despite this, Pepco reported a 4.3% drop in group LFL sales over the quarter. The sales slump was even more pronounced in its Poundland stores, which saw a 6.9% drop in LFL sales.

This was largely attributed to challenges associated with the launch of new clothing and general merchandise ranges from its Pepco business, which are "being addressed". Nonetheless, overall group revenues increased by 8% year-on-year to €1.48 billion (£1.25 billion), boosted by a series of new store openings.

The executive chair of Pepco Group, Andy Bond, noted: "We have continued to execute against our strategy to deliver more measured growth doing less, to achieve more with a greater focus on improving profitability."

He also remarked that "Group like-for-like revenues in Q3 were below our expectations, partly due to macro factors, such as ongoing supply chain disruption, and company-specific issues, including slower-selling older stock which is being removed through markdown, as well as the transition to Pepco-sourced clothing and general merchandise in Poundland and Dealz."

Additionally, he emphasized, "We are actively improving the availability and breadth of our ranges, and expect to benefit from these actions in the new financial year."

Pepco has maintained its earnings guidance from before, suggesting it expects to post about a 20% increase in earnings before interest, tax, depreciation, and amortisation (EBITDA) to approximately 900 million euros (£759 million) for the current fiscal year.