LPP announces its financial results for the third quarter of 2016
In the third quarter of 2016, the revenues of LPP, owner of clothing brands such as Reserved, Cropp, House, Mohito, Sinsay and Tallinder, amounted to PLN 1.5 billion. The rate of revenue growth, amounting to 18 per cent year-on-year, is the best result in two years. In addition, for the first time in the company’s history, Reserved stores outside Poland generated higher income than the domestic brand stores, and the company consistently pursues its strategy to, in 2-3 years, receive most of its income from the stores abroad. At the same time LPP increases revenues from e-commerce – after 9 months of this year their value amounted to PLN 100 million, an increase of 103 per cent year-on-year.
Our goal is for the company’s revenues to grow faster than retail area of the stores – we managed to fully achieve it in the third quarter of 2016. We are also pleased that the company reported the largest nominal increase in sales on key markets – Russia, Poland and Germany – says Przemysław Lutkiewicz, Vice President and Financial Director of LPP. In the reporting period, for the first time in history, Reserved stores outside Poland generated higher income than the domestic stores. We can clearly see that the positioning of our flagship brand as a global trademark affects not only our image but it also has a direct impact on our business, among others in Germany, which is now our 5th market in terms of revenue. We assume that in 2-3 years our revenues will come principally from overseas – adds Vice President.
Sales in the so-called comparable stores (LFL) across all brands increased by nearly 11 per cent year-on-year, and sales per square meter increased over 8 per cent. The net loss of LPP in the reporting period amounted to PLN 6 million. The slightly negative result of LPP in the third quarter of 2016 was significantly influenced by several factors. The first of these was the reduction in gross margin, amounting to 47 per cent, i.e. 5.5 percentage points less year-on-year, which resulted from intensive summer sales allowing the company to reduce its supplies. The result was also impacted by the costs of liquidation of Tallinder and the high exchange rate of the US dollar, the currency used by the company for settlements with the majority of its suppliers.
At the end of the third quarter of 2016 the sales network of LPP consisted of retail space of 888 thousand sqm, i.e. 11 per cent more than a year ago. At the end of September, the company managed 1668 stores located in 18 countries. LPP has consistently pursued the development strategy of e-commerce. Internet sales in the reporting period constituted 3.4 per cent of revenues from Poland and 2.1 per cent of group sales, an increase of 127 per cent year-on-year. By 2020, online sales are to generate 7-8 per cent of the company’s revenues.
For another quarter in a row the highest percentage revenue growth was achieved by LPP brands addressed only to women – Sinsay (PLN 120 million, + 45 % yoy) and Mohito (PLN 192 million, + 27 % yoy). Double-digit sales were also noted for Reserved (PLN 661 million, + 18 % yoy), Cropp (PLN 246 million, + 13 % yoy) and House (PLN 189 million, +11 % yoy).
CAPEX in the third quarter of 2016 was PLN 62 million. The company plans a marked increase in investment in 2017. Estimated expenditures are to be approx. PLN 430 million, of which LPP plans to spend PLN 350 million on the development of the sales network and approx. PLN 80 million on the expansion of company headquarters.
In 2017, LPP plans to increase the total area of retail stores by about 11 per cent. The flagship brand of LPP – Reserved – will debut on 4 new markets. Of key importance for the development in Western Europe will be the opening of a flagship store at Oxford Street in London. Moreover, the company will begin operations on another Balkan market – in Serbia. An important part in the development of the network will also have franchise stores in Belarus and Kazakhstan. The company also returned to its development in Russia and Ukraine, i.e. the markets that currently generate 25 per cent of its revenue, as well as further expansion in the Middle East – in 2017 the local partner of LPP, Azadea, will open new Reserved stores in Egypt and Qatar.
LPP SA, a company listed on the Warsaw Stock Exchange since 2001, is one of the fastest growing clothing companies in the region of Central and Eastern Europe. For over 20 years, the company has consistently carried out its operations in Poland and abroad, being successful on the demanding clothing market. LPP SA manages 6 fashion brands: Reserved, Cropp, House, Mohito, Sinsay and Tallinder. The company has a network of nearly 1 700 stores and creates jobs for over 22 thousand people in its offices and sales structures in Poland, Europe, Asia and Africa. LPP SA invests and acquires new markets. In 2015, the company opened e.g. its first stores in the Middle East. In 2014, the company advanced to WIG20 stock exchange index, which generates a significant part of the turnover on the WSE, and is listed on the prestigious MSCI Poland index.
Contact for media:
Marta Chlewicka
LPP Spokesperson
media@lpp.com