Pepco raises profit outlook and unveils share buyback after strong fourth quarter

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Pepco raises profit outlook

Highlights

Pepco upgraded its full-year outlook, now expecting underlying net profit growth to exceed 60% and revenue above 4.5 billion euros after a strong fourth quarter.
Like-for-like revenue excluding fast-moving consumer goods rose 9.5% in the fourth quarter, its best performance since last year’s strategic overhaul and the sale of Poundland.
Pepco launched a new 400 million euro share buyback, highlighting management’s confidence after a transformational year in operations and portfolio optimization.

Upgraded outlook after late-year trading strength

As reported by Reuters, Pepco says fourth-quarter momentum prompts it to raise guidance for the financial year ending on Thursday, with underlying net profit growth now expected to surpass 60%, up from earlier guidance for more than 50% growth.

The group also says full-year revenue should exceed 4.5 billion euros, reaching the top end of its previously indicated 6% to 8% growth range. Like-for-like revenue excluding fast-moving consumer goods rises 9.5% by Sept. 20 in the fourth quarter, marking the best performance since Pepco's strategic overhaul, which includes last year's sale of Poundland in Britain.

Pepco also announces a new 400 million euro share buyback programme, underscoring management's confidence after what it describes as a transformational year for the retailer's operations and portfolio.

Market conditions differ across Europe

Pepco CEO Stephan Borchert tells Reuters that long-term supplier agreements and flexible supply-chain lead times help the company secure favourable pricing, allowing it to enter the new financial year with confidence despite wider industry pressures.

He says the retailer is navigating an uncertain macroeconomic environment, weak consumer confidence and rising wage and fuel costs. At the same time, Pepco is seeing different customer trends across Europe, with rising disposable incomes in Central and Eastern Europe contrasting with tighter household budgets in Western Europe that are pushing more consumers toward discount chains.

Borchert says Pepco is also benefiting in more mature markets from middle-class shoppers trading down to lower-price formats. He highlights Italy and Spain as key opportunities, saying the two markets together represent about 100 million potential middle-class customers.

In Poland, where newer discount rivals including Modivo's Shockprice and LPP's Sinsay are competing for share, Borchert says Pepco is relying on its network of more than 1,400 stores and frequently refreshed product ranges to keep attracting repeat shoppers.

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