Pep&Co, new skincare, boost lacklustre Poundland

By

Sandra Halliday

Published
Sep 4, 2018

​Value-focused store Poundland’s results may have shown that there's still work to do this week, but at least the clothing operation, Pep&Co, appears to be doing well and the addition of skincare is a wise move.

Poundland sales reached £1.19 billion in the first nine months of its current year, but that was 5% lower than last year after the closure of around 60 stores across the UK. However, like-for-like sales managed a small increase of 1.7%.

The company, which is now part of Pepkor Europe, has seen plenty of upheaval in recent periods as it has been caught up in the issues faced by Pepkor owner Steinhoff after news of serious accounting irregularities surfaced and the company lost 90% of its stock market value. 

But the nine months to the end of June saw it continuing to be “profitable and stable” and as well as closing some UK stores, it also opens new locations in Poland, France and Spain.

Poundland’s stores have benefited from the rollout of Pep&Co corners in its branches, something that has put it into direct competition with big-name value-focused retailers such as Primark and the supermarkets.

Poundland chief Andy Bond said that the retailer is “extending the value it can offer through additional price points and the introduction of Pep&Co fashion 'shop-in-shops' is giving customers a distinctive reason to shop on the high street.

“Underpinned by the introduction of tighter retailing disciplines, Poundland is changing at a pace led by its customers who are really embracing the difference.”

And while this could be seen as mere hyperbole on the part of an executive talking up the performance, he seems to have plenty of justification for his view. The stores that have Pep&Co corners in them saw like-for-like sales rising 7.7% in the period.

The Pep&Co presence certainly impressed analysts. Hannah Thomson, Senior Retail Analyst at GlobalData, said: “[The company] will be relieved that Pep&Co is performing so well. Rolling out the brand into Poundland helped boost sales and while fewer than a quarter of Poundland shops currently stock Pep&Co, it’s easy to see an opportunity for future growth here.

"The clothing offer will also help differentiate [it] from discount rivals such as B&M and Home Bargains, both of which are expanding their store portfolios but neither stocks a clothing range.”

She also said that the company has been wise to widen its price range  and its product offer, which now includes beauty: “While trading conditions are not likely to improve in the short term given the uncertainty and disruption inevitably caused by Brexit, Poundland is equipping itself to weather the storm. While 90% of products are still just £1, it has navigated its way out of its fixed-price straight-jacket effectively.

"As well as the multi-price Pep&Co, it has products on offer for 50p, £2 and £5 which should ensure it is able to protect its trading margins, while the recent launch of its #6 skincare range shows it is far from becoming complacent in the fight to tempt shoppers back to the high street and into its stores.”