1Q22/23 Results presentation

•In Q1 2022/23, revenues of the Polish clothing producer increased by over 67% YoY, exceeding PLN 3bn (data excluding operations in Russia).

•High revenues of LPP Group in Q1 2022/23 resulted from the growing popularity of Sinsay brand in both channels.

•The past quarter, despite the suspension of online sales in Ukraine and Russia, brought LPP nearly PLN 1bn in e-commerce revenue and continued steady growth of online sales.

•The company once again achieved higher revenues from abroad, which in Q1 2022/23 already accounted for 57% of the Group’s revenue.

•After a temporary suspension of sales operations in Ukraine, LPP is back to business in that country – resuming e-commerce deliveries and stationary sales operations to a limited extent.

The first quarter of the current fiscal year at LPP (February-April) was strongly affected by the war going on across the eastern border. For security reasons, the company temporarily suspended its operations in Ukraine, and at the end of April, after previously halting its stationary and online sales in Russia, it took a directional decision to sell its entire business in this country. Consequently, as at the end of April this year, the company had 1760 physical stores in 25 markets, and the online offer was available in 32 countries. The war in Ukraine and the related unfavourable USD exchange rate, as well as discounts on LPP goods originally destined for eastern markets, also affected the gross margin, which fell to 53.3%. Despite this difficult situation, the company performed well financially. A flexible approach and agile operations in the area of the company’s development strategy ensured a net profit of PLN 268m already in the first quarter. At the same time, revenue from sales exceeded PLN 3 bn, which means an increase in the Group’s revenue by over 67% YoY[1].

The record-breaking turnover growth in Europe, at 98% YoY, allowed the Gdańsk-based company to compensate for the loss caused by the closure of stores in Russia. As a result, total revenues from abroad again exceeded those generated in Poland and accounted for 52% of the Group’s total revenues. Good sales, especially in countries such as Romania, the Czech Republic and Germany, and on the domestic market, which recorded a 60% increase YoY, are the effect of Sinsay’s dynamic development. The company set its sights on strengthening the brand position both within the physical stores network in Poland and abroad, as well as in e-commerce.

The practically complete lifting of sanitary restrictions in the past quarter encouraged customers to return to shopping in the physical stores chain. Despite these changes, the company maintained a stable growth rate in the online channel YoY, recording revenue of almost PLN 1bn. The majority, 72%, of purchases were made via mobile devices. The highest increase in e-commerce sales, by almost a quarter, was seen in the European market, due to the launch of Sinsay online stores in Greece, Spain and Italy in April. This allowed the company to offset a significant YoY decline in online sales in eastern markets, associated with the closure of stores in Russia and the temporary suspension of trade operations in Ukraine. However, in response to an appeal by the Ukrainian authorities, the company has resumed business operations in that country.

While resuming business operations in Ukraine, LPP continues its activities supporting its employees and citizens from the war-stricken country. As part of the ongoing assistance, the company prepared financial and in-kind support worth a total of PLN 20m, which is allocated for such things as accommodation or legal aid, but also to support the aid activities of the LPP Foundation’s external partners.

For the Polish clothing company, the last quarter was also a time of logistics development. In February this year, the Distribution Centre in Brześć Kujawski became operational; together with the Distribution Centre in Pruszcz Gdański, it constitutes a key pillar of the LPP logistics network. The warehouse with the area of 75th m2 provides services up to 1000 stores simultaneously, employing over 700 people. In the first quarter, the construction works at the Fulfilment Centre in Podkarpacie also gained momentum. The new e-commerce warehouse, which is scheduled to be launched in the fourth quarter of this year, is to support the service of neighbouring markets such as: Hungary, the Czech Republic, Germany, Slovakia, Ukraine, and partly also Poland.

As part of its sustainable development strategy, the company also continued to work on the preparation of its decarbonisation strategy. With this in mind, last year it self-calculated its carbon footprint in all three scopes in line with the GHG Protocol guidelines. Professional scientific assessment of the strategy in line with SBTi methodology is to help the Polish company achieve climate neutrality by 2050.