Lpp S.a. · GPW:LPP
Lpp — Investor Presentation (July 2020)
121 slides from Lpp's investor presentation, July 2020
Slide 1: LPP Equity Story
LPP EQUITY STORY JULY 2020 GLOBAL ASPIRATIONS 1
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
Slide 3: Table of contents
Table of contents 5 OVERVIEW 45 BACK-UP 14 INVESTMENT CASE 46 BRANDS 16 OMNICHANNEL DEVELOPMENT 56 LFLs 62 FLOORSPACE 26 COPING WITH COVID-19 66 REGIONS 32 EFFICIENT BUSINESS MODEL 80 GROWTH DRIVERS 37 STABLE FINANCIAL POSITION 84 BUSINESS MODEL DETAILS 40 A RESPONSIBLE COMPANY 103 CORPORATE MILESTO
Slide 4: 2019/20 - a shifted fiscal year
2019/20 - a shifted fiscal year It encompassed Fiscal year 2019/20 the period from The next fiscal years was the only the beginning will be 12-month- 13-month-long year. of January 2019 long. till the end of January 2020. The YoY dynamics are given in relation to unaudited data for a comparable 13-m
Slide 5: Overview
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 5
Slide 6: The largest clothing retailer on WSE
The largest clothing retailer on WSE OFF-LINE ON-LINE LPP GROUP 1,746 12% PLN 9.9bn stores of revenues revenues 25 30 39 countries countries countries PLN 15.7bn 70% MSCI POLAND MARKET CAP FREE-FLOAT MEMBER GLOBAL ASPIRATIONS 6 Data as of 31.01.2020
Slide 7: A diversified brand portfolio
A diversified brand portfolio … GLOBAL ASPIRATIONS 7
Slide 8: …with varied but modern store concepts
…with varied but modern store concepts GLOBAL ASPIRATIONS 8
Slide 9: Portfolio of mainstream brands
Portfolio of 5 mainstream brands WE FOCUS ON MAINSTREAM-PRICED BRANDS Streetwear brand Comfort and elegance Clothes for every day KEY BRAND Anchor brand with broad An optimistic fashion influenced by hip-hop for business and informal inspirations and original FEATURES customer base brand and pop-cul
Slide 10: 1,746 stores on 3 continents
1,746 stores on 3 continents 31.01.2020 Number of stores YoY GDAŃSK LPP GROUP 1 746 +5 LPP’s headquarters Design centre of Reserved 454 +2 Reserved, Cropp, Sinsay brands 5 Cropp 360 -9 Back-office Distribution centre House 318 - 11 29 Mohito 283 -9 332 19 Sinsay 324 + 53 23 Outlets 7 - 21 1
Slide 11: Operations in six geographic regions
Operations in six geographic regions DEVELOPMENT STAGE MATURITY DEVELOPING EARLY STAGE CEE BALTIC SEE CIS WE ME Poland, Czech Bulgaria, Romania, COUNTRIES Lithuania, Latvia, Russia, Ukraine, Germany, UK, Egypt, Kuwait, Republic, Hungary, Croatia, Serbia, PRESENT Estonia Belarus, Kazakhstan Finland Q
Slide 12: A lean customer focused business model
A lean customer focused business model Design Production Logistics Stores Customers 3 90% 240 ths m2 39 1,746 countries off-line design centres goods sourced of warehousing space stores and on-line from Asia 300+ 11 m 265m + designers 1,200+ e-commerce orders 3 continents Europe, Asia, Africa clothi
Slide 13: Eyeing the international giants
Eyeing the international giants LEADER ON THE DOMESTIC AMBITIONS TO BE AMONG RETAIL MARKET THE INTERNATIONAL LEADERS REVENUES (PLN m) REVENUES (EUR m) 9,899 53,670 28,286 5,845 22,072 17,895 14,668 11,764 1,068 6,483 3,091 2,301 514 282 179 140 Note: data for LPP for 2019/20, while for other compani
Slide 14: Investment case
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 14
Slide 15: Investment case
Investment case 1 Omnichannel development 8% YoY floorspace growth plus doubling of on-line sales targeted for 2020/21 Agile business model adjusted to post-COVID retail 2 Coping with COVID-19 market 3 Efficient business model Lean and cost cautious business model 4 Stable financial position PLN 789
Slide 16: Omnichannel development
1 2 Omnichannel development 3 8% YoY floorspace growth plus doubling of 4 on-line sales targeted for 2020/21 5 GLOBAL ASPIRATIONS 16
