Aug 20, 2015
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Polish retailer LPP returns to profit in Russia, eyes new stores

Aug 20, 2015

Poland's largest clothing retailer LPP  (brands : Reserved, Cropp, House, Mohito and Sinsay) recovered from losses in Russia in the first half of the year, thanks to cost cutting and sales growth, and is considering opening a few more stores there next year, its CFO said on Thursday.

LPP halted its expansion in former Soviet Union countries last year as the crisis in Ukraine and the depreciation of the Russian rouble hurt business.

The improved performance in Russia, despite a weak rouble and a struggling economy, helped LPP, which competes with H&M and Inditex, to turn a total net profit of 99 million zlotys for the first half, well above a market forecast of 69 million.

"Our financial results in Russia and Ukraine are fantastic and I hope this situation will carry on," Chief Financial Officer, Przemyslaw Lutkiewicz, told a news conference.

"We have significantly lowered our cost base and our profits are the best in years (...)."

Its Russian arm posted an operating profit of 50 million zlotys ($13.33 million) for the first six months of the year versus loss a year ago, Lutkiewicz said.

Still, the company said its expansion in Russia would not be as fast as before the crisis.

"We will decide in September (...) I don't think that we will be as bold as earlier ... but we are thinking of about 5-10 percent yearly increases (in store area)," Lutkiewicz said.

"We also plan to expand in Belarus, which is currently a blank point on our map. We want to make it colourful and open two shops in Minsk," he said.

LPP is going against the trend among Polish companies, which are losing market share in Russia due to the economic slump there and some are withdrawing from the country, such as banking group Getin Holding, which recently sold its leasing firm Carcade.

Lutkiewicz said LPP planned to spend 400 million zlotys next year to increase its total store area globally by 15 percent, including new shop openings in Germany and the Middle East, markets it entered this year. Most of its stores are in Poland and central Europe.

LPP's shares fell nearly 20 percent last year due to its weak performance in Russia but they have gained 3 percent this year, outperforming the main Warsaw bourse index. ($1 = 3.7504 zlotys)


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