Press room

LPP S.A. Press room LPP sums up the second quarter of this year and prepares for a difficult year-end

LPP sums up the second quarter of this year and prepares for a difficult year-end

06.10.2021

• In the second quarter of the2021/2022 financial year the revenues of the Polish clothing manufacturer increased by 71% compared to last year and exceeded PLN 3.6 billion. This is a result of, among others, the reopening of stationary shops and the phenomenon of deferred demand.

• The results generated made it possible to end the first half of this year with nearly PLN 6 billion in revenue and PLN 480 million in net profit.

• LPP’s online sales in the analysed quarter amounted to almost PLN 800 million. The growth dynamics of e-commerce is slower than last year, but remains at a double-digit level.

• A recipe for uncertain times and challenges in the upcoming six months is strengthening the multichannel sales model – LPP is expanding its stationary network, which at the end of the second quarter exceeded 2,000 stores and since September has included the 26th market – North Macedonia. In parallel, the company is expanding its e-commerce reach to its 31st online market – Bulgaria.

• LPP is integrating its business plans with its sustainability strategy, which was recognised in the corporate Climate Crisis Awareness study. The company has also signed a letter of intent with an energy supplier and will power its buildings using RES from 2023.

The period from May to the end of July this year brought the lifting of pandemic restrictions and the prospect of a slow stabilisation of the retail sector in Poland. The reopening of stationary stores allowed for a rebound in sales and generating long awaited growth. In the second quarter of the 2021/2022 financial year, revenues of LPP brands in the multichannel model amounted to PLN 3.6 billion with a gross margin of 55.4%. In the analysed period, the company generated nearly PLN 800 million in e-commerce, which accounts for 21.8% of the Group’s revenue. Compared to last year, online sales increased by nearly 28%. In omnichannel terms, the Polish clothing manufacturer ended the first half of this year with PLN 6 billion in revenue, thus improving last year’s result by 81%.

– In recent months, we have benefited from the effects of deferred demand. Customers missed shopping in stationary stores and our collections proved well-aligned with their expectations. We also continued to record growth in e-commerce, which is now lower – double digit – but given the last year’s soars in sales recorded in this channel, the trend is still high. Sales were also positively influenced by market circumstances and the associated relatively low cost of purchasing goods, as we placed orders for the Spring/Summer 21 collection back in 2020, during the peak of the crisis. This enabled us to end the first half of the year with a very good result. However, our enthusiasm is waning somewhat in the perspective of the next quarters. There are many challenges ahead of us, including delays in the delivery of containers with goods and a large increase in transport costs, significantly higher production prices resulting from rising prices of cotton and raw materials, lack of availability of RFID chips, computers and construction materials to build the stores. The inflation picking up is not helping either. I am also worried about reported stoppages in Chinese factories due to power cuts. As a well-developed omnichannel organisation, with efficient logistics, we are able to mitigate many of the effects of these risks. However, we see black clouds amassing over our company again. A year ago, the factories and logistics were operational, but the customer could not make purchases because of lockdowns. Today, we are experiencing disrupted supply chains, resulting in shortages and delays – comments Przemysław Lutkiewicz, Vice-President of LPP.

From the perspective of the last few years, the development of the omnichannel model in LPP proved to be a favourable factor in the face of the unfavourable market situation and changes caused by the pandemic. In line with the adopted strategy, the Polish clothing manufacturer develops e-commerce, while at the same time strengthening traditional sales. At the end of Q2 the offer of LPP brands was available in 2000 stores, and the area of the chain increased by 24% y/y. In September, North Macedonia joined the stationary markets, while the online offer of all LPP brands was introduced in Bulgaria. In the second quarter of this year, most European markets brought the company favourable revenue levels, but the highest growths were recorded in the CIS region. The development of sales potential is followed by investments in logistics – in July, the company launched a new warehouse in Russia, twice as big in size, which will triple the efficiency of e-commerce services in this country.

– We are strengthening our position on the markets with the highest sales potential. We can see that this strategy is viable judging by our sales results – our position on foreign markets is getting stronger, which is reflected in the nearly 60% share of exports in the Group’s revenues. Parallel to the dynamic growth abroad, we are still satisfied with the results in Poland where we record double-digit increases in sales. Here, in turn, we see potential for development in retail parks located in smaller towns. What worries us, however, is the increasing number of COVID-19 infections worldwide, which in many countries may soon mean the reinstatement of the lockdown on stationary sales – adds Przemyslaw Lutkiewicz.

Nevertheless, in line with the sustainable development strategy, the company is constantly integrating its business plans with activities limiting the impact of the company on the environment. By 2025, the Polish manufacturer wants to reduce CO2 emissions by 15%. In order to attain this goal, it carries out further investments, including the implementation of “green solutions” in its buildings. On the roof of the newly built LPP Distribution Centre in Brześć Kujawski, 4000 photovoltaic panels with a total power of 1.5 MW have been installed, which will supply the facility with solar energy. The company also relies ecological sources in other facilities – according to the letter of intent signed with FIGENE Energia, as of 2023 most of the office buildings and the Distribution Centre in Pruszcz Gdański will be powered by energy from wind farms for the next 10 years.

The consistent implementation of the strategy and transparent communication with the capital market in the area of sustainable development are reflected in the results of the latest corporate Climate Crisis Awareness study conducted by the Polish Association of Listed Companies, Foundation of Reporting Standards and Bureau Veritas Polska. Another year in a row, LPP has found itself among the leaders, taking the 3. place out of 153 companies listed on the Warsaw Stock Exchange.

______________________________________________________________________________

LPP is a Polish family business and one of the fastest growing clothing companies in the region of Central and Eastern Europe. For 30 years it has been successfully operating in Poland and abroad, offering its collections on 26 stationary markets, including in such prestigious capitals as London, Helsinki, Tel Aviv or Moscow. The online offer is available on 31 markets. LPP SA manages five fashion brands: Reserved, Cropp, House, Mohito, and Sinsay. The company has a chain of over 2000 stores with the total area of over 1.6 million sq.m. On the basis of a global supply chain, the Polish clothing producer distributes over 259 million pieces of clothing to three continents. LPP plays another important role as it employs nearly 22 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.