Slide 17: Omnichannel – the key to retail of the future
Omnichannel – the key to retail of the future Traditional stores E-stores Brick&mortar stores of all Own e-stores of all 5 brands 5 brands TARGET: floorspace TARGET: obtaining new growth customers off-line + on-line = omnichannel GLOBAL ASPIRATIONS 17
Slide 18: Floorspace growth to continue
Floorspace growth to continue FLOORSPACE GROWTH TARGETS FLOORSPACE TARGETS BY REGIONS (ths m2) +8% +11% YoY 2016 -19 CAGR ths m2 I.2020 I.2021 YoY 1 330.5 1 246.9 1 230.9 1 091.3 LPP GROUP 1,230.9 1,330.5 8% 1 000.6 920.7 Poland 530.0 542.9 2% Europe 370.7 408.3 10% CIS 321.8 369.5 15% ME 8.4 9.9 17
Slide 19: Reserved remains our most important brand
Reserved remains our most important brand GROUP REVENUES BY BRANDS GROUP REVENUES BY BRANDS (PLN m) 9,899 PLN m 2016 2017 2018 2018/19 2019/20 8,756 8,047 LPP GROUP 6,019 7,029 8,047 8,756 9,899 7,029 6,019 Reserved 2,693 3,160 3,578 3,881 4,047 Cropp 915 1,064 1,120 1,206 1,300 House 767 805 920 99
Slide 20: New countries broaden our presence
New countries broaden our presence EXPANSION BY COUNTRIES + Belarus + Egypt + Kazakhstan + Serbia + Qatar + Israel + B&H + UK + Macedonia + Kuwait + Slovenia + Finland - S. Arabia + Germany + S. Arabia + ZEA + Croatia 26 20 23 25 countries 17 18 countries countries countries 11 13 countries countrie
Slide 21: New countries fuel revenue growth
New countries fuel revenue growth GROUP REVENUES BY REGIONS GROUP REVENUES BY REGIONS (PLN m) 9,899 PLN m 2016 2017 2018 2018/19 2019/20 8,756 8,047 LPP GROUP 6,019 7,029 8,047 8,756 9,899 7,029 6,019 CEE 4,039 4,572 5,115 5,562 5,851 Baltic 256 295 358 388 437 SEE 230 317 463 513 812 64% 59% CIS 1,
Slide 22: Dynamic on-line sales growth to continue
Dynamic on-line sales growth to continue 2,000+ 1,174.1 712.0 360.8 2020/21 target: 173.1 64.8 79.3 • over PLN 2 bn e-commerce revenues, 2014 2015 2016 2017 2018 2019/20 2020/21 TARGET • doubling of revenues YoY. ON-LINE SALES (PLN mln) GLOBAL ASPIRATIONS 22
Slide 23: Acceleration of e-commerce roll-out
Acceleration of e-commerce roll-out CZECH REP., GERMANY RUSSIA (Cropp), SLOVAKIA POLAND HUNGARY, ROMANIA, UK 5 ME countries SLOVAKIA, GERMANY (Reserved via franchise partner) on-line store on-line store on-line store on-line stores on-line store on-line stores 07.2014 10.2015 02.2016 12.2016 09.2017
Slide 24: Pan European e-store
Pan European e-store Goals behind the launch of pan European e-store: • on-line sales growth, • learning the tastes of Western European customers, • identification of potential new markets for traditional stores. Another step towards realisation of our goal: Development through own e-stores gives us
Slide 25: RFID to support omnichannel
RFID to support omnichannel Achieving first RFID Achieving full benefits in RFID implementation integrity in Reserved. implementation in Cropp, House, the supply chain in Reserved Mohito and and some 3% On-line deliveries brand. Sinsay. sales increase. from stores. 2019 2020 2021 2022+ GLOBAL ASPIRA
Slide 26: Coping with COVID-19
1 2 Coping with COVID-19 3 Agile business adjusted to post-COVID retail 4 market 5 GLOBAL ASPIRATIONS 26
Slide 27: 2020/21 results impacted by COVID-19
2020/21 results impacted by COVID-19 Shopping malls closed in majority Opening of shopping of countries, in which malls on selected LPP has traditional markets stores beginning beginning mid-March 2020 end of July 2020 of February 2020 of May 2020 Growing uncertainty, concerns regarding Acceleration
Slide 28: More favourable dynamics than in base case scenario
