This article first appeared on GuruFocus .
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Revenue:EUR4.5 billion, up 8.7%.
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Gross Margin:Increased by 100 basis points.
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Underlying Profit After Tax (PAT):Up 20% to EUR219 million.
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Dividend:EUR0.096 per share, payout ratio of 25%.
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Free Cash Flow:EUR334 million.
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Store Openings:200 net new stores in Poland and CEE; 215 stores opened in CEE and Poland.
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Like-for-Like Growth:Poland 2.4% including FMCG, 3.9% excluding FMCG; Western Europe 6.8% including FMCG, 14.1% excluding FMCG.
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Store EBITDA Margin:Western Europe average store EBITDA margin reached 11%, up 460 basis points.
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Net Earnings Growth:20% in fiscal year '25.
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CapEx:Expected to be at the top end of EUR160 million to EUR180 million range for fiscal '26.
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Debt Refinancing:Reduced average coupon by 2.5 percentage points, creating an interest saving of EUR40 million annually.
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Store Closures:Closing 28 of 64 stores in Germany.
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Release Date: December 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Pepco Group NV ( FRA:8UX ) reported a revenue increase of 8.7% to EUR4.5 billion, despite a 2% headwind from exiting FMCG.
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The company achieved a gross margin improvement of 100 basis points, driven by a shift from low-margin FMCG to higher-margin clothing and general merchandise.
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Underlying profit after tax increased by 20% to EUR219 million, reflecting strong bottom-line growth.
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The company declared a dividend of EUR0.096 per share, up from a 20% payout ratio last year to 25% this year.
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Pepco Group NV ( FRA:8UX ) is executing a strategic plan to simplify and streamline operations, including the sale of Poundland and plans to divest Dealz, enhancing focus on core operations.
Negative Points
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The exit from FMCG resulted in a 2% negative impact on revenue growth, which will continue to be a headwind in the first half of fiscal '26.
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Store costs increased due to higher labor costs, particularly in CEE, impacting overall profitability.
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The company faced a one-off IFRS 16 impairment charge of EUR38 million, affecting EBIT growth.
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Despite improvements, the Western Europe segment still requires further growth to match group profitability levels.
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The competitive environment remains challenging, particularly in Poland and Northern CEE, with high competitive pressure.
Q & A Highlights
Q: Can you unpack the drivers of the 6% to 8% revenue growth for next year, excluding the FMCG drag? How does this vary by category and region? A: Stephan Borchert, CEO: We don't guide down to segment detail, but we've seen strong performance in general merchandise and positive progress in ladies' wear. Kids' products, which make up about 25% of our business, will also grow. In Western Europe, we see strong growth in kids and baby categories, while in mature markets, there's a focus on general merchandise. Western Europe is currently driving like-for-like growth, but CEE remains our core market.
Q: How should we think about midterm gross margin guidance and potential for further expansion? A: Willem Eelman, CFO: Our group margin was 48%, with an additional 40 basis points expected from the FMCG exit. We see continued tailwinds from ForEx and local currency purchase costs. While maintaining our price competitive position, we aim to use gross margin opportunities to drive profit growth ahead of revenue growth.
Q: What is the consumer backdrop in key markets, and how do you view the competitive environment? A: Stephan Borchert, CEO: Consumer behavior is volatile, but we see stable transaction numbers. November was weaker due to delayed spending, but overall, we are not worried about spending power. We have pricing flexibility if needed. Competitive pressure varies by market, with Poland and northern CEE seeing high competition. The EU's fixed levy on low-value e-commerce imports may impact the competitive landscape.
Q: Can you comment on inventory levels and sourcing trends from Asia? A: Stephan Borchert, CEO: We are comfortable with our inventory levels, meeting internal targets. Our sourcing is diversified across Asia, including China, Bangladesh, and India. We are exploring sourcing from Northern Africa, which may offer cost advantages. We continue to improve our processes and balance the value chain.
Q: Does the earnings growth guidance include the impact of share buybacks? A: Willem Eelman, CFO: The guidance is on absolute earnings, not earnings per share. On a diluted basis, the number was in line with our underlying earnings growth. The guidance reflects absolute euro level growth.
Q: How does Pepco view the ongoing decline in birth rates in Poland and Europe? A: Stephan Borchert, CEO: While birth rates are declining, the spend per child is increasing. We are in the value segment, so demographic changes are not a major headwind. We focus on upgrading ranges and quality to remain a destination for young families on a budget.
Q: How many new locations are planned for Poland in 2026? A: Stephan Borchert, CEO: We do not disclose detailed market plans, but focus on capital allocation and return thresholds. White spot opportunities are moving towards southern CEE and Western Europe. In Poland, we focus on upgrading and relocating stores to drive like-for-like growth.
Q: Will customers be able to make purchases in the Pepco app? A: Willem Eelman, CFO: Initially, the app will focus on customer engagement and driving store visits, not transactions. We are exploring strategic options for a transactional strategy in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
