Pepco lifts full-year profit forecast as it closes strong fourth quarter

Discount retailer Pepco raised its full-year net profit forecast and ⁠announced a new €400 million ($454 million) share buyback programme on Tuesday, citing a strong end to a “transformational year.”

The Warsaw-listed company expects its underlying net profit growth to exceed 60% in the financial year ⁠that ends on Thursday, ‌up from the earlier ⁠guidance of more than 50% growth. It also sees full-year revenue exceeding €4.5 billion, at the top of its 6% to 8% ​growth forecast range.

The ​outlook was lifted after a strong fourth quarter, where like-for-like revenue excluding fast-moving consumer goods grew 9.5% by September 20, the best performance since Pepco’s strategic revamp that included ‌last year’s Poundland ​sale in Britain. Pepco CEO Stephan Borchert told Reuters long-term supplier agreements and flexible supply-chain ‌lead times had helped it ⁠secure favourable pricing and it was therefore opening the new financial ‌year with confidence despite continued industry-wide concerns.

“We are here to mitigate and tackle challenges,” Borchert said, referring to issues tied to an uncertain macroeconomic environment, subdued consumer confidence, and climbing wage and fuel costs. Pepco shares were up 2.7% by 09:30 ​GMT.

Pepco is seeing contrasting dynamics across its markets, from growing disposable incomes in Central and Eastern Europe to tighter household budgets in Western Europe, ​which drive consumers ‌toward ​discount chains, Borchert said. “We see, particularly in the more mature markets, ‌a trading ‌down from middle class into concepts like ours,” he said, basing his view on unit prices and payment data. Italy and Spain, where the combined middle ⁠class totals roughly 100 million potential customers, are among those markets, he added.

Asked about competition in Pepco’s home market Poland, where ‌discount market entrants such as Modivo’s Shockprice, ​and LPP‘s Sinsay vie for market share, Borchert said he was counting on Pepco’s network of more than 1,400 stores and constantly refreshed product ‌lines to keep shoppers coming back.