Pepco reports 'real turning point' after refocusing on clothing

Pepco Group, owner of Pepco clothing and Dealz,  has reported a "real turning point" in its financial performance, posting strong growth across revenue and profits after refocusing the business on its core Pepco brand and its clothing offer.

The European value retailer reported FY25 revenue of €4.52 billion (£3.97 million), up 8.7% year-on-year, with like-for-like sales returning to growth at 2.6%. Meanwhile, underlying EBITDA increased 10.3% to €865 million (£760 million)  and underlying net earnings rose 19.7% to €219 million (£193 million).

The results cover continuing operations only, following the sale of Poundland in June 2025 and Pepco’s full exit from FMCG. Gross margin improved by 100 basis points to 48%, a performance the group said reflected "exceptional pace" of execution after outlining its new strategic framework in March.

In August, Poundland confirmed it will return to developing its clothing ranges in-house by early 2026, as part of a wider business reset following its sale to investment firm Gordon Brothers for £1 in June.

The retailer, which has sold apparel under the PEP&CO brand since 2016, currently sources the majority of its clothing through former owner Pepco Group’s pan-European supply chain. That model was adopted in 2023 after Poundland became part of the Poland-based group, which operates more than 5,000 Pepco stores across Europe.

However, following its sale, Poundland has entered into a transitional agreement with Pepco to maintain current clothing ranges through to early 2026. The arrangement is designed to ensure continuity while the retailer restructures to reintroduce a UK- and Ireland-specific model led by an in-house team.

Chief Executive, Stephan Borchert. said: "2025 was a real turning point for the group. Having outlined our new strategic framework in March, the group has executed at exceptional pace, delivering significant progress in a short timeframe.

"The decision to refocus on Pepco and exclusively on our core categories of clothing and general merchandise has been validated by these strong results."

Pepco opened 247 net new stores during the year, taking its total estate to 4,359 locations, with Western Europe emerging as a clear growth engine. "The performance of Western Europe has become a clear growth engine, exceeding our initial expectations. It is clear this region is now prepared for future accelerated growth," Borchert said.

"We focused on the continuous improvement of our customer value proposition, which includes upgrading our product quality across numerous categories and further ensuring market-leading prices across our estate," Borchert added, alongside improvements to the supply chain and progress on digital capabilities, with a new website, app and loyalty scheme set to launch in Q1 2026.

Looking ahead, Pepco expects FY26 underlying EBITDA to grow by at least 9% year-on-year, with underlying net earnings growth expected to exceed 25%. "We are still early in our journey, but have a large opportunity ahead," Borchert concluded.