More favourable dynamics than in base case scenario YoY REVENUE DYNAMICS 364% As we expected, triple-digit on-line sales dynamics 251% continue despite reopening of shopping malls. 105% 72% 62% -19% -39% 14% -68% -32% Sales in traditional stores pick 10% -42% -36% up faster than we initially -100% -
Slide 29: Liquidity is the key to a stable situation
Liquidity is the key to a stable situation ACTIONS TAKEN TO MAINTAIN A STRONG LIQUIDITY POSITION OF THE GROUP REVENUES COSTS CASH OUTFLOWS E-commerce development Reduction of store costs Lower orders HQs costs reductions Lower capex No dividend pay-out GLOBAL ASPIRATIONS 29
Slide 30: Sound cash management
Sound cash management The aim of the Management is to run the Group through the difficult times. Inventory/ sell-offs Lower cash outflows No dividend Timely service of interest payments Our goal is to reasonably manage the Reduction of capex or transfer from bonds issued in 2019 (interest inventory
Slide 31: New reality, new trends
New reality, new trends Affordable garments Universal design, which can be used for a couple of quarters Clothes from eco fabrics and materials NEW TRENDS Homewear type of clothing Offer of all LPP’s brands is a good response to these trends. GLOBAL ASPIRATIONS 31
Slide 32: Efficient business model
1 2 Efficient business 3 model Lean and cost-cautious 4 business model 5 GLOBAL ASPIRATIONS 32
Slide 33: LFLs remain crucial to traditional business
LFLs remain crucial to traditional business LFLs (local currencies) AVERAGE MONTHLY REVENUES/ M2 10.1% PLN m 2016 2017 2018 2018/19 2019/20 LPP GROUP 575 628 662 657 671 7.8% 7.2% Poland 595 654 693 692 697 6.4% Export 516 593 619 617 639 Reserved 475 514 527 525 500 3.6% Cropp 653 732 729 723 717 H
Slide 34: Gross profit margin on high levels
Gross profit margin on high levels KEY FACTORS INFLUENCING GROSS PROFIT MARGIN Inventory management policy – FX – some 90% of purchases are Quality of collections – we have current inventory management policy made in the Far East and indexed to introduced far reaching changes is aimed at selling goo
Slide 35: High operating leverage business
High operating leverage business AVERAGE MONTHLY SG&A COSTS/ M2 SG&A COSTS (IAS17) (PLN, 2019/20 IFRS16) Variable HQs PLN costs 30% costs 27% 41% 280 291 287 289 Fixed Costs of FX 251 costs stores costs 73% 70% 59% 2019/20 2019/20 2019/20 2016 2017 2018 2018/19 2019/20 Note: SG&A relations based on
Slide 36: ROE levels point to value creation
ROE levels point to value creation LPP’S ROE CONTRIBUTORS Operating cost A lean Moderate usage discipline business model of debt NET INCOME OPERATING FINANCIAL PROFITABILITY EFFICIENCY LEVERAGE NET INCOME REVENUES ASSETS ROE REVENUES ASSETS EQUITY NI margin Asset Turnover Equity Multiplier ROE 2016
Slide 37: Stable financial position
1 2 Stable financial 3 position PLN 789m net cash on 4 the balance sheet (IAS17) 5 GLOBAL ASPIRATIONS 37
Slide 38: We focus on FCFF generation
We focus on FCFF generation NOPAT We focus on positive LFLs on all brands. FCFF GENERATION Positive LFLs trigger the operating leverage to work in our favour. PLN m 2016 2017 2018 2018/19 2019/20 Strong growths in e-commerce supports EBIT. FCFF 454 405 204 438 920 NOPAT 205 452 528 474 562 CAP
Slide 39: We want to return to dividend payments
We want to return to dividend payments NET DEBT VS NET DEBT/EBITDA DIVIDENDS (PLN m, IAS17) (PLN m) 800 0.3 -0.4 -0.7 -0.8 -0.6 0.4 600 0.2 400 0.0 200 144 -316 -753 -841 -789 -0.2 COVID 0 -0.4 -19 -200 110 -0.6 impact -400 73 -600 -0.8 66 -800 -1.0 -1000 -1.2 2016 2017 2018 2018/19 2019/20 2016 201
Slide 40: A responsible company managed by founders
1 2 A responsible company managed 3 by founders 2025 CSR Strategy with 4 ambitious targets 5 GLOBAL ASPIRATIONS 40
Slide 41: Sustainable development strategy 2020-2025
