LPP’s consolidated results for the first quarter of 2014

LPP’s financial situation after the first quarter of 2014 is very good – the company’s sales revenues grew as a result of increased retail space and sales in stores. Despite the difficult situation in the East, which had an impact on our current results, the company continues to grow as it diversifies into three new sales markets. We are planning to open our first stores in Western Europe and in Arabic countries this autumn.   In the first quarter, LPP’s total revenues from sales were 26% higher compared to the same period last year, amounting to 945 million PLN. This is a consequence of increased retail space and a 7% growth in sales in stores. The percentage margin in the period in question rose by 1.1 percentage points to reach 56.9%. As previously announced, LPP has continued to dynamically develop its store chains, with the total store area growing last year by 153,000 square meters (i.e. by 34%), reaching 606,000 square meters at the end of March 2014.   Additionally, LPP’s operating costs grew by 24% in the first quarter of this year, which corresponded to an 87% increase in earnings before income and taxes, giving the total of 48.4 million PLN (this is significantly less than the increase in sales).   LPP’s Q1 2014 financial results were also affected by the situation in the Eastern market. Foreign exchange losses, resulting from lower values of the Russian rouble and the Ukrainian hryvna, amounted to 57.4 million PLN, impacted the net result, bringing about a loss of 14.3 million PLN.   “In March and April we reviewed our retail chain development plans. This review included a more cautious approach to the Russian and Ukrainian markets. That said, we don’t think it will significantly impact our plans for retail chain development. We have assumed that the increase in retail space will be 25%, which is only 3% less than our original assumption. By the end of 2014, LPP should have 737,000 square meters of retail space and 1551 stores,” says Dariusz Pachla, Deputy President of LPP’s Management Board. “We are searching for new growth opportunities to reinforce our market position. That is why, irrespective of the situation in Russia and Ukraine, we are on the lookout for new markets that will enable us to grow. Already this autumn we have set out to begin operating in Germany, opening 3 new Reserved stores.”   The company is also planning to open stores in Croatia (5 stores of each brand: Reserved, Mohito, House, Cropp and Sinsay). Moreover, towards the end of the year our first store outside of Europe will probably open in Qatar, under a Reserved franchise agreement with Azadea.   LPP, a company listed on the Warsaw Stock Exchange since 2001, is one of the most dynamically developing clothing companies. It has been steadily growing its business in Poland and abroad for a number of years, and has enjoyed a remarkable success in the clothing industry. The company manages 5 well-known fashion brands, a chain of 1400 stores, employing almost 18,000 people in offices and sales structures in Poland, in other Central and Eastern European countries, and in Shanghai. LPP continues to make new investments and win new markets. In March 2014, the company entered the WIG20 Index, which generates a significant part of the trading turnover on WSE.