GDANSK, Poland, Dec 17 (Reuters) - European discount retailer Pepco Group on Wednesday guided for underlying core profit growth of at least 9% and 250 store openings in the 2026 financial year,
Pepco Targets Swift Store Expansion Following Profit Increase
GDANSK, Poland, Dec 17 (Reuters) - European discount retailer Pepco Group on Wednesday guided for underlying core profit growth of at least 9% and 250 store openings in the 2026 financial year, signalling confidence in its strategy after the sale of Poundland in Britain.
For the year through September 30, the Warsaw-listed group's underlying earnings before interest, taxes, depreciation and amortization rose 10.3% to 865 million euros ($1 billion).
"2025 was a real turning point for the group," CEO Stephan Borchert said in a statement, adding that strong results on gross margin and free cash generation reflected the success of the new strategy.
The final step in a strategic reset to remove distractions and focus solely on the core Pepco format is the divestment of the Dealz brand, which keeps weighing on growth numbers — a process which the group expects to kick off next year.
This new focus hinges on a simplified, standardized store model that sells clothing and general merchandise, which offer better margins than food items.
"We are creating a cookie-cutter structure, which we can now roll out faster," Borchert told Reuters.
Supporting the physical rollout is a digital application, to be launched in the first quarter of 2026. The app's purpose is to get customers into stores through a loyalty programme and promotions, rather than to build a standalone e-commerce business.
This strategy contrasts with that of Pepco's Polish rival Sinsay, which has made significant investments to build out its e-commerce operations across Europe.
Borchert said a full transactional e-commerce model would be challenging due to low basket values.
"The unit economics do not add up," the CEO said, although he would not rule out the possibility of moving into e-commerce transactions at a later stage.
Pepco said in the earnings statement it would raise its dividend payouts to 25% of its underlying net profit, from 20% previously. As a result, it lifted the 2025 dividend to 9.6 euro cents per share, up 57% from last year.
The retailer also raised its free cash flow target by 50 million to 250 million euros per year.
($1 = 0.8530 euros)
(Reporting by Alicja Surdy, editing by Milla Nissi-Prussak)
