Press room

LPP S.A. Press room Summary of LPP’s financial results for 2021/22

Summary of LPP’s financial results for 2021/22

21.04.2022

• Last year at LPP saw high, double-digit sales growth and the continuing trend of deferred demand in all markets.

• In 4Q2021/22, the Polish clothing company generated sales exceeding PLN 4bn and closed last year with PLN 14bn in revenue, which means a YoY increase of nearly 80%.

• The resumption of the consumer habits, as well as the adopted pricing policy and favourable trading conditions for orders contributed to LPP’s net profit for 2021/22 at the level of PLN 954m.

• The growth rate of e-commerce sales remained at a high double-digit level, and in 4Q2021/22 amounted to +63.6% YoY, exceeding PLN 1.2bn in revenue. In annual terms, revenues from this channel amounted to nearly PLN 4bn and accounted for as much as 28% of the Group’s revenues.

• In 2021, the Gdańsk-based company strengthened its presence in the Balkan region, debuting with its brands in another market –the 7th in this region – North Macedonia.

• Another year in a row, foreign revenues exceeded domestic ones and in 4Q2021/22 they already accounted for over 60% of the Group’s revenues.

After difficult periods of deterioration caused by the effects of the pandemic, the past year brought a significant recovery to the Gdańsk-based company and was one of the best in terms of financial results. Despite the many subsequent challenges faced by the industry, especially in the area of logistics and disruptions in the supply and raw materials market, LPP took advantage of the so-called deferred demand trend, which persists in practically all markets. As a result, the Polish company ended 4Q2021/22 with a record result of over PLN 4bn in revenues accompanied by a YoY sales increase of nearly 97%, generating annual revenue of PLN 14bn and a profit of PLN 954m. Such record-breaking sales results at the end of the year and a high margin of 60% were achieved thanks to good trading conditions for ordering collections for the autumn/winter season, the growing share of exports and the pricing policy adopted by the company – which assumed limiting the level of sell-offs while at the same time encouraging customers to buy new collections of LPP brands at the initial price.

– The past year, despite a slow return to normality, was not devoid of challenges we had to face. Disruptions in supply chains and difficulties in obtaining raw materials for production, combined with rising inflation, did not foster optimism. We are therefore pleased that we managed to close the previous year with such a good financial result. Despite the turmoil, we once again proved to ourselves, our employees and our business partners that we are a strong organisation, ready to handle different market scenarios. What is more, today, in the face of the loss of a significant part of our revenue as a result of military operations behind our eastern border, we see great potential for growth in the remaining regions of Europe, which, in turn, allows us to think about the future of LPP with optimism – comments Przemysław Lutkiewicz, vice-president of the Management Board of LPP.

The effects of deferred demand were reflected in LPP’s sales results already from the first quarter of last year in all regions where the company operates and this trend continued consistently throughout the subsequent months. The past year was once again marked by more revenues generated abroad for all LPP brands. The high dynamics of sales growth in Europe, amounting to over 80% in 4Q2021/22, with very good results in the markets of South-Eastern Europe and as much as fivefold increase in sales in the pan-European online store, are a positive sign for the company in light of the new geopolitical conditions in Eastern Europe. The return of customers to their old shopping habits was visible both in physical stores and in e-commerce, which note a double-digit growth throughout the year and in 4Q2021/22 already accounted for 30% of the Group’s revenues, reaching nearly PLN 4 bn in annual terms. The dynamics of growth in this channel prompted the company to enter another e-commerce market in Bulgaria. The past year was also marked by the continuing trend of increasing interest in shopping via mobile devices, which in 4Q2021/22 already accounted for over 73% of online purchases. This, in turn, prompted the company to accelerate its work on launching mobile applications, which can already be used by consumers interested in the offer of Reserved and Sinsay brands.

Pursuing the concept of multi-channel sales, the Polish clothing company has also consistently implemented its plans for the development of the stationary network, which at the end of January 2022 already comprised 2,244 stores with a total area of over 1.8m m2, giving a YoY increase of 31.5%. RFID technology has also proved to be an important supporting factor in strengthening the omnichannel model, whose effectiveness in Reserved has prompted the company to speed up the implementation of electronic tags in Mohito, Cropp and House brands.