Sustainable development strategy 2020-2025 //4 strategic pillars ECO AWARE – SUSTAINABLE CHEMICAL SAFETY PACKAGING AWARE – PRODUCT AND DEVELOPMENT IN HQs IN PRODUCTION PLASTIC UNDER CONTROL PRODUCTION AND SALES NETWORK // 2025 50% of Reserved Full compliance with 100% of plastic 100% of stores cover
Slide 42: A socially responsible Polish family company
A socially responsible Polish family company A safe delivery chain LPP Foundation from Asia: activities: audits in production facilities conducted by SGS and internal together with LPP, LPP Foundation auditors, donated over PLN 3.2m. PLN 24.5m invested in safety and We supported more than 140 proper
Slide 43: Company managed by founders
Company managed by founders Most effective CEO by Harvard Index of Success awarded by Deloitte Top Investor Relations by Parkiet Business Review and Rzeczpospolita newswire in 2016 (2017, 2018, 2019) (2013) for the last 10-year performance Top Stock Company of the Year Digital Excellence Awards for
Slide 44: LPP – an investment opportunity
LPP – an investment opportunity Company with both off-line and on-line expansion. Stock benefiting High quality growth from liquidity and company with recognition from a successful track WIG20 and MSCI record. Poland membership.
Slide 45: Back-up
0 1 . O v e r v ie w 0 2 . I n v e stme nt c a se 0 3 . B a c k -up GLOBAL ASPIRATIONS 45
Slide 46: Reserved: key brand features
KEY BRAND Anchor brand with broad FEATURES customer base TARGET Women, men, children CUSTOMERS YEAR OF 1998 LAUNCH # STORES 454 # MARKETS 25 off-line, 30 on-line STORE SIZE 1,464 m2 International stars like Cindy Crawford, Kate Moss, Georgia May Jagger, Kendall Jenner ADVERTISING and Polish stars li
Slide 47: Reserved: key data
Key data 2016 2017 2018 2018/19 2019/20 REVENUES (PLN m) Revenues (PLN m) 2,692.9 3,159.5 3,578.4 3,880.5 4,046.8 3,881 4,047 No. of stores 461 468 464 452 454 3,578 3,160 2,693 Store size (m2) 1,104 1,202 1,329 1,338 1,464 Floorspace (ths, m2) 509.1 562.3 616.7 605.0 664.8 Sales/ m2 monthly 475 514
Slide 48: Cropp: key brand features
KEY BRAND Streetwear brand influenced FEATURES by hip-hop and pop-culture TARGET Teenagers CUSTOMERS (boys and girls) YEAR OF 2004 LAUNCH # STORES 360 # MARKETS 17 off-line, 12 on-line STORE SIZE 411 m2 Partner of artistic and street ADVERTISING art events GLOBAL ASPIRATIONS 48
Slide 49: Cropp: key data
Key data 2016 2017 2018 2018/19 2019/20 REVENUES (PLN m) Revenues (PLN m) 914.9 1,063.9 1,119.9 1,205.7 1,300.2 1,300 1,206 1,064 1,120 No. of stores 379 381 373 369 360 915 Store size (m2) 318 334 359 360 411 Floorspace (ths, m2) 120.4 127.2 134.0 132.8 147.9 Sales/ m2 monthly 653 732 729 723 717 %
Slide 50: House: key brand features
KEY BRAND An optimistic fashion brand FEATURES TARGET Teenagers CUSTOMERS (boys and girls) YEAR OF 2001 LAUNCH (at LPP since 4Q08) # STORES 318 # MARKETS 17 off-line, 12 on-line STORE SIZE 401 m2 Artistic events partner and ADVERTISING music sponsor GLOBAL ASPIRATIONS 50
Slide 51: House: key data
Key data 2016 2017 2018 2018/19 2019/20 REVENUES (PLN m) 1,117 Revenues (PLN m) 767.1 805.3 920.0 992.6 1,117.3 993 920 No. of stores 330 333 332 329 318 767 805 Store size (m2) 320 332 350 350 401 Floorspace (ths, m2) 105.7 110.6 116.2 115.2 127.4 Sales/ m2 monthly 621 639 689 684 715 % of floorspa
Slide 52: Mohito: key brand features
KEY BRAND Comfort and elegance; FEATURES business and casual TARGET Young women CUSTOMERS YEAR OF 2008 LAUNCH (at LPP since 4Q08) # STORES 283 # MARKETS 17 off-line, 12 on-line STORE SIZE 395 m2 Super models (Anna ADVERTISING Jagodzińska, Anja Rubik, Zuzanna Bijoch) GLOBAL ASPIRATIONS 52
Slide 53: Mohito: key data
