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LPP S.A. Press room For the first time LPP records over a half of revenues generated by foreign sales

For the first time LPP records over a half of revenues generated by foreign sales

12.09.2019

• The sales of LPP in 2Q of this year exceeded PLN 2.2 bn and overall for the first half of the year amounted to over PLN 4 bn. This means an increase by 8% and 11% y/y, respectively.

• In 2Q19, the company recorded a nearly 50% increase in e-commerce sales due to the development of online stores abroad.

• In this period, the area of brick-and-mortar stores of LPP increased by almost 10% y/y.

• In 2Q2019, for the first time in history, foreign sales results of the Polish manufacturer were higher than domestic revenues.

In 2Q2019, LPP generated over PLN 2.2 bn in revenue – thanks to which the group’s total sales for the first six months of this year exceeded PLN 4 bn. Such a good quarter for the Polish clothing producer is due to the positive results of sales abroad, the increase in the area of the brick-and-mortar stores network and further growth in e-commerce. Online sales increased by 45% at that time and already constituted 13% of revenues from Poland and 11.7% of the Group’s sales.

– The positive end of the half year was mainly due to successful collections which attracted the attention of customers despite unfavourable weather conditions. We are particularly satisfied with the results of Sinsay and House brands, which ended the quarter with double-digit sales growth. Cold spring did not cool down our ambitions – LPP stores generated positive LFL in this period and online sales were growing all the time. We also notice a great potential for the development of the mobile channel, which already accounts for more than half of the revenues from e-commerce. This is the result of the investments we have made in this area in order to ensure that our websites are as consistent as possible with the ‘mobile first’ philosophy – commented Przemysław Lutkiewicz, Vice President of the Management Board of LPP for Finance.

According to Business Insider Intelligence forecasts, by 2023 online sales via mobile phones in the United States will account for nearly 40% of all e-commerce operations. Meanwhile, since the beginning of this year, smartphone sales have already accounted for over 50% of online sales structure of LPP, which significantly exceeds global trends.

The company maintains a stable level of gross margin, thanks to, among others, effective goods management policy, which allows for greater flexibility of deliveries. As in the analogous quarter of the previous year, LPP recorded a gross margin of 59%. Compared to the previous year, the Company reduced the costs of its own stores per square metre by 4 p.p. Despite significant investments in the development of e-commerce and rising logistics costs resulting from the development of this channel, LPP reduced total SG&A/m2 costs by 5 p.p. per year. All these factors contributed to the generation of PLN 205.5 mn net profit for 2Q2019.

– For the first time in history, we recorded higher revenues from foreign sales than sales in Poland. We are pleased that the growing importance of exports in the structure of our revenues generates a steady, organic growth. The next, equally intensive months are ahead of us – we continue to invest in e-commerce and accelerate the pace of development of the brick-and-mortar stores network. We expect that at the end of 2019 we will be able to boast as much as 14% y/y area increase – adds Przemysław Lutkiewicz.

At the end of the second quarter of this year, the Gdańsk clothing manufacturer has been operating on 24 markets. Collections of Polish brands were well received in Western Europe, which is one of the strategic regions for the company. The sales results were also positively influenced by the growth of retail space at the level of 10% y/y, in particular by the dynamic development in South-Eastern Europe. Within three months, the Polish clothing manufacturer increased the area of its stores in the Balkans by over 17,000 m2. – We can see a large growth potential in South-Eastern Europe, hence the dynamic development of retail space in the region and the recent debuts in Slovenia and Bosnia and Herzegovina. Another direction of our expansion will be North Macedonia, where we intend to open our stores already in 2020 – announces Przemysław Lutkiewicz. The plans for the second half of this year also comprise opening in Finland, where all five LPP brands will make their debut.

According to the plan, in 2019 the clothing manufacturer wants to exceed PLN 1 billion in e-commerce sales. The company intends to achieve this by, among other things, expanding its offer to new countries. By the end of the year, the company intends to make its offer available online in every EU Member State and in Ukraine.

A breakthrough moment for LPP in 2019 will be the implementation of RFID in Reserved stores. Currently, a team of several dozen trainers conducts trainings for employees of Reserved stores on the use of electronic tags. Already 170 stores of the brand are ready to use RFID. RFID implementation in the Reserved network will have been completed this year, and in the following years it will include the remaining brands.

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LPP SA is a Polish family business and one of the fastest growing clothing companies in the region of Central and Eastern Europe. For over 25 years it has been successfully operating in Poland and abroad, offering its collection already on 24 markets, including in such prestigious capitals as London, Berlin, Tel Aviv or Moscow. LPP SA manages five fashion brands: Reserved, Cropp, House, Mohito, and Sinsay. The company has a chain of over 1700 stores with the total area of over 1 million sq.m. and operates online stores in 12 European countries. On the basis of a global supply chain, the Polish clothing producer distributes over 200 million pieces of clothing to three continents. LPP plays another important role as it employs over 25 thousand people in its offices and sales structures in Poland, Europe, Asia, and Africa. The company is listed on the Warsaw Stock Exchange in the WIG20 index and belongs to the prestigious MSCI Poland index.