Pepco Group reports 4.3 percent revenue growth amid strategic FMCG exit

Pan-European variety discount retailer Pepco Group has announced its trading update for the first quarter of fiscal year 2026, ended December 31, 2025. The group reported a 4.3 percent increase in total revenues to 1.40 billion euros (1.63 billion dollars) on a constant currency basis. This growth was primarily driven by the flagship Pepco brand, which offset a softer performance at Dealz and a temporary drag from the group's planned exit from fast-moving consumer goods (FMCG). Group like-for-like (LFL) revenues, excluding FMCG, grew by 3.3 percent during the quarter.

The group increased its gross margin by 360 basis points year-over-year to 49.4 percent, matching the level achieved in the final quarter of fiscal year 2025.

Stephan Borchert, chief executive officer of Pepco Group, described the start to the year as encouraging, noting that the group's focus on price leadership continues to resonate with customers in a subdued macroeconomic environment.

Pepco delivers strong volume growth

The Pepco brand achieved first quarter LFL revenue growth of 4.2 percent when excluding FMCG categories. This performance was supported by strong volume growth and positive LFL results in key markets, including Poland, Italy, and Iberia. In Western Europe, the brand maintained consistent double-digit LFL growth (excluding FMCG) throughout the period.

Dealz reported a 7.7 percent decline in LFL revenues for the quarter. The business faced operational disruption in October and November 2025 following a replatforming exercise after the sale of Poundland, although a material recovery was observed in December. Pepco Group continues to progress with the divestment of the Dealz brand, which it intends to complete during 2026.

At the end of the quarter, the group operated a total of 4,410 stores. During the period, 51 net new stores were opened. The group maintains its target to open approximately 250 net new stores across the full fiscal year 2026, with all new openings focused on the Pepco brand.

Financial outlook and shareholder returns

Pepco Group’s guidance for fiscal year 2026 remains unchanged. The group expects full-year revenue growth of 6 percent to 8 percent, despite an estimated two percentage point adverse impact from the FMCG exit. Underlying EBITDA growth is projected to increase by at least 9 percent, while underlying net earnings growth is expected to exceed 25 percent year-over-year.

The group also updated shareholders on its 200 million euros share buyback programme. The second 50 million euros tranche is set to conclude on January 16, 2026, and the group intends to commence a third tranche of up to 50 million euros later this financial year.