Key data 2016 2017 2018 2018/19 2019/20 REVENUES (PLN m) Revenues (PLN m) 736.8 828.6 781.6 846.0 896.9 897 829 846 782 No. of stores 290 294 296 292 283 737 Store size (m2) 342 353 370 370 395 Floorspace (ths, m2) 99.1 103.8 109.4 107.9 111.7 Sales/ m2 monthly 636 696 620 619 631 % of floorspace in
Slide 54: Sinsay: key brand features
KEY BRAND Every day clothes and original FEATURES party outfits TARGET Women, men, teenagers, CUSTOMERS children YEAR OF 2013 LAUNCH # STORES 324 # MARKETS 17 off-line, 12 on-line STORE SIZE 535 m2 ADVERTISING Social media GLOBAL ASPIRATIONS 54
Slide 55: Sinsay: key data
Key data 2016 2017 2018 2018/19 2019/20 REVENUES (PLN m) Revenues (PLN m) 460.9 610.2 788.9 850.8 1,208.1 1,208 No. of stores 198 233 272 271 324 851 789 Store size (m2) 352 363 379 379 535 610 461 Floorspace (ths, m2) 69.8 84.6 103.0 102.7 173.3 Sales/ m2 monthly 607 690 719 709 728 % of floorspace
Slide 56: Positive LFLs – key to successful off-line stores
Positive LFLs – key to successful off-line stores LFLs DEFINITION LFLs IN LOCAL CURRENCIES Stores that: LPP GROUP have been the same as a year before (have not changed their floorspace, have not undergone 2016 6.4% upgrades) and 2017 10.1% have been in operation for the past 12 months (without
Slide 57: RFID to support LFLs
RFID to support LFLs HOW STORES BENEFIT? Faster transfer of goods 70% shorter time of product from the storage room to 60% faster delivery receipt registration at the counter the sales room (availability of 95% of models and sizes) COSTS PLN 60m annually - Additional costs: cost of electronic tags t
Slide 58: International stars promote our brands
International stars promote our brands Georgia May Jagger Kate Moss Cindy Crawford Anja Rubik Anna Jagodzińska Zuzanna Bijoch Joanna Kulig Kendall Jenner GLOBAL ASPIRATIONS 58
Slide 59: We focus on flagships
We focus on flagships Reserved in Moscow, Russia Reserved in Munich, Germany Reserved in Belgrade, Serbia 4,000 m2 3,500 m2 3,500 m2 Reserved in Helsinki, Finland Reserved in London, UK Reserved in Warsaw, Poland 3,100 m2 3,000 m2 2,500 m2 GLOBAL ASPIRATIONS 59
Slide 60: New Reserved store concept
New Reserved store concept … Modern LED lamps and LED screens Lack of dedicated Wide, open and Furniture made illuminate Comfortable, large zones allows for transparent storefront of straight profiles, the collections in and spacious fitting a smooth transition allows for a deep view flexible and mo
Slide 61: … turns more green
… turns more green Smart fitting rooms in Energy-saving screens Heat maps that allow Reserved stores, Progressive LED Modern air and intelligent video us to monitor and where you can find lighting system that conditioning system wall control, which, analyze customer tablets with special saves energy
Slide 62: Network development (calendar years)
Network development (calendar years) Floorspace (ths m2) 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 30.06.2018 30.09.2018 31.12.2018 Reserved 509.1 510.7 520.8 526.8 562.3 561.0 582.2 584.9 616.7 Poland 248.7 245.9 247.4 247.9 266.8 264.9 264.7 259.3 273.3 Europe 144.1 147.7 1
Slide 63: Network development (shifted year)
Network development (shifted year) Floorspace (ths m2) 31.01.2019 30.04.2019 31.07.2019 30.10.2019 31.01.2020 30.04.2020 Reserved 605.0 616.6 634.3 655.0 664.8 657.1 Poland 268.7 263.5 267.6 272.0 270.3 262.9 Europe 188.0 204.4 215.1 218.4 225.3 223.7 CIS 141.2 141.6 143.2 156.1 160.8 162.1 ME 7.1 7
Slide 64: Network development details as at I.2021
Network development details as at I.2021 Floorspace (ths m2) 31.01.2020 31.01.2021 Nom. growth. YoY growth No. of STORES 31.01.2020 31.01.2021 Nom. growth YoY growth Reserved 664.8 676.6 11.8 1.8% Reserved 454 443 -11 -2% Poland 270.3 265.0 -5.3 -2.0% Poland 200 189 -11 -6% Europe 225.3 233.9 8.6 3.
