Lpp S.a. · GPW:LPP

Lpp — Q3 2016 Earnings Presentation

54 slides from Lpp's earnings presentation, Nov 15, 2016

  1. Slide 1: Financial Results for 3Q16

    F I N A N C I A L R E S U LT S FOR 3Q16 G L O B A L A S P I R AT I O N S W A R S A W, 1 5 t h N O V E M B E R 2 0 1 6

  2. Slide 2: Disclaimer

    DISCLAIMER This presentation (the “Presentation”) was prepared by LPP SA (the “Company”) with a due care. Still, it may contain certain inconsistencies or omissions. The Presentation does not contain a complete or thorough financial analysis of the Company and does not present its standing or prospe

  3. Slide 3: Agenda

    AGENDA  Executive summary  3Q16 financial results  Key corporate events  2016 and 2017 outlook  Q&A 3

  4. Slide 4: Over PLN 4bn revenues in 9M16

    Over PLN 4bn revenues in 9M16 1,668 +7.0% STORES LFLs PLN 4,166m 18 +11.2% R EVENUES + 1 7 . 2% COU NTRI ES m2 47.8% +7.7% GROSS P ROFI T SG&A / m2 PLN 27m EBIT MARGI N 4

  5. Slide 5: Key 3Q16 achievements

    Key 3Q16 achievements Franchise agreement Closing the Tallinder RESERVED flagship LPP stores for Belarus brand in Munich free from furs Agreement with a local Lower-than-expected sales 16th store in Germany, Resignation from franchisee for first stores were one of the reasons for in Munich. natural

  6. Slide 6: Almost 1,700 stores worldwide

    Almost 1,700 stores worldwide NO. OF LPP STORES 26 291 30.09.2016 No. of stores YoY growth 19 LPP GROUP 1,668 +94 26 RESERVED 449 +12 990 Cropp 375 +13 16 71 House 326 +15 79 61 MOHITO 288 +17 16 34 SiNSAY 185 +28 17 Tallinder 8 +8 16 KUWAIT Outlets 37 +1 1QATAR 1 2 1 1 1 EGYPT UAE SAUDI 6 1 ARABIA

  7. Slide 7: Agenda

    AGENDA  Executive summary  3Q16 financial results  Key corporate events  2016 and 2017 outlook  Q&A 7

  8. Slide 8: Dynamic LFL growth

    Dynamic LFL growth LFLs in LOCAL CURRENCIES LFLs in LOCAL CURRENCIES data for the group data for the group 11.7% 9.2% 6.6% 7.0% 5.1% 4.6% 4.2% 2.8% 1.5% -0.8% -1.5% -1.7% -3.5% -0.2% -6.9% -2.0% 9M14 9M15 9M16  LFLs were positive in each month in 3Q16. All brands showed positive LFLs in 3Q16. RESER

  9. Slide 9: Floorspace growth in Europe and Russia

    Floorspace growth in Europe and Russia F L O O R S PA C E G R O W T H 3 Q 1 6 F L O O R S PA C E ths m2 by regions by regions 900 ths m2 3Q15 3Q16 YoY +7.1 0.0 888.0 +14.3 LPP GROUP 798.8 888.0 11.2% 880 872.7 -6.1 Poland 443.9 471.2 6.2% Europe 161.7 205.2 26.9% 860 +15.3 ths m2 CIS 187.7 204.0 8.7

  10. Slide 10: RESERVED brand – a growth leader

    RESERVED brand – a growth leader F L O O R S PA C E G R O W T H 3 Q 1 6 F L O O R S PA C E ths m2 by brands by brands 900 ths m2 3Q15 3Q16 YoY +13.5 +1.8 +2.1 0.0 0.0 888.0 LPP GROUP 798.8 888.0 11.2% 880 RESERVED 435.7 487.2 11.8% 872.7 -1.0 -1.0 Cropp 109.1 116.7 6.9% House 95.2 103.8 9.1% 860 MOH

  11. Slide 11: Fast top-line growth

    Fast top-line growth GROUP REVENUES GROUP REVENUES PLN m by regions PLN m by brands in 3Q16 2,000 40% RESERVED 31.3% 661 + 18% YoY 10.9% 12.1% 18.0% 1,600 9.0% 16.4% Cropp 246 + 13% YoY 11.4% 30% 31.7% 19.6% 2.2% 17.2% 1,200 6.1% MOHITO 192 + 27% YoY 25.9% 20% House + 11% YoY 189 800 SiNSAY 120 + 45

