Pepco Group had lots of news on Thursday with a Q2 trading update and a CEO announcement. Executive Chairman Andy Bond unveiled Stephan Borchert as its new CEO, effective from 1 July when he’ll start a three-month induction process to acquaint himself with the group’s operations and culture.

Bond will stay in his Executive Chairman role for those three months, remaining in the chair but in a non-executive capacity after that.

Borchert will be based in London even though the business — which owns the Pepco, Poundland and Dealz chains — is spread all over Europe and has its stock exchange listing in Poland.

The company said he’s “an accomplished CEO with a strong track record of leading international companies across various sectors including fashion, beauty, pharmacy and healthcare services. His extensive experience in leading complex, multi-brand retail businesses globally and in EMEA made him the standout candidate in the search process”.

For four years until 2022 he was CEO of GrandVision, the optical retail giant that operates more than 7,400 stores in over 40 countries.

While there he worked “to develop a new growth strategy underpinned by a centralised technology platform, investments in omnichannel, the customer proposition and supply chain capability. The new strategy drove increased sales and EBITDA, which reached record levels in 2021, despite the challenges of the Covid-19 pandemic”.

Before that, he was President of Sephora EMEA on the Global Executive Committee, “where he again improved profitability and increased revenue, while accelerating the beauty and cosmetics retailer’s omnichannel development”.

He replaces former CEO Trevor Masters who left last autumn as the company continued to struggle, despite the assumption that such a value retailer would prosper in the cost-of-living crisis.

And it still faces major challenges as the Thursday update showed. The first half of FY24 (ending 31 March) saw group revenue of €3.2 billion, up 11% in constant currency. But group like-for-like (LFL) revenues were down by 2.5%.

In Q2 alone, revenues of €1.349 billion were up 11.7% but fell 2.9% LFL.

Pepco itself was down 3.2% LFL in the half, “against a tough comparative period where LFL sales were up by 15.8% in H1 FY23”.

Poundland was down 0.7% LFL, “with a positive FMCG performance offset by a weaker performance in clothing and general merchandise (GM) impacted by [the] transition to new Pepco ranges”.

And Dealz dropped 4.6% LFL impacted by the same planned transition to Pepco-sourced GM.

But it has seen a strong recovery in group gross margin continuing, driven by Pepco.

Andy Bond said: “We continued to make good progress against our renewed strategy in H1, growing revenue and driving a positive trajectory in gross margin. While the trading environment remains challenging, we are encouraged by signs of an improved performance in some of our core Pepco Central and Eastern Europe markets – a key geographical region for the group – during the second quarter. We expect a continued upward trajectory in LFL sales at Pepco in H2.

“We remain focused on cost control and are on track to deliver a significant reduction in our capex this year – making us increasingly confident on enhanced free cash flow generation in FY24. Our margin improvements are being driven by a combination of macro-factors from easing input costs, including commodity and freight, to more favourable foreign exchange, as well as self-help levers including enhanced purchasing and supply chain efficiencies.

“As planned, we’ve taken a measured approach to store openings in Q2, with new store growth focused in markets where we are confident of generating the highest returns. This targeted approach will continue over the coming quarters, as part of our renewed strategy to drive core profitability through a more disciplined approach to growth and investment.”