Slide 65: Continuation of growths in 2020/21
Continuation of growths in 2020/21 Floorspace I.2020 I.2021 target YoY (ths m2) • Continuation of floorspace growths in 2020/21 – 8% YoY (majority rolled-out in 1H2020/21). BY BRANDS • Shift in entry with own stores on a new market – Reserved 664.8 676.6 2% Northern Macedonia in 2021/22. Cropp 147.9
Slide 66: CEE region
CEE region CENTRAL EASTERN EUROPE COUNTRIES Poland, Czech Republic, PRESENT Slovakia, Hungary OFF-LINE GROWTH STAGE Maturity POLAND TRADITIONAL Reserved, Cropp, House, Mohito, STORES Sinsay in all countries 874 CZECH REP. Reserved, Cropp, House, Mohito, 89 ON-LINE STORES SLOVAKIA Sinsay in all count
Slide 67: Established position domestically
Established position domestically Key data Poland 2016 2017 2018 2018/19 2019/20 Focus set on network optimisation Revenues (PLN m) 3,511 3,906 4,274 4,647 4,793 in Poland. % of group revenues 58% 56% 53% 53% 48% No. of stores 1,017 990 959 949 874 Floorspace (ths m2) 496.6 514.0 529.5 523.0 530.0
Slide 68: Strong presence in other CEE countries
Strong presence in other CEE countries Key data of other CEE 2016 2017 2018 2018/19 2019/20 Strong presence in other CEE Revenues (PLN m) 527 666 840 915 1,058 countries. % of group revenues 9% 9% 10% 10% 11% No. of stores 160 159 163 160 177 All five mainstream brands are now Floorspace (ths, m2)
Slide 69: Baltic region
Baltic region BALTIC COUNTRIES COUNTRIES PRESENT Lithuania, Latvia, Estonia OFF-LINE GROWTH STAGE Maturity 29 ESTONIA TRADITIONAL Reserved, Cropp, House, Mohito, STORES Sinsay 19 LATVIA Reserved, Cropp, House, Mohito, ON-LINE STORES Sinsay 23 LITHUANIA # STORES 71 FLOORSPACE 51.0 ths m2 on-line + of
Slide 70: Strong presence in Baltic countries
Strong presence in Baltic countries Key data 2016 2017 2018 2018/19 2019/20 On-line stores now in all Baltic Revenues (PLN m) 256 295 358 388 437 countries. % of group revenues 4% 4% 4% 4% 4% No. of stores 73 79 75 71 71 Five mainstream brands present Floorspace (ths, m2) 39.5 43.0 43.5 41.1 51.0
Slide 71: SEE region
SEE region SOUTH EASTERN EUROPE COUNTRIES Bulgaria, Romania, Croatia, PRESENT Serbia, Slovenia, B&H OFF-LINE GROWTH STAGE Developing Reserved (all countries), Cropp, TRADITIONAL House, Mohito, Sinsay (all SLOVENIA STORES SERBIA countries except Slovenia) ROMANIA 6 29 59 Reserved, Cropp, House, Mohit
Slide 72: Developing presence in SEE countries
Developing presence in SEE countries Key data 2016 2017 2018 2018/19 2019/20 We see development potential Revenues (PLN m) 230 317 463 513 812 in the SEE region . % of group revenues 4% 4% 5% 5% 7% Late SEE entry (2008) due to: 1) priority No. of stores 63 69 98 98 145 given to CIS and 2) limited
Slide 73: CIS region
