LPP summarises first quarter results and continues growth in Southern and Western Europe

• In the first quarter of this financial year, the Polish clothing producer’s revenues exceeded PLN 3.6bn, an increase of almost 20% YoY.
• The period between February and April 2023 saw the opening of 92 new stores and an increase in retail space of almost 20%, which, in turn, contributed to a 34% YoY increase in offline sales.
• Steady YoY e-commerce sales growth brought the company over PLN 900m in sales in the past quarter, which accounted for around 26% of the Group revenue.
• In omnichannel terms, Mohito brand once again recorded a high growth rate of nearly 25% YoY. Nominally, the highest sales are maintained by Sinsay, which brought the company over PLN 1.5bn in the first quarter.
• The implementation of the adopted strategy to strengthen the presence of LPP brands in European markets became the Polish company’s main source of growth in the first quarter of the current financial year. The share of foreign revenues in this period accounted for 58% of the Group’s revenues.
• The priority in the company’s plans for the current financial year still consists in the development in the markets of Southern and Western Europe and the continuation of the development of the stationary network with further 400 new stores. At the same time, the implementation of business plans will be accompanied by further maintenance of cost discipline.

The first quarter of this financial year brought a nearly 20 % YoY increase in sales for the Polish fashion group and revenues in excess of PLN 3.6bn. This is the outcome of good reception of all LPP brands’ collections and the adopted strategy of developing the stationary sales network in the western and southern parts of Europe. As planned, the company has already increased its retail floorspace abroad by over 25% YoY thanks to the opening of new stores in such countries as Romania, Macedonia, Serbia, Bulgaria, and Bosnia and Herzegovina. Thus, between February and April 2023, the Group’s retail floorspace increased by nearly 20%, and the LPP offer was already available in over 2000 stores located in 27 countries and 34 online markets. The effective use of omnichannel sales potential in nearly 40 markets in total also ensured that the company’s net profit in the first quarter of this year more than tripled YoY at PLN 112m.

– We are pleased with the financial results achieved in the first quarter. They confirm that the development strategy we adopted after withdrawing from the Russian market last year ensures that the company remains stable. We can see that the market is reacting positively to our efforts to strengthen our position abroad, and that customers from outside Poland are eager to buy our collections. On the one hand, this is due to our investment outlays on the development of the sales and distribution network, which is in line with the needs of the modern omnichannel customer, who alternates between traditional and online stores. On the other hand, it shows that by having a wide portfolio of brands and conducting an optimal pricing policy tailored to the characteristics of the customer, we are responding to diverse needs, while at the same time tapping into the potential of the markets in which we are already present – comments Przemysław Lutkiewicz, vice-president of the management board, LPP.

Thanks to the continuing popularity of products from the value-for-money segment, in the period in question the company recorded high nominal growth and good sales dynamics for Sinsay. The effects of the positive reception of both women’s and men’s offer are also visible in Reserved brand, which is constantly working on expanding its premium line offer, among others. The good reception of the new collections is also the source of sales increases of nearly 25% at Mohito and the Cropp, which recorded sales higher by nearly 30% YoY.

The first quarter of the current financial year at LPP Group was marked primarily by high growth in the offline channel, where total revenues increased by 34% in the period in question. At the same time, despite a significant reduction in marketing expenditure, the company maintained a stable level of online sales, which in 1Q23/24 accounted for approximately 26% of the Group’s turnover and brought the company over PLN 900m in revenue, 70% generated by sales via mobile devices. The growing interest in this form of contact among customers can be seen in the increasing popularity of the Sinsay and Reserved apps, which together generated around 50% of the total e-commerce sales of both brands in Poland alone.

– The growing importance of m-commerce tools in the online channel has prompted us to make further investments in this area and triggered the decision to launch, later this year, the third application. This time, after Reserved and Sinsay, we decided on Mohito brand, where we have been observing a steadily growing share of online shopping for several quarters. In 1Q23/24, it already accounted for 34% of the brand’s sales. We assume that the new application, as a more effective way of reaching the brand, will increase its recognisability and help build customer loyalty, which will ultimately translate into higher Mohito sales in the future – adds Przemysław Lutkiewicz.

The positive impact of accessing the offer via mobile apps is visible not only in Poland. In Romania, sales via this tool already accounted for more than 30% of total e-commerce turnover. In 1Q23/24, the Reserved and Sinsay apps were also made available to customers in the Czech Republic, Slovakia, and Hungary. In addition, the Reserved app is also operational in Germany, and since June this year it has also been available to Sinsay customers in Bulgaria. By the end of this financial year, the tool will be launched for users of the Group’s youngest brand in another market – Croatia.

The gradual expansion of retail space supported by mobile solutions that meet customers’ expectations confirms that the strategy adopted is correct. The positive effects of using the omnichannel potential are particularly visible in foreign markets, where turnover in the first quarter of the financial year increased by 34% YoY, and the share of sales in the Group’s revenue already accounted for 58%. The leading countries with the highest nominal sales again included Romania, as well as the Czech Republic and Ukraine, where 125 stores were operational at the end of October. In the first quarter, the company continued its efforts to further develop in the markets of Southern and Western Europe, preparing for the planned opening of another Reserved store in London and the debut of its flagship brand in Milan. In April and May, LPP also signed an agreement for two more Reserved stores in Italy and finalized lease agreements for Mohito, which will also make its debut on the Apennine Peninsula next year with stores in shopping centres in Milan and Marcon, near Venice. For this year, the company is planning to open a total of 400 new stores in all markets. To date, 133 stores have already been opened, mainly for Sinsay, Cropp, and House, which means that one third of the annual plan has already been implemented.

The dynamic expansion of the physical stores, as well as LPP’s development plans in foreign markets, resulted in the Group establishing two subsidiaries in April, LPP Logistics Romania s.r.l. and LPP Logistics Slovakia s.r.o., responsible for logistics services in the markets of Southern and Central Europe. Both entities will allow the Group to increase the efficiency of its operations in this region and strengthen the position of the logistics company as an independent operator in Europe.

– The establishment of LPP Logistics subsidiaries in Romania and Slovakia will allow for more effective use of the Group’s regional distribution infrastructure. Taking full control of e-commerce logistics operations in Slovakia from an external partner is also part of the strategy to adapt the structures of our distribution network to the needs of local markets. The new company in Romania, on the other hand, is the first step towards fully independent handling of all processes – customs clearance, transport of containers from the port of Constanta and organisation of road transport. Notably, not only will this standardise the quality of service at the facilities we manage, but also reduce the costs of logistics processes – concludes Przemysław Lutkiewicz.

The positive effects of the cost optimisation introduced by the company could be seen in the lower dynamics of costs in relation to sales. Despite the increase in rental prices, which resulted from the inflation indexation of fixed rents affecting approximately 70% of contracts and the unfavourable YoY euro exchange rate, the company managed to optimise expenses by introducing savings in the operation of online stores through lower YoY expenditures on marketing, transport costs, and e-commerce logistics. In turn, improvements in merchandise management policy and skilful use of sales trends supported by promotional campaigns in the period in question, contributed to the normalisation of the Group’s inventory levels.

– The development of omnichannel sales in both existing and new markets, while maintaining cost discipline, gives us the foundation for maintaining a good outlook for the Group’s performance in future periods. The company’s objective remains to focus on maintaining collections tailored to the different needs and expectations of customers in nearly 40 countries and to increase the profitability of its operations – concludes Przemysław Lutkiewicz.

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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 2000 stores with the total area of 1.7 million m2 and distributes clothing and accessories to three continents every year. LPP also plays an important role as it employs nearly 30 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.