The company’s stable financial standing and positive forecasts regarding sales in the omnichannel model allowed LPP to implement its investment plans. The Polish clothing company’s capex on the development of its sales network, distribution, offices and IT solutions totalled PLN 1,325m in 2021/22, which means more than 60% capex increase as compared to the previous year. One of the key areas, apart from the expansion of the stores network, was the consistent implementation of the targets set in the area of logistics. Owing to that, at the end of last year LPP completed the construction works on a new Distribution Centre in Brześć Kujawski.

The experiences of the previous year relating to the effects of the pandemic and the disruptions in supply chains that accompanied the industry for many months made the company change its inventory management policy. The 86% YoY increase in the level of warehouse stocking is also a result of the further development of the sales network planned by LPP.

– The company’s stable standing allowed us to take decisions that guarantee further safe development of the Group and to change the direction of development from the war-stricken East to the West of Europe. We forecast that the new strategy based on development in those EU countries where we see growth potential for our brands, will enable us to generate revenues of PLN 16bn in the current financial year – explains Przemysław Lutkiewicz.

The 13% sales increase planned by the company for this year will be achieved in particular through the intensive development of Sinsay brand. The sales network of the youngest brand in LPP’s portfolio will see expansion by further 440 stores this year, thus becoming the second – besides Reserved – pillar of development for the Polish clothing manufacturer. – The capex assumed for the current financial year, amounting to PLN 1bn, is not only the outcome of our plans in the area of stationary network development and the opening of over 500 new stores, including the debut of our brands in Albania, planned for this year. Investment in the expansion of the distribution network and technological support in logistics will remain an integral part of strengthening omnichannel sales. In this respect, one of the key projects for this year is the construction of a new Fulfilment Centre-type warehouse in Podkarpacie region, which will constitute a significant reinforcement of operating capacities in view of the planned further growth in e-commerce – adds Przemysław Lutkiewicz.

The past year at LPP brought not only good reception of the collection by the customers but also recognition in the capital market as regards the effectiveness of the implemented business goals. The company was awarded the title of the WIG20 Index Company of the Year in the Byki i Niedźwiedzie [Bulls and Bears] competition of “Parkiet” stock exchange and investors’ magazine. LPP Group’s results also translated into a significant economic contribution to the Polish economy. Last year, the Gdańsk-based company contributed to the state budget by levies equivalent to almost PLN 1.6bn.

At the same time, the financially stable year allowed the company to consistently fulfil its commitments towards sustainable development, which are summarised in the latest edition of the LPP integrated report entitled “With ESG brought to the fore”. In order for the company to implement its strategy is to gradually increase the share of collections from the Eco Aware line – made from environmentally friendly materials or as part of a sustainable process. Last year, they accounted for over a quarter of the offer of brands from LPP’s portfolio, including every 5th item of Sinsay. The implemented solutions also rendered it possible to reduce the consumption of single-use plastics by a further 445 tonnes, which means a reduction of 1015 tonnes of this raw material in LPP packaging since 2017. The past year also saw a continuation of the work undertaken by the Polish company to improve safety and production conditions in its suppliers’ factories, as the company allocated further PLN 5.6m to this end, and since the beginning of its activities pursuing this direction it has already invested nearly PLN 35m in this area. Activities in the field of responsible manufacturing also include a continuation of the Eco Aware Production scheme, which has already covered 30% of the factories in South Asia.

– For LPP, the last few years have been a period of many challenges, which often required quick decisions and strategic changes in our development plans. What remains unchanged are our commitments to people and the environment, which we try to fulfil consistently. Being aware of our impact on our environment, regardless of the market situation, we are not indifferent to climate issues or to people in need, and we are pursuing our social and environmental commitments on an ever-growing scale. By joining new international initiatives, such as Canopy for the protection of forest resources, or Cotton made in Africa, a globally recognised standard for sustainable cotton cultivation in Africa, we want to be an active participant in activities aimed at developing best practices and production standards supporting sustainable development of the textile industry – concludes Przemysław Lutkiewicz.

The full version of LPP’s integrated report for the 2021/22 financial year is available at https://www.lppsa.com/en/sustainable-development.

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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 in such prestigious capitals as London, Helsinki or Tel Aviv. LPP manages 5 fashion brands: Reserved, Cropp, House, Mohito, and Sinsay, whose offer is available today in stationary and online stores in nearly 40 markets worldwide. The company has a chain of over 2200 stores with the total area of over 1.8 million m2. Based on a global distribution network located in 4 countries, it distributes clothing and accessories to 3 continents every year. LPP plays another important role as it employs 32 thousand people in its offices and retail structures in Poland, and in the countries of 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.