The Warsaw-listed group, which owns the Pepco, Poundland and Dealz brands, had performed resiliently through the first year of the cost of living crisis, but had cautioned in July that sales growth had started to slow.

Its shares fell as much as 15% in morning trade on Thursday after it highlighted weaker consumer demand for its key clothing and general merchandise categories, leaving the stock price down 43% this year.

Executive chairman Andy Bond said on a call for analysts that whilst the group delivered good underlying sales growth in July, helped by a promotion of "Barbie" merchandise, like-for-like sales in the main Pepco business were negative in August and further deteriorated in September with "double digit" declines in the month to date.

The group said it had not, as yet, seen an expected recovery in gross margins as it continued to work through inventory from earlier in the year bought at a higher cost.

"We overbought for spring/summer and we're just struggling to digest all of that product," said Bond.

The landing of Pepco's autumn/winter collection in stores had also coincided with record warm weather in Poland and adjacent markets resulting in weaker customer demand.

"When it's 26 degrees you don't tend to sell coats," said Bond, echoing comments from fashion retailer H&M on Wednesday.

The group said weaker sales, provisions for the value of stock, continued inflationary pressure on costs, and the drag from investment in new stores, meant a further cut to its earnings outlook.

It now expects full year 2023 core earnings, or EBITDA, of about 750 million euros ($788 million), versus 731 million in 2022.

The group had previously downgraded its outlook on Sept. 12, when CEO Trevor Masters resigned and Bond took on an executive role.

In further changes, Anand Patel, the managing director of the Pepco business, has now stepped down and been replaced by Barry Williams, the MD of Poundland. Austin Cooke, currently the chief operating officer of Poundland, has been promoted to MD.

"It's clear to me that we've lost focus on delivering the results in our core business which is the heartbeat of any good retail business," said Bond, who has set up a new group executive committee to undertake a strategy review of all activities.

($1 = 0.9523 euros)

(Reporting by James Davey in London and Mateusz Rabiega in Gdansk; Editing by Sharon Singleton, Elaine Hardcastle)

By James Davey and Mateusz Rabiega