(Reuters) -Polish fashion group LPP said on Wednesday it planned to double its store count over the next three years driven by its cheaper brand Sinsay.
LPP, which trades in 39 countries, aims to have 4,755 stores by the end of 2026, including 3,248 Sinsay stores, it said in a presentation as part of the release of its 2023 results.
It will focus the expansion on Southern and Central Europe, it said in its annual report, adding that growth in Western Europe will be carried out conservatively.
“Only in the next three years, we plan to double our traditional network and, in the meantime, generate twice as much sales volume as we do today,” CEO Marek Piechocki said in a letter to shareholders released with annual report.
For its financial year 2023, LPP’s revenue rose 9.3% from a year earlier to 17.41 billion zlotys ($4.38 billion), in line with preliminary figures it reported last week.
Net profit increased 85.5% to 1.61 billion zlotys, in line with earlier estimates.
LPP said that like-for-like sales at Sinsay stores from Feb. 1 to March 25 rose 26% year-on-year.
To accommodate its growth, it plans to increase its logistics network floor space by nearly 50% in 2024-25.
It plans to propose a dividend of 610 zlotys per share, up from an earlier proposal of at least 570 zlotys.
RUSSIA RESPONSE
On March 15, the Gdansk-based company’s shares plummeted after a Hindenburg Research report questioned the sale of its business in Russia, part of a divestment in response to Russia’s invasion of Ukraine.
LPP denied the allegations and said it had no operating or trading activities in Russia after selling the business in June 2022.
“I assure you that the allegations made by the intelligence service against the LPP Group are untrue,” Piechocki said in the letter to shareholders.
LPP responded to the allegations last week that as part of the sale agreement of the Russian business, it delivers goods to trade agents during the transition period.
In the results presentation, LPP reported earnings before interest and taxes of 168.1 million zlotys in 2022 and 158.4 million zlotys in 2023 on the sales to the trade agents.
The presentation also said LPP has applied a 0% margin on its settlements with the trade agents since January and plans to end sales to the agents in the fourth quarter of 2024. The company reported a 21% gross margin on these sales in 2023.
“The company stated in last week’s presentation that it does not benefit from quasi-sales to Russia (present tense). However, it didn’t disclose that it had done so in the past, which could continue to weigh on sentiment,” Erste Group analyst Krzysztof Kawa said in a note on Wednesday.
LPP shares were up 1.8% at 0854 GMT and while they have recouped some losses are still around 20% below levels prior to the Hindenburg report.
($1 = 3.9778 zlotys)
(Reporting by Anna Pruchnicka; Editing by Sonali Paul and Christian Schmollinger)
