Polish fashion retailer LPP to cut costs, shares jump

·2-min read
Clothes are displayed on the mannequins at Polish fashion retailer LPP brand Reserved shop in Warsaw

By Patrycja Zaras

GDANSK (Reuters) -Poland's biggest fashion retailer LPP is cutting its marketing budget and rethinking logistics as part of an ongoing drive to reduce costs, sending the company's shares up sharply.

Chief Financial Officer Przemyslaw Lutkiewicz said on Thursday that the retailer's previous attempts to raise prices were met with resistance from its customers, especially in value-for-money brands like Sinsay.

Instead, LPP plans to reduce spending on logistics and to use Romania's Constanta port to cut delivery time and costs significantly, he said.

At the same time, the retailer is focusing on growth opportunities in southern and southeastern Europe, as well as tapping into growing demand for value ranges.

Out of 380 new store openings planned for 2023/2024, about 150 of them will be in southeastern Europe. And of those, 100 will be Sinsay stores, Lutkiewicz said.

As high inflation bites, LPP is seeing more customers shift to cheaper brands such as Sinsay, he said.

Lutkiewicz, turning to plans for upcoming year, said the retailer's main goal for 2023/2024 was to work on increasing profitability of its operations.

He said the company is aiming for an EBIT margin above 10%, as it balances higher margin brands like Reserved with its lower margin, but also lower cost, value-for-money Sinsay brand.

LPP shares surged and were up more than 18% late on Thursday.

"The company is going through the toughest moment for consumer in very good, quality style," Trigon analyst, Grzegorz Kujawski told Reuters, praising retailer's outlook for upcoming quarters and adding that analysts will now be reviewing their recommendations for retailer.

LPP reported a 15% jump in full-year net profit to 1.10 billion zlotys ($264 million) on Wednesday, driven mainly by new store openings and like-for-like sales growth.

At 1452 GMT, LPP shares were up 18.4%.

($1 = 4.1600 zlotys)

(Reporting by Patrycja ZarasEditing by Mark Potter and Jane Merriman)