LPP to focus on quality development
Retail & leisureQuality, not quantity
During the meeting summarising its annual results, the company presented its plans for the next few years. In 2018, the development and expansion of LPP brands (Reserved, House, Cropp, Mohito and Sinsay) will be geographically diversified. Poland will remain the most important market but the number of stores will not increase significantly. Store locations will be reviewed and stores will be modernised, which may result in a decrease in their number, while the Reserved and Sinsay brands are to increase in their floor space. LPP will also focus on increasing LFL results (like for like) and improving the online sales of all its brands. A similar strategy will apply to the Czech and Slovak markets. Meanwhile,the company sees development opportunities in Hungary, although the lack of new shopping centres is a difficulty. In the Baltics, existing stores will be expanded rather than an increase in their number. In Germany, the UK and the Middle East (Egypt, Kuwait, Qatar and the United Arab Emirates), the company plans to strengthen sales and accelerate the development of its e-commerce channel. In 2018, the company will open stores in three new countries: Slovenia, Israel (two Reserved franchise stores) and Kazakhstan (five Reserved stores within three years, the first will open in 2018). By the end of 2018, the company intends to have stores in 23 countries. Currently, it has a total of 1,743 stores in 20 countries. In 2017, the area of its stores increased by a total of 9 pct and exceeded 1 mln sqm.
Infrastructure first and foremost
LPP is investing significant funds in the infrastructure (the logistics base and offices) necessary for its further development. From 2018 to 2020, the company will spend PLN 720 mln on this, 70 pct of which will be financed by bank debt. It is considering renting a warehouse in the UK and Southern Europe and will also expand its warehouse in Pruszcz Gdański. The project will start in 2018-2019 and it envisages a new high-storage warehouse to be built on the plot next to the existing facility. Furthermore, LPP is looking for a plot of land in Central Poland along the A1 motorway to build another distribution centre for servicing its bricks-and-mortar stores. Warehouses that support e-commerce are rented. LPP currently has its own logistics centre (66,000 sqm) and warehouses rented in Stryków (30,000 sqm with the possibility of being extended to 60,000 sqm) and Moscow (9,500 sqm for servicing stores and 7,000 sqm for servicing e-commerce – both rented). Furthermore, the LPP group has leased over 10,000 sqm in the 7R logistics park in Gdańsk Kowale. The company is currently building a complex of four office buildings on ul. Łąkowa in Gdańsk adjacent to the company's headquarters. A new office will also be built in Kraków. This year alone, LPP will spend PLN 95mln on the project.
Summary of financial results
The group’s total sales increased by 17 pct to PLN 7 bln last year, which was achieved not only by the opening of new stores but mainly due to new collections being received well, in particular Reserved, Sinsay and Cropp. This is reflected by the high, two-digit sales ratio for comparable stores in 2017 (10 pct y-o-y). The current product management also helps, which helped the gross margin in the last quarter of 2017 to reach 58 pct, over 7 percentage points higher than the same period in 2016. “Such good results were possible mainly due to customers' appreciation of our range last year. I am pleased that besides the now traditional positive reception of the collections of our flagship brand Reserved for women and children, all other brands recorded significant sales increases in Q4. Importantly, in Q4 2017 we doubled our online sales, which reached 8 pct of our total sales in Poland. We will try to maintain this trend by developing online sales in other countries where our stores are already present. At the moment, our collections are available online in more than half of the 20 countries in which we sell,” comments Przemysław Lutkiewicz, deputy CEO for finance at LPP. Online sales increased in 2017 by 108 pct to account for 8 pct of the whole group’s sales and the company intends to strengthen this channel. The company has not commented so far on the Sunday trading ban. “It is too early to assess the impact of the new law on our business. After the first closed Sunday, we noticed an increase in turnover on other days: Thursday and Friday, as well as Monday and Tuesday. We believe that, just like in Hungary, customers will change their shopping habits and sales will be spread out over weekdays,” concluded PrzemysławLutkiewicz.
After MIPIM 2024: cautious optimism and new trends
After MIPIM 2024: cautious optimism and new trends
Avison Young
A tentative, moderate optimism was noticeable in the mood at MIPIM. There was a lot of talk about Poland in the context of a stable, economically strong market, providing good cond ...
A queue for residential plots
A queue for residential plots
Walter Herz
Recently, there have been major changes on the investment land market. The expectations of plot owners are still high, however nowadays, buyers are willing to pay more for plots th ...
Waiting for cheaper money
Waiting for cheaper money
Walter Herz
In 2023, Polish investment market, like foreign markets, saw low investor activity. The value of investment volumes in all real estate sectors was much lower than in previous years ...