ProCook Group: Strategic Expansion and Margin Gains Fueling EPS Growth Potential

ProCook Group PLC (LON:PROC) has emerged as a compelling story in the UK kitchenware market, leveraging a mix of aggressive store expansion, product innovation, and operational discipline to drive margin improvements and revenue growth. With FY25 results underscoring its ability to outperform a challenging macroeconomic backdrop, the company is positioned to capitalize on its strategic initiatives to boost earnings per share (EPS). Here's why investors should take notice.

The Growth Engine: Stores and Ecommerce
ProCook's revenue surged 11% to £69.5 million in FY25, with both its Ecommerce and Retail channels contributing meaningfully. The Ecommerce division, now a £25.5 million business, grew 12.3%, fueled by a 10.3% like-for-like (LFL) sales increase and the relaunch of its curated Amazon UK range. Meanwhile, the Retail segment expanded 10.3% to £44.0 million, driven by 12 new store openings (totaling 66 by year-end) and strong seasonal campaigns.

The company's Q1 FY26 results further validate this momentum, with revenue up 13.7% to £12.8 million. While Retail LFL growth slowed to 0.3% due to unseasonably warm weather, Ecommerce LFL sales rose 4.9%, demonstrating resilience in its digital channels. With plans to add 5–10 net new stores in FY26 (already reaching 68 stores post-Q1), ProCook is steadily moving toward its medium-term goal of 100 stores, a key lever to scale revenue.

Margin Improvements: A Tightening of the Belt
Beyond top-line growth, ProCook's bottom-line progress is equally compelling. Gross profit margins rose to 65.8% (up 10 bps YoY), with Q4 margins hitting 66.8%. Underlying EBITDA jumped 31% to £8.9 million, pushing the margin to 12.8% (from 10.9% in FY24). Operating profit surged 51% to £3.2 million, with margins improving 120 bps to 4.6%. These gains stem from:
- Cost Discipline: Supply chain efficiencies (e.g., a new transport partner, warehouse optimizations) and marketing spend prioritization.
- Product Mix: Higher-margin electricals (e.g., coffee machines) now contribute meaningfully to sales, outperforming expectations.
- Store Synergies: New locations are maturing, reducing overhead dilution and boosting economies of scale.

Strategic Initiatives: Building a Sustainable Advantage
1. Product Innovation: The launch of electricals and enhanced seasonal campaigns (e.g., Black Friday) have broadened customer appeal. The active customer base grew 7.9% to 1.13 million, though the repeat rate dipped slightly to 20.5%. This suggests opportunities to deepen engagement through targeted loyalty programs.
2. Operational Excellence: Investments in inventory management and omnichannel systems (e.g., gift cards, payment options) are reducing friction in customer journeys.
3. Sustainability & Workforce: Commitments to 100% renewable energy, B Corp certification, and Real Living Wage adherence enhance brand equity and employee retention (engagement scores rose to 77%).

The Path to EPS Growth
ProCook's FY26 outlook is optimistic but realistic. Revenue growth is expected to continue, with Ecommerce and new stores as key drivers. Margin expansion should persist, even with cost pressures like National Insurance Contribution hikes. The company's net cash position (£1.0 million) and £17 million liquidity provide a buffer for further investments.

Crucially, the path to its 10% operating margin target hinges on:
- Store Optimization: Balancing aggressive openings with closures of underperforming locations.
- Margin Leverage: Scaling fixed costs across a larger revenue base.
- Electricals Upside: Expanding this high-margin segment into adjacent categories.

Investment Considerations
ProCook's stock (LON:PROC) has historically traded at a premium valuation, reflecting its growth trajectory. However, current valuations—based on FY26 estimates—suggest a price-to-EBITDA multiple of ~10x, which appears reasonable for a company with 10-15% revenue growth potential.

Risks to Consider:
- Economic Sensitivity: Kitchenware demand could soften if consumer spending weakens further.
- Store Integration: New locations may face saturation or operational hiccups.
- Supply Chain Volatility: Shipping costs or component shortages could pressure margins.

Conclusion
ProCook's combination of strategic execution, margin discipline, and growth drivers positions it to deliver EPS growth well into FY26. While macroeconomic risks linger, the company's focus on high-margin products, store expansion, and operational efficiency creates a robust foundation. For investors seeking exposure to a UK consumer discretionary play with clear growth metrics, ProCook warrants consideration—if they can tolerate the stock's volatility.

Stay tuned for updates on ProCook's Q3 FY26 results and store expansion progress.