(Bloomberg) — An $8 billion, family-run Polish fashion retailer maneuvered past a minefield of Covid restrictions across its 27 markets this year, beating both its international competitors and every stock in Warsaw’s blue-chip index.
LPP SA shares gained 108% this year, ten times more than Warsaw’s WIG20 gauge. The valuation of its Swedish competitor Hennes & Mauritz AB was nearly unchanged in 2021 while Zara owner, Spain’s Inditex SA, gained 5%.
All three clothiers faced lockdowns, a continued switch to e-commerce and supply-chain woes, yet LPP managed to report strong earnings and set ambitious 2022 targets. Unlike H&M and Zara, it continued to invest heavily in boosting its physical presence in smaller markets, while the industry focused on online sales.
“LPP’s guidance for next year is very strong, and the company reemerged even stronger from lockdowns, showing it understands well buyers’ needs” Tomasz Sokolowski, an analyst at Santander Bank Polska SA, said by email. “There is still some potential for gains even after this rally.”
Bloomberg Intelligence’s Tatiana Lisitsina said that “while most western peers need to trim store portfolios and find new growth avenues, LPP’s aggressive store expansion in under-penetrated and rapidly growing smaller towns in Eastern Europe, allowing it to capture cheaper growth with less competition.”
Run by founder Marek Piechocki, LPP operates in 27 countries from Egypt to Finland. It invested cash reserves at the start of the pandemic in its network of shops, which operate under names such as Reserved and Cropp, as well as in e-commerce.
It plans to widen its network 25% next year, while keeping operating margins little changed. Such a strategy, together with a focus on lower prices amid a surge in inflation across Europe may continue to pay off, even as LPP shares are already trading near their 12-month target price average.
“LPP remains our top pick for 2022” as it “starts to reap the benefits” of expansion during the pandemic, said Sylvia Jaskiewicz, an analyst at BOS Bank SA.
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