  12. Slide 12: Acceleration of sales/m2 growth

    Acceleration of sales/ m2 growth SALES/ m2 R E TA I L S A L E S / m 2 average per month PLN / m2 1,000 +6% YoY 10% PLN (monthly) 3Q15 3Q16 YoY 800 724 755 610 608 663 567 535 631 580 567 0% LPP GROUP 504 547 8.5% 600 536 462 468 Poland 544 560 3.0% 400 -10% Europe 456 497 9.1% 200 CIS 463 570 22.9%

  13. Slide 13: Dynamic e-commerce development

    Dynamic e-commerce development ON-LINE SALES ON-LINE SALES PLN m +127% YoY PLN m 100.2 50 41.2 3% +103% YoY 40 30.0 31.6 23.4 27.4 2% 30 17.4 12.4 16.1 12.8 13.9 49.4 20 11.5 18.0 41.4 6.6 1% 10 15.2 0 0% 9M13 9M14 9M15 9M16 E-commerce revenues % of group sales  On-line sales constituted 3.4% of re

  14. Slide 14: A new sell-out policy

    A new sell-out policy GROSS PROFIT MARGIN vs PLN/US$ 9M16 PURCHASES by regions PLN/USD 0.40 65% Far East Turkey 57.5% 56.7% 52.6% 47.1% 30% 10% 0.35 60% Poland 1% 55% 0.30 Other 50% 2% 0.25 45% 0.20 40% China 57% PLN/USD rate (T-2 quarters) Gross profit margin (%)  Fall in 3Q16 gross profit margin

  15. Slide 15: Higher costs per m2

    Higher costs per/ m2 COSTS of OWN STORES/ m2 SG&A/ m2 +11% YoY +10% YoY 238 235 220 222 220 205 299 296 202 189 187 186 195 191 202 270 274 274 271 62 66 54 57 236 230 232 244 237 254 254 57 52 46 47 48 55 46 48 49 58 58 56 57 56 53 50 48 47 52 52 56 57 118 111 110 108 107 97 93 93 90 93 98 99 89 Re

  16. Slide 16: 3Q16 results burdened by write-offs

    3Q16 results burdened by write-offs PLN m 3Q15 3Q16 YoY  Dynamic revenue growth (positive LFLs and floorspace increase). Revenues 1,261.5 1,488.4 18.0%  Decrease in gross margin: lower margins in Gross profit on sales 663.2 700.6 5.6% sell-out months (July and August), but margin Gross profit marg

  17. Slide 17: Closing down the Tallinder brand

    Closing down the Tallinder brand P & L A N D C A S H F L O W I M PA C T  September 6, 2016 the Management Board decided to resign from further developement 1Q16 2Q16 3Q16 2016 target of the Tallinder brand. Revenues (PLN m) 0.7 3.1 3.8 35  The first store was opened in February 2016. Sales / m2 pe

  18. Slide 18: Adjusted bottom-line above zero

    Adjusted bottom-line above zero PLN m 3Q15 3Q16 YoY  3Q16 EBIT charged with PLN 24.6m write- offs and provisions related to resignation Revenues 1,261.5 1,488.4 18.0% from development of the Tallinder brand. Gross profit on sales 663.2 700.6 5.6%  PLN 3.7m provisions for closing down Gross profit

  19. Slide 19: Results in line with preliminary data

    Results in line with preliminary data PLN m 9M15 9M16 YoY  Dynamic revenue growth (positive LFLs and Revenues 3,555.3 4,165.6 17.2% higher floorspace). Gross profit on sales 1,880.1 1,992.1 6.0%  Continuation of trends on gross profit margin: new sell-out policy and competitive Gross profit margin

  20. Slide 20: Fall in inventory/m2

    Fall in inventory/ m2 INVENTORY CASH CYCLE PLN m PLN/ m2 225 207 191 1,684 1,621 1,634 181 177 168 167 188 168 165 2,000 168 1,527 158 1,355 1,669 1,600 1,575 150 1,600 1,507 1,443 1,383 1,516 1,200 1,200 82 1,444 1,374 1,320 1,336 75 107 93 102 87 106 1,438 94 82 800 66 68 75 1,167 800 1,131 1,037

