Reserved owner LPP sees strong Q3 sales, but predicts slowdown
Polish fashion retail giant LPP has reported its Q3 results with a leap in revenues, although it said it’s preparing for a slowdown. The company owns the Reserved brand that’s about to start a major UK and Italy expansion drive, as well as the fast-growing Sinsay brand, among others.
It said Q3 revenues rose almost 40% to exceed PLN4.3 billion (€917m/£799m/$975m). The figure is on a comparable basis that excludes the Russian market.
It also saw more than 23% year-on-year growth in e-commerce sales and they generated more than PLN1 billion in revenues in the quarter, accounting for 23.6% of the group’s total.
Looking at both physical stores and online revenue, it saw the highest growth in its Sinsay brand with a year-on-year leap to more than PLN1.7 billion.
It also said that its international expansion plans in other European markets meant it saw another quarter of non-Polish growth and revenues from outside of its domestic market accounted for almost 60% of its revenues in the three months to October.
The company continues to target double-digit revenue growth, mainly due to its investments in the Sinsay and Reserved brands in new markets in both physical and online channels.
It wasn’t all good, however, as the gross margin in the period fell to 51%. This was due to unfavourable exchange rates, as well as to the increase in the share of the Sinsay brand in total revenues, “and the need to sell off products destined for eastern markets”.
But it still generated net profit of PLN395 million between August and October, although this was down from PLN 486 million a year earlier.
The company said its omnichannel sales results were mainly as a result of new stores and e-commerce debuts in new markets. At the end of October, its brands were was available in 1,837 stores in 25 countries and in 32 online markets.
It added that with another quarter affected by "the situation across our eastern border, we decided to focus on implementing our business plans and strengthening the presence of our brands in markets that guarantee us a stable situation for the company”.
And it said its Q3 results show that this was the right decision.
It added that the growth drivers during the quarter were the Sinsay brand entering new markets and the “successful” casual Mohito collections for AW22.
“This is a good sign for us for the coming year as well,” it added. “Given the continuing inflationary pressure and the expected increasing tendency to reduce consumer spending, investments in the development of value-for-money brands are, in our opinion, a good direction.”
The company continues to focus on expansion in the west and south of Europe.
“We are continuing to prepare for next year’s debut of Reserved in two locations in Milan, as well as to expand in the important markets where we are already present, adding, among others, three new stores in London and a new location in the German market to the flagship brand’s shop portfolio,” it explained.
And it’s accelerating its launch of Sinsay in new online markets Italy and Greece by the end of the financial year following its strong reception in new markets so far.
It also said that “the decision to open a design centre for our youngest brand in Barcelona, which was also completed this year, will allow us to better anticipate expectations and align our collections with the tastes of consumers in the markets where we see the greatest potential for development”.
That said, it’s also facing cost headwinds and is preparing for the opening months of the new financial year to possibly “bring us a significant slowdown, which we are already preparing for”.
That means keeping control of costs and managing inventory carefully, while also focusing its investments on key areas.
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