LPP with very good results for Q1 2024: over PLN 4.3 bn in revenue, double-digit sales growth and record operating profit

• The positive reception of the spring collections by customers of LPP brands in the first quarter of this year made it possible to generate over PLN 4.3bn in revenue, which means an increase in sales by 18.3% year-on-year.
• In the analysed period, the gross margin reached 52%, which, with a favourable exchange rate and good sales results of the first-price collection, translated into a record operating profit of PLN 411m (+78% year-on-year).
• The financial results achieved are attributed to well-thought-out collections that fit in with customers’ expectations, as well as a consequence of the development of omnichannel sales.
• Despite market downward trends in online sales, the beginning of the year brought LPP a significant improvement in online sales, which increased by over 23% year-on-year. The company is also maintaining stable double-digit growth in the physical stores channel.
• The company’s priority in the plans for the current year remains the development on the markets of Central and Southern Europe. LPP maintains its plans to expand its physical s network at +700 new stores per year and is betting on further strengthening the e-commerce channel, using the potential of mobile applications.

The spring fashion offer of the Gdańsk-based company’s designers was positively received by customers, thanks to which LPP once again improved its quarterly results, achieving over PLN 4.3bn in revenue in the analysed period. Over 18% year-on-year increase in sales shows that the company is right on track to meet its ambitious business goals for this year and proves that the offer of LPP brands meets customers’ expectations. Better financial results as compared to the same period last year are also due to the gross margin of 52% generated in the first quarter. Its increase by 2.5 p.p. year-on-year is a result of, among other things, well-balanced costs of collection purchases at favourable exchange rates. Therefore, the company achieved a record operating profit of PLN 411m, increasing it by 78% year-on-year.

– Understanding customer expectations is key to enabling our business to continue to grow. We have ambitious plans of over 20% sales growth for this year, but also a strong belief that we will be able to achieve them. We are definitely pleased with the positive reception to our spring proposals, especially as consumer sentiment across the market as a whole is rather moderate, particularly in the online channel. Our results are successfully resisting the unfavourable trends – we are recording double-digit growths in both traditional and online sales, which served to prove that we have a good sense of style, feel of customer expectations and what modern shopping should look like – comments Przemysław Lutkiewicz, vice-president of the management board, LPP.

Despite the declining dynamics of online sales visible across the industry, the company clearly deviates from market trends and skilfully adapts to customers’ expectations. A good start to the year online was due to, among other things, the development of mobile applications and the expansion of the assortment offer in the online store, which resulted in an improvement of the e-commerce sales result from last year by over 23%. The positive reception of the online offer is particularly visible in Poland, thanks to high brand recognition and the introduced mobile applications, but also in Germany, Serbia, and Croatia.

The expansion of the physical stores network also remains a key foundation for LPP’s growth, which translated into more than 21.5 % growth in sales in this channel in the first quarter of this year. Over 330 new stores were added compared to last year, and the company’s sales area increased by 19%, exceeding 2 million square metres. The efficiency of the LPP network is reflected in the decreasing SG&A costs, whose share in relation to sales remains at 42%, meaning that they are growing more slowly than revenues. The development of the LPP network is based primarily on tapping into the potential of smaller towns and locating stores in retail parks popular there. At the same time, the Gdańsk-based company continues to build brand recognition in large cities. The company’s priority direction of expansion remains Central and Southern Europe, which is one of the key sources of revenue, along with Poland. Outside the country, the collections of LPP brands sold best in Romania and the Czech Republic.

– Considering current market trends, the parallel growth of both sales channels is what gives us a competitive advantage in the industry. In many cases, retailers focus their efforts on only one of them, which definitely reduces the attractiveness of their offer to the customer and limits the resilience of the business to market turbulence. Omnichannel has become our recipe for changing expectations and difficult times – adds Przemysław Lutkiewicz.

The aspect that supports the omnichannel strategy and reaching the customer is, in the case of LPP, new technologies. For several years, the company has been implementing solutions based on AI in its contact centre service, which allows efficient communication with customers in 27 languages. Currently, almost 50% of enquiries are already being dealt with using AI. A novelty in the online store, on the other hand, is the use of artificial intelligence to better display product images. Thanks to the developed algorithms, LPP brand collections can be presented, for example, on a beach or against the backdrop of a popular street, without the need to organise expensive photo shoots in these locations.

LPP also uses artificial intelligence for effective goods management, which in the first quarter of this year resulted, among other things, in a 4.2% reduction in stock levels and thus achieving optimum stocking levels. The use of Machine Learning allows the company to tailor its offer in terms of a specific location or geographical location. It also reduces the level of overstocking of stores, while limiting the possibility of stock shortages. LPP estimates that implementing solutions based on artificial intelligence will allow it to save up to PLN 30m in 2024.

The favourable financial balance of the first quarter and the positive forecasts for the next period give grounds for maintaining ambitious development plans for 2024. The company intends to spend a total of PLN 1.5bn on investments, of which PLN 1.2bn on new store openings. LPP plans 700 new locations this year. Following the dynamic development of the sales network, the company is also implementing a plan to strengthen its logistics facilities, including through the expansion of the Distribution Centre in Brześć Kujawski, which started in April this year. The new logistics capacity will allow the company to handle higher sales volumes in the key markets of Central and Southern Europe.

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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 2400 stores with the total area of over 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.