  21. Slide 21: Lower YoY indebtedness and capex

    Lower YoY indebtedness and capex C A P E X v s N E T D E B T/ E B I T D A NET DEBT PLN m (x) PLN m (x) PLN 787m PLN 647m 250 1.6 194 1,050 1.1 1.2 1.5 200 172 160 109 153 1.2 132 117 104 750 150 125 101 0.8 586 1.0 89 689 100 62 450 50 36 0.4 0.5 150 320 224 0 0.0 -120 -150 -266 0.0 3Q15 3Q16 Short-

  22. Slide 22: Strong operating cash flow

    Strong operating cash flow 3 Q 1 6 C A S H G E N E R AT I O N 3Q16 CASH FLOW PLN m PLN m +30.8 +54.3 265.9 +68.1 104 101 219.2 47 -0.9 -62.1 -40.2 -3.2 -11 -39 -36 -43 -100 3Q15 3Q16 Operating CF Investing CF Financing CF Total CF  Operating cash flow  YoY increase thanks to changes in inventory m

  23. Slide 23: 9M16 executive summary

    9M16 executive summary ACHIEVEMENTS AND CHALLENGES  Improvement in RESERVED women collection. Work in progress.  Strong results of MOHITO, SiNSAY, Cropp and House brands.  Further growth in foreign sales. RESERVED foreign sales exceeded domestic revenues.  Acceleration of e-commerce dynamics. 

  24. Slide 24: Agenda

    AGENDA  Executive summary  3Q16 financial results  Key corporate events  2016 and 2017 outlook  Q&A 24

  25. Slide 25: Franchise agreement for Belarus

    Franchise agreement for Belarus  Agreement signed in August 2016. DEVELOPMENT IN BELARUS  Brand to be developed: RESERVED.  An experienced local franchisee: Investment Group RAPA  Settlement: wholesale, direct sales to franchisee. Lack of SG&A costs and capex. Minsk  Planned development: up to

  26. Slide 26: Another RESERVED flagship in Germany

    Another RESERVED flagship in Germany FURTHER DEVELOPMENT IN GERMANY LPP stores Planned openings  First store in the capital city of Bavaria, Munich. This high- street store was opened in September 2016. NEXT OPENENINGS M2 DATE  Floorspace: 3,456 m2. Personnel: 60 people. Berlin 2,096 1Q 17  16th

  27. Slide 27: No more natural furs in our collections

    No more natural furs in our collections RESPONSIBLE R E S I G N AT I O N F R O M PRODUCTION N AT U R A L F U R S  Signing the ACCORD agreement (2013).  Ban is effective for all LPP brands.  Effective supervision over factories and  Launch of Fur Free Stores campaign from suppliers: Autumn/Winter

  28. Slide 28: Autumn/Winter trends at MOHITO

    Autumn/Winter trends at MOHITO Sensual and dark limited Pop-culture icon, Minnie Comfortable clothes Top model Magdalena collection with elegant Mouse, inspired us to underlining female shapes. Frąckowiak is the face of clothes in line with the create a special Dominating colours are the collection.

  29. Slide 29: Agenda

    AGENDA  Executive summary  3Q16 financial results  Key corporate events  2016 and 2017 outlook  Q&A 29

  30. Slide 30: 2016 floorspace targets maintained

    2016 floorspace targets maintained 2016 2016 Floorspace YoY  9% YoY floorspace growth targeted for 2016 31.12.2015 previous new (ths m2) growth together with 1,700 stores in 18 countries. target target BY BRANDS  2016 targets: (1) further development in Germany, (2) further floorspace growth in Ru

  31. Slide 31: 2016 expectations

    2016 expectations 2016 TARGETS MAINTAINED 2016  Revenue growth should exceed floorspace growth. TA R G E T S  Fall in gross profit margin by no more than c.3-4% p.p. versus 2015 level.  LFLs improvement. 4Q16  E-commerce development (4 brands on-line in 5 new countries in 4Q16). CHANCES  Lack o

  32. Slide 32: Double-digit floorspace growth in 2017

    Double-digit floorspace growth in 2017 Floorspace 2016 2017 YoY growth  11% YoY floorspace growth in 2017. (ths m2) target target  4 new countries in 2017: BY BRANDS  Serbia and the UK in Europe (own stores);  Belarus and Kazakhstan in CIS (franchise stores). RESERVED 507.3 581.4 15% Cropp 120.4

