Pepco Group: Potential Supply Chain Risks Due to Conflict in Red Sea

Discount retailer Pepco Group has stated that the ongoing conflict in the Red Sea has had minimal impact on its product availability. However, the company warns that if the conflict persists, it could pose supply chain challenges in the upcoming months.

Pepco Group, which encompasses Poundland in the U.K. and Dealz and Pepco in continental Europe, highlighted on Thursday that Houthi fighters' attacks on vessels in the Red Sea have resulted in increased spot freight rates and delays in container lead times.

Although Pepco has secured contracted freight costs until the end of its third quarter, it anticipates additional surcharges from carriers. These charges arise from shipping companies taking longer routes to avoid the Red Sea.

During its fiscal first quarter, which concluded on December 31, Pepco reported a 2.3% decline in like-for-like revenue across the group. However, there was a positive trend observed during this period.

On a constant currency basis, revenue for the company grew by 11% compared to the previous year, reaching 1.9 billion euros ($2.07 billion). Notably, Pepco's business saw a 3.7% decline in like-for-like revenue, reflecting a challenging comparative period when sales had increased by 20% year-on-year.

Dealz experienced a 4.6% drop in revenue, primarily due to planned lower stock availability in various merchandise categories. However, Poundland's performance remained robust, with strong Christmas sales driven by consumer demand for fast-moving consumer goods.

In light of these developments, Pepco Group remains vigilant about potential disruptions to its supply chain. Further updates will be provided as the situation unfolds.