After an explosive rally, Steinhoff falters as Pepco releases trading update

After a monster 50% rally on Tuesday, Steinhoff's share price retreated slightly on Wednesday after its European retail chain - which may be the target of a takeover bid - reported a trading update.

Pepco Group reported total revenue growth of 13% for the three months ended December 2019. The group increased the number of the stores in its store network by almost 15% from the previous year, to 2,809 stores.

The group owns the cut-price retailer Pepco, which has more than 1 600 stores in Central and Eastern Europe, as well as the UK chain Poundland, which famously sells branded products for a pound, and Dealz, which does business in Ireland, Poland and Spain. 

Sky News reported on Monday that a former owner of Poundland is plotting a takeover deal with two private equity firms, in a transaction that could value Steinhoff's European company at more than €4.5bn (R73 billion)

Pepco Group's Eastern Europe chain Pepco bolstered its total revenue by almost 25% after the retailer expanded its store portfolio by over 20%, opening 94 new stores in the three months. 

“Pepco Group has continued to deliver operational and strategic progress, in this important trading quarter, reflecting our clear growth strategy, centered on the significant long-term opportunity for further PEPCO stores in central Europe, together with a focus on day-to-day retail execution, said the CEO of Pepco Group Andy Bond.

“This combination has secured another quarter of strong revenue growth, both in total and like-for-like terms, in each of the Group’s brands,” he added. 

Poundland's Dealz's total revenue for the period rose 1.3%. Despite a weak consumer backdrop, the retailer saw a record trading day before Christmas where it served about 1.6 million customers. The retailer also expanded its portfolio by over 40% after opening 22 more stores and expectations of opening 50 more in the period.

Steinhoff’s shares price reached approached R2 on Wednesday morning - for the first time since May 2019 - amid optimism about a possible Pepco Group takeover deal. 

According to Sky News, the previous owner of Pepco, Advent International who sold Pepco to Steinhoff for £200 million a decade ago, is partnering with Hellman & Friedman and Mid Europa Partners and plans to reclaim control of Pepco.

But by lunchtime on Wednesday, it was trading at 155c. 

steinhoff
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