  33. Slide 33: CIS development acceleration

    CIS development acceleration BELARUS RUSSIA Up to three franchise stores in two years. The first one Second largest country after in 1H17. Poland (c. 20% of group revenues) RESERVED Floorspace: +8% in 2016 +14% in 2017 UKRAINE Acceleration of development K A Z A K H S TA N in 2017 due to new shoppin

  34. Slide 34: 2017 outlook

    2017 outlook  Revenue growth should exceed floorspace growth (positive LFLs at 2017 all brands). TA R G E T S  Pick-up in gross profit margin versus 2016 level. Estimated 2017 gross profit margin at 52-53%. 2017  LFLs improvement, especially at RESERVED brand. CHANCES  Dynamic e-commerce develop

  35. Slide 35: E-commerce – a strategic pillar

    E-commerce – a strategic pillar 3Q16 2016 2017 S TAT U S TA R G E T TA R G E T  6 brands have on-line  4 new brands on-line:  RESERVED on-line stores in Poland Cropp, House, in Russia  RESERVED on-line MOHITO, SiNSAY  RESERVED on-line stores in Czech  in 5 new countries: in Ukraine Republic, S

  36. Slide 36: Agenda

    AGENDA  Executive summary  3Q16 financial results  Key corporate events  2016 and 2017 outlook  Q&A 36

  37. Slide 37: Back-up

    = Back-up TALLINDER

  38. Slide 38: Network development

    Network development Floorspace (ths m2) 30.09.2014 31.12.2014 31.03.2015 30.06.2015 30.09.2015 31.12.2015 31.03.2016 30.06.2016 30.09.2016 RESERVED 367.4 389.7 402.7 416.3 435.7 461.3 467.1 473.8 487.2 Poland 204.7 209.2 215.2 219.0 223.4 232.5 230.9 235.1 232.0 Europe 69.6 83.9 90.1 95.1 106.5 120.

  39. Slide 39: 2016 network development details

    2016 network development details Floorspace (ths m2) 31.12.2015 2016 TARGET Nominal growth YoY growth No. of stores 31.12.2015 2016 TARGET Nominal growth YoY growth RESERVED 461.3 507.3 46.0 10% RESERVED 449 460 11 2% Poland 232.5 246.9 14.4 6% Poland 237 234 -3 -1% Europe 120.2 144.1 23.9 20% Europ

  40. Slide 40: Group 3Q16 revenue growth contributors

    Group 3Q16 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands 1,600 PLN m +78 +5 1,488 PLN m 3Q15 3Q16 YoY +84 +60 LPP GROUP 1,261.5 1,488.4 18.0% 1,400 1,261 RESERVED PL 314.5 329.7 4.8% 1,200 RESERVED EX 245.4 331.1 34.9% Cropp PL 131.2 132.9 1.3% 1,000 Cropp EX 86.2 113.5 31

  41. Slide 41: Group 9M16 revenue growth contributors

    Group 9M16 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 4,500 +154 +12 4,166 PLN m 9M15 9M16 YoY +253 4,000 +192 LPP GROUP 3,555.3 4,165.6 17.2% 3,555 RESERVED PL 985.0 971.4 -1.4% 3,500 RESERVED EX 694.5 893.5 28.6% Cropp PL 330.6 355.2 7.4% 3,000 Cropp EX 224.9 29

  42. Slide 42: Costs of stores and HQs

    Costs of stores and HQs SG&A COSTS SG&A COSTS PLN m PLN m 125 1,909 115 131 1,583 +21% r/r 120 119 107 103 103 90 375 296 493 521 537 451 455 434 444 476 409 1,534 1,287 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 9M15 9M16 Costs of stores HQ Costs of stores HQ  Costs of stores encompass costs of

  43. Slide 43: Other operating activity and net financials in 3Q16

    Other operating activity and net financials in 3Q16 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 3Q15 3Q16 PLN m 3Q15 3Q16 Inventory excess (write-ups) 2.6 4.0 FX gains 0.0 -1.9 Gain on sale of assets 2.1 3.6 Interest 0.7 0.0 Other operating revenues 6.0 7.4 Financial revenues

