Pepco Lifts Full-Year Guidance on Strong Western Europe Sales and Dealz Poland Exit

Pan-European discount retailer Pepco Group raised its full-year guidance for profit and cash flow, citing strong third-quarter trading and the agreed sale of its Dealz Poland food business. The company's performance was bolstered by robust demand in Western Europe, which helped drive an 8.5% increase in group revenue for the quarter.

Upgraded Outlook and Q3 Performance

Pepco announced on Thursday that it now anticipates a full-year gross margin of around 51%, an increase from its previous forecast of at least 49.4%. The company also lifted its outlook for underlying EBITDA growth to the mid-teens, up from a low-teens forecast, against a restated base of €841 million. Furthermore, guidance for unlevered free cash flow was raised to approximately €300 million from over €250 million.

For the three months ending June 30, 2026, the group's revenue, excluding the Dealz business, reached €1.09 billion. Key growth metrics for the quarter include:

• Like-for-like sales (excluding food): +5.4%
• Western Europe like-for-like sales (excluding food): +15.0%
• CEE South and CEE North like-for-like sales (excluding food): +3.6% each

Gross margin for the first nine months of the fiscal year improved by 290 basis points year-on-year to 51.9%, attributed to sourcing efficiencies and favorable foreign exchange movements.

Strategic Exit from Food Retail

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A key factor in the revised outlook is the sale of Dealz Poland to Modella Capital, a specialist European retail investor. The disposal, which has received antitrust approval, completes Pepco's exit from the fast-moving consumer goods (FMCG) retail sector, allowing it to focus on its core discount clothing and general merchandise operations.

Pepco will provide an 18-month asset-backed vendor financing facility of up to £20 million as part of the deal and will retain a 35% share of net cash proceeds from any future sale of the business by Modella Capital. The Dealz Poland unit will be reclassified as a discontinued operation in the company's year-end financial statements.

Market Context and Shareholder Returns

CEO Stephan Borchert attributed the strong results to the "continued execution against our New Pepco strategy." The company's expansion continues, with 74 net new stores opened in the third quarter, bringing the total to 4,151. Pepco remains on track to open around 250 net new stores in the full year.

The group is also focused on shareholder returns, with a tender buyback of up to €400 million on track to be completed during the 2026 fiscal year. This follows a previous €200 million share buyback program that was completed ahead of schedule in May.