European discount retailer Pepco Group reported an annual net loss of €662 million ($699 million) citing a non-cash impairment charge of €775 million for its Poundland business in the UK on a weak performance and outlook.

The Warsaw-listed group, whose shares have fallen 39% this year, said on Tuesday the Poundland impairment charge was primarily goodwill. It followed a slump in its performance in the 2023/24 year and a weaker profit outlook for the British variety store chain amid “increasing competitive and cost challenges”.

Poundland saw its like-for-like sales fall 3.6% in the year to September 30, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 21.5% to €153 million.

It ended the period with 836 stores.

Poundland was “impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year,” new Pepco Group CEO Stephan Borchert said.

“We are taking swift action to get Poundland performance back on track,” he said.

The group as a whole reported underlying EBITDA, its preferred profit measure, of €944 million in 2023/24, in line with guidance of at least €900 million and up from €754 million in 2022/23.

Revenue was a record €6.2 billion, up 10.2%, driven by 392 net new stores.

It announced an inaugural full-year dividend of 6.2 euro cents per share.