Over PLN 17bn in sales revenue and a record profit. LPP summarises financial results for 2023

• A diversified business model combining the value-for-money segment in small towns with traditional retail in the malls of large cities and profitable online sales factored into LPP’s solid stability and resilience in the face of a difficult economic climate.
• The decline in sales momentum from the beginning of the year was offset by the company’s rebound in the fourth quarter, reaching a historic sales revenue of over PLN 17bn and an operating profit of PLN 2.3bn (+93% y/y year) for 2023.
• As part of the strategy adopted in 2023, the company continued its plan for openings in Central and Southern Europe resulting, among other things, from the intensive development of the Sinsay brand sales network in smaller towns.
• For 2024, the company is setting an ambitious sales growth target of 20%, primarily utilising the potential in the value-for-money segment and opportunities to develop the sales network.
• The element expected to support the Group’s sales in the physical stores chain in 2024 is also the ever-widening reach and steady growth of e-commerce backed by mobile apps, which are growing in importance.

In the past year, consumer sentiment was dominated by high inflation and fluctuations in the economic climate, which affected the moderate sales dynamics in the first quarters and was reflected in LPP’s financial results recorded in this period. However, after a difficult start to the year, the last months brought a significant recovery in sales, allowing the company to return to double-digit dynamics. In the fourth quarter of 2023, the Polish clothing manufacturer recorded a 15.7% y/y increase in revenue, thanks in large part to the strong growth of the Sinsay brand. Thanks to favourable exchange rates, the company also generated margins of 52.5% at the end of the year, an increase of nearly 3 p.p. y/y. Net profit from continuing operations in the fourth quarter of 2023 increased by over 160% y/y.

– It was a difficult year, which, at least initially, did not inspire optimism and prompted us to reasonable planning for the future. After a sales rebound in the fourth quarter, which resulted in double-digit sales increases, we ended the year with a favourable balance sheet. The factor that ensured stability for most of the year and ultimately outweighed the final results was our consistently implemented omnichannel strategy. We have reached a point where our business model allows us to survive the most difficult times and constitutes our competitive advantage. We rely on diversified channels to reach customers, while operating in different price segments. This is a unique model, thanks to which we reach a wide group of customers, regardless of the changing sentiments and consumer habits – comments Marek Piechocki, CEO of LPP.

In 2023, the company recorded a nearly 16% y/y increase in sales in the stationary network and a slight decrease in revenue in e-commerce. Operating profit increased by 93%, reaching the highest level in the company’s history at PLN 2.3 bn.

Despite the increasing share of the value-for-money channel, centred around the Sinsay brand, LPP’s gross margin for the year increased to 51.5% (up 1.2 p.p. y/y). The brand’s competitive advantage is based on a refreshed concept introduced a few years ago, founded on a unique store format, a wide assortment offer and favourable prices with strong omnichannel support. A share of over 40% of the Group’s revenue for 2023 confirms that the Sinsay brand is becoming the driving force behind LPP’s growth.

The favourable balance sheet at the end of 2023 is also the result of high operational efficiency, as evidenced by a 2% y/y decrease in SG&A costs, mainly due to the optimisation of energy consumption and external service costs. Rational management of expenses reduced debt and increased cash from operating activities to PLN 1.1bn. As a result, net profit from continuing operations in 2023 increased by 85.5% to a record PLN 1.6bn.

– The key goal we adopted for 2023 was to maintain profitability and long-term dynamic growth of LPP, which we managed to achieve while maintaining exceptional cost discipline. Thanks to a sensible approach to spending, we were able to secure a solid financial cushion, despite unfavourable market trends and high inflation. Regardless of the decline in sales growth in early 2023, we achieved our best ever financial result and increased profitability. Thus, irrespective of the unfavourable market environment, we are able to consistently stick to our ambitious plans – comments Przemysław Lutkiewicz, vice-president of the LPP management board.

In 2023, LPP was strengthening its sales network in European markets, especially in the central and southern parts of the continent. A key element of the implemented strategy was to tap into the potential in the value-for-money segment and open Sinsay stores in small towns and retail parks. Six years after its debut on the prestigious Oxford Street, the company also decided to open a further three Reserved stores in London. The Polish clothing manufacturer has also decided to debut in the Italian market with the first stores of its key brands – Sinsay – in the north of the Apennine Peninsula, and Reserved – on Milan’s most important shopping street. Presence in large shopping malls and locations popular with tourists strengthens the recognition of the Polish brands internationally.

The LPP Group’s stationary sales are also supported by a wide-ranging e-commerce. Mobile applications are also gaining in importance in the online channel, which is why the company rolled out this form of shopping not only in Sinsay and Reserved, but also in the Mohito brand from 2023.

For 2024, the company has planned to develop the sales network of all LPP brands, for most of them at a single-digit rate. The largest increase in the number of stores is planned for the Sinsay chain, with a particular focus on smaller towns and retail parks that are popular among their residents. In this vein, the company is planning a major expansion of its distribution network by a further 200,000 m2 in the coming period. This will mean that by the end of 2025, the Group’s warehouse facilities will already comprise over 700,000 m2 of space.

– Preliminary sales data from February and March allow us to look to the future with optimism. Our assumed 20% y/y increase in sales for 2024 means much more ambitious growth plans than we have had so far, which are definitely easier to implement when looking at the positive reception of the spring/summer collections. While last year we focused primarily on profitability and sensible planning, in 2024 we would like to focus more strongly on sales growth and tap into the growth opportunities ahead of us. We plan to open further stores in Central and Southern Europe, taking advantage of the low saturation of our brands in this region, especially in smaller towns – announced Przemysław Lutkiewicz.

For 2024, the company has decided to allocate a record amount of PLN 1.5bn for investments, including PLN 1.2bn for the development of the store network. In turn, it has planned outlays on logistics at a level of PLN 200m this year and PLN 250m the following year. The company’s key investment in the near future in this respect will be the expansion of the Distribution Centre in Brześć Kujawski, which will increase its area by an additional 85th square metres and strengthen the logistics facilities for the growing sales network. With attractive collections, increasing retail space and developing omnichannel sales, the company aims to achieve PLN 21bn in revenue this year, including positive offline growth and double-digit y/y e-commerce growth, while maintaining cost efficiency and margins at 52-53%.

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LPP is a Polish family business and one of the fastest growing clothing companies in the region of Central 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 five 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 nearly 2 million m2 and distributes clothing and accessories to 3 continents every year. LPP also plays an important role as it employs 43 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.