The owner of discount retailer Poundland has cautioned that his customers in the United Kingdom appear to be suffering the most as the cost of living crisis intensifies, with even spending on necessities taking a hit.
Owner Pepco, which conducts business in seventeen European countries, reports that the United Kingdom is seeing the most consumer reluctance but is optimistic about the future due to its value proposition.
Pepco Group, which also owns the European discount brands PEPCO and Dealz, blamed sluggish wage growth in the United Kingdom on inflation, which is currently at a 40-year high and is expected to continue rising in the coming months.
Despite stronger inflationary pressure in its central and eastern European regions, the company listed in Warsaw stated that higher salary growth was now balancing the impact on sales.
“Specifically in the United Kingdom, the cost-of-living problem has affected customers’ disposable money as they cut back on even basic expenditures,” Pepco added.
The company stated that it was attempting to alleviate the pressure on its prices by decreasing costs, particularly by increasing the use of self-service checkouts, while also absorbing a portion of the costs it was facing.
Pepco noted, “Our continuing commitment to cutting company expenses allows us to offset some of our input inflation, allowing us to protect prices for all of our price-conscious consumers.
It disclosed a £30 million group-wide investment in pricing for the first half of its fiscal year, which ended on March 31.
It meant, according to Pepco, that its gross margin had decreased by 137 basis points.
New shop openings helped increase Poundland’s six-month revenue by 11.4%, reaching £940 million.
Pepco said that its Poundland company was still trading above pre-pandemic levels, gaining market share, and expressed optimism that its discount position would flourish if the economic situation deteriorated.
Mat Ankers, interim chief financial officer, told Reuters, “We’re a value store, and this is our moment when we can drive our goal.
The greatest way to negotiate the current environment is to develop and generate scale,” he added, noting that the business opened 192 net stores in the first half, bringing the total to 3,696 in 17 countries.
