In LPP, the beginning of the year saw double-digit falls in LFLs and triple-digit increase in e-commerce revenues.25.06.2020
• The total revenues of the Polish clothing producer in 1Q20/21 exceeded PLN 1.1 bn, which means a fall by 35.3% in relation to a comparable quarter of the previous year.
• Due to the lockdown during the most part of the quarter and stationary stores being closed, the company recorded double-digit negative LFLs in all countries where it operates.
• Owing to the continuing triple-digit e-commerce growth, according to the plan for 2020/21, LPP intends to reach PLN 2 bn revenues in this channel.
• The results for 1Q20/21 were strongly affected by COVID-19 pandemic. The resulting shut-down of shopping malls in that period led to the loss of nearly 100% of revenues from sale at brick-and-mortar stores.
The first quarter of LPP’s shifted fiscal year, encompassing the period from 1 February until 30 April was marked by the pandemic. Owing to the closure of shopping malls in the majority of countries where the company has its brick-and-mortar stores affected the sales results – with the level slightly over PLN 1.1 bn giving the result lower by 35% YoY. That also negatively affected the company’s gross profit margin, which amounted to 48%, which means a fall by almost 7 p.p. YoY. With the lower Group revenues and double-digit negative LFLs, the company recorded a considerable increase in the proceeds from the e-commerce channel, which in1Q20/21 amounted to PLN 384 m and were higher by as much as 120% YoY. Online sales in this period constituted as much as 38% of Group revenues from Poland and nearly 33% of the Group’s total revenues.
– On the one hand, we have been experiencing the hardest period in the company’s history which affected the sales results of all our brands. On the other hand, we are optimistic as far as our efforts in the scope of supporting online sales are concerned – given that this was the only source of revenues for us during that time. Activities supporting the development of this channel, such as the implementation of the Fulfillment Center project in the Distribution Centre in Pruszcz Gdański, which was extended in February, or increasing the pace of migration of our brands to the cloud with strategic cooperation with Google, resulted in a three-digit increase in revenue YoY in March and April. Importantly, this trend continues after the opening of stores in May, although at a slightly lower level. Given that currently our sales in brick and mortar stores still account for only 50% of the revenue generated in the comparable quarter of the previous year, the good results of the online channel confirm our belief that the plan to double the e-commerce revenue this year to PLN 2 bn is very realistic today – comments Przemysław Lutkiewicz, Vice-President of LPP.
The Polish clothing company estimates that not only online shopping as such is gaining in popularity. In the first quarter of this year, there was also a clear increase in visits in the online stores of brands belonging to LPP via mobile devices. In this period, they accounted for as much as 80% of the entire traffic in online stores. At the same time, they generated as much as 60% of revenues in this sales channel. The positive reaction of customers to the solutions offered by the Gdańsk-based company and the facilitation of remote shopping encourage the company to further strengthen and develop the omnichannel model.
– Despite the continued double-digit growth of revenues from the online channel, they are not able to cover the losses resulting from the long lockdown of our business. The effort put into the development of e-commerce has a chance to bring the expected results only while maintaining plans for floorspace increases and improving existing stores. Therefore, we are convinced that operating in the omnichannel model, taking into account the change of customers’ expectations, as well as the offer of our brands adapted to new shopping trends and a sound promotional policy, will allow us to tap into the potential resulting from the combination of these two sales channels – adds Przemysław Lutkiewicz.
Export has still been playing an important role in the structure of LPP revenues. For yet another quarter in a raw, despite the difficult situation on all markets, foreign sales of the Polish producer exceeded the domestic sales and accounted for 54% in the revenue structure. At the end of the first quarter of 2020/21, the Gdańsk-based company conducted sales on 24 foreign markets. According to the announcements, this situation will change only in the following year, when the company will debut on a new market, i.e. Northern Macedonia.
Changes in the development plans of the LPP’s sales network are not the only decisions related to the implementation of the savings plan. The scenario of recovering from the crisis by the Polish clothing producer still assumes a reduction of investment outlays by approx. 60% this year, sound inventory management and maintaining the cash base by, among others, renouncing the payment of dividends. These and other decisions, concerning, among others, the reduction of orders for the coming season, as well as the control of store costs and the reduction of the number of new store openings, already in the first quarter had a positive impact on the balancing of trade liabilities with inventories.
– Despite operating in a highly uncertain market environment, our sustainable cost policy and cash reserves ensured our financial security. At the same time, we managed to achieve our long-term goal, which was to balance trade liabilities with inventories, which means releasing cash and improving our liquidity, so important especially in the current situation – confirms Przemysław Lutkiewicz.
After a period of freezing of the global economy, markets and global supply chains are gradually returning to operation in the new reality. Shopping in LPP stores in shopping malls is already possible in most markets, apart from Kuwait.
LPP SA is a Polish family business and one of the fastest growing clothing companies in the region of Central and Eastern Europe. For over 25 years it has been successfully operating in Poland and abroad, offering its collection already on 24 markets, including in such prestigious capitals as London, Berlin, Tel Aviv or Moscow. LPP SA manages five fashion brands: Reserved, Cropp, House, Mohito, and Sinsay. The company has a chain of over 1700 stores with the total area of over 1 million sq.m. The online offer of the brands collections is available on 31 markets. On the basis of a global supply chain, the Polish clothing producer distributes over 265 million pieces of clothing to three continents. LPP plays another important role as it employs over 24 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.