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H1 like-for-like revenue down 2.5%

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Revenue up 11%, reflecting store openings

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Gross margin improving

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Expects profitable growth in 2023/24 year

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Names Stephan Borchert as new CEO

(Adds link paragraph 7, shares paragraph 12)

By James Davey

LONDON, April 11 (Reuters) - Discounter Pepco Group

reported a 2.5% fall in first-half same-store sales in

a still challenging trading environment across Europe but said

its profit margins were recovering.

The Warsaw-listed owner of the Pepco, Poundland and Dealz

brands issued two profit warnings last September and in October

said it would slow down its store opening programme to focus on

rebuilding profitability. In February it said it would exit the

Austrian market.

It said on Thursday group revenue was 3.2 billion euros

($3.4 billion) in the six months to March 31, a rise of 11% on a

constant currency basis, which reflected the opening of 289 net

new stores.

The group also announced the appointment of Stephan

Borchert, the former chief executive of optical retailer

GrandVision, as CEO effective from July 1.

It said Andy Bond will remain in his role as executive chair

until Oct. 1, when he will become non-executive chair.

"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,"

Bond said.

He told Reuters he was confident of a return to

like-for-like sales growth by the end of its 2023/24 year.

The group was also encouraged by year-on-year improvements

in gross margins, which it said were being driven by easing

input costs, including commodity and freight, more favourable

currency rates, and better buying margins.

The group noted disruption to Red Sea shipping continued to

lead to some surcharges in freight rates and delays to container

lead times.

However, it said it was "managing" product availability and

did not expect much impact on gross margins in the second half.

"Overall, the group remains confident in delivering

profitable growth in this financial year," it said.

Shares in Pepco were up 2.6% in morning trading, paring 2024

losses to 28.2%.

The group still plans to open at least 400 net new stores in

2023/24.

Pepco said in February its Hungarian business had lost about

15.5 million euros in a phishing attack.

($1 = 0.9308 euros)