  44. Slide 44: Other operating activity and net financials in 9M16

    Other operating activity and net financials in 9M16 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 9M15 9M16 PLN m 9M15 9M16 Inventory excess (write-ups) 9.3 12.0 FX gains 0.0 8.7 Gain on sale of assets 4.4 7.4 Interest 1.7 0.5 Other operating revenues 16.5 21.1 Financial revenu

  45. Slide 45: Historical quarterly numbers

    Historical quarterly numbers PLN m 4Q14 4Q15 1Q15 1Q16 2Q15 2Q16 3Q15 3Q16 YoY Revenues 1,404.9 1,575.0 1,002.6 1,174.8 1,291.3 1,502.4 1,261.5 1,488.4 18.0% Gross profit on sales 829.1 862.8 543.6 541.8 673.4 749.7 663.2 700.6 5.6% Gross profit margin 59.0% 54.8% 54.2% 46.1% 52.1% 49.9% 52.6% 47.1%

  46. Slide 46: Balance sheet remains stable

    Balance sheet remains stable PLN m 30.09.2015 31.12.2015 30.09.2016  Higher YoY fixed assets due to investments Non-current assets 1,664.3 1,797.0 1,797.8 in stores. intangibles (including goodwill) 323.3 324.4 325.9  Stable YoY intangibles due to investments fixed assets 1,149.0 1,258.8 1,260.3 i

  47. Slide 47: RESERVED brand profile

     A fast fashion brand with a broad customer base; PLN m REVENUES wide range of collections. 676 754 666 661 635 627 544 576 580 560 538  Target customers: women, men and children. 479 493  Established in 1998.  First brand in Germany and the Middle East.  Advertised by international stars (Geor

  48. Slide 48: Cropp brand profile

     A casual streetwear brand. PLN m REVENUES  Target customers: teenagers (boys and girls). 221 220 217 234 232 246 193 199 194 196  Established in 2004. 136 142 167  Partner of events for artists and street art.  Offers also international labels (eg. New Balance, Converse).  Store concept: the

  49. Slide 49: House brand profile

     Urban fashion brand with folk and vintage PLN m REVENUES elements. 216  Target customers: teenagers (boys and girls) who 175 158 165 200 160 170 189 189 145 144 like brave fashion choices. 111 127  Established in 2001 (in LPP Group since 4Q08).  Participates in multiple artistic events and spon

  50. Slide 50: MOHITO brand profile

     A brand that combines comfort and elegance PLN m REVENUES for business and informal meetings. 183 192  Target customer: young women. 146 146 151 175 150 144 132 134 122 112 115  Established in 2008 (in LPP’s Group since 4Q08).  Anja Rubik created a limited collection for AW2014/15. Zuzanna Bijo

  51. Slide 51: SiNSAY brand profile

     Clothes for every day inspirations and original PLN m REVENUES party outfits. 117 120  Target customers: teenagers – girls only. 105 83 83 88 77  Established in 2013. 55 59 58 37 33 22  The brand stands out for original T-shirts with extraordinary prints.  In AW15/16 singer Margaret designed h

  52. Slide 52: Tallinder brand profile

     Fashion brand for customers who appreciate PLN m REVENUES timeless elegance, minimalism and high quality.  Target customer: Men and women + 30 years old.  First stores: February 2016. 3 4  To be closed down in February 2017. 1  SS16 collection advertised by a well-known football player Jarosła

  53. Slide 53: Glossary

    Glossary Poland Retail sales in Poland and other sales of LPP SA. CEE Region including: Czech Republic, Slovakia, Hungary. Baltic Region including: Lithuania, Latvia, Estonia. CIS Region including: Russia, Ukraine and from 2017 also Belarus and Kazakhstan. SEE Region including: Bulgaria, Romania, Cr

  54. Slide 54: Contact Information

    CONTACT INFORMATION GDANSK HEADQUARTERS. KRAKOW BRANCH LOGISTICS CENTRE LPP SA LPP SA LPP SA takowa 39/44 B: Tezewska 2 80-769 Gdarisk, Poland 30-733 Krakow, Poland 83-000 Pruszcz Gdatiski, Poland 58 7696 900 Phone + 48 12 39 25 000 696 909 E-mail: [email protected] MEDIA CONTACT INVESTOR RELATIONS CONT

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