CIS region CIS REGION COUNTRIES Russia, Ukraine, Belarus, PRESENT Kazakhstan OFF-LINE GROWTH STAGE Developing TRADITIONAL Reserved, Cropp, House, Mohito, RUSSIA STORES Sinsay 332 Reserved, Cropp, House, Mohito, ON-LINE STORES Sinsay in Russia and Ukraine BELARUS 104 10 # STORES 446 KAZAKHSTAN UKRAIN
Slide 74: More opportunities in the CIS region
More opportunities in the CIS region Key data 2016 2017 2018 2018/19 2019/20 We see long-term growth Revenues (PLN m) 1,269 1,542 1,770 1,924 2,333 potential. % of group revenues 21% 22% 22% 22% 24% CIS is the second most important market No. of stores 368 420 443 436 446 after Poland, responsible
Slide 75: Western Europe
Western Europe WESTERN EUROPE COUNTRIES PRESENT Germany, the UK, Finland OFF-LINE 5 GROWTH STAGE Early stage FINLAND Reserved (in all countries), Cropp, TRADITIONAL House, Mohito, Sinsay STORES UK (in Finland only) 1 Reserved, Cropp, House, Mohito, GERMANY ON-LINE STORES Sinsay in Germany, Reserved
Slide 76: Western Europe as a new growth pillar
Western Europe as a new growth pillar Key data 2016 2017 2018 2018/19 2019/20 Revenues (PLN m) 194 279 320 345 433 We focus on BEP in Germany . % of group revenues 3% 4% 4% 4% 4% Germany was the first Western European No. of stores 16 20 20 20 25 country entered. In July 2014 we launched Floorspac
Slide 77: Restructuring in Germany started in 1Q20/21
Restructuring in Germany started in 1Q20/21 The corrective measures at LPP Deutschland GmbH are aimed at improving the situation and restructuring of the company selling our goods in Germany, including a temporary (3-month) creditor protection. REASON: negative effects of the COVID-19 pandemic – clo
Slide 78: Middle East
Middle East MIDDLE EAST COUNTRIES PRESENT Egypt, Kuwait, Qatar, UAE, Israel OFF-LINE GROWTH STAGE Early stage TRADITIONAL ISRAEL Reserved 3 STORES EGYPT KUWAIT 1 1 No own stores; Reserved on QATAR ON-LINE STORES Namshi.com from July 2018 2 1 UAE SAUDI ARABIA # STORES 8 OMAN FLOORSPACE 8.4 ths m2 on-
Slide 79: ME – foothold on the third continent
ME – foothold on the third continent Key data 2016 2017 2018 2018/19 2019/20 We develop ME via franchise Revenues (PLN m) 31 24 22 24 33 stores. % of group revenues 1% 0% 0% 0% 0% Development via franchise stores opened No. of stores 6 6 7 7 8 by franchisee Azadea since 1Q15. Floorspace (ths, m2)
Slide 80: Reserved dominated floorspace growth
Reserved dominated floorspace growth FLOORSPACE GROWTH BY BRANDS FLOORSPACE BY BRANDS ths m2 2016 2017 2018 2018/19 2019/20 LPP GROUP 920.7 1,000.6 1,091.3 1,075.6 1,230.9 Reserved PL 248.7 266.8 273.3 268.7 270.3 ths m2 13 103 -4 -7 1,230.9 27 22 Reserved EX 260.4 295.5 343.4 336.3 394.5 156 Cropp
Slide 81: New regions fuel floorspace growth
New regions fuel floorspace growth FLOORSPACE GROWTH BY REGIONS FLOORSPACE BY REGIONS ths m2 2016 2017 2018 2018/19 2019/20 LPP GROUP 920.7 1,000.6 1,091.3 1,075.6 1,230.9 ths m2 1,230.9 CEE 580.6 602.1 635.4 626.6 663.5 11 82 115 18 1 33 50 Poland 496.6 514.0 529.5 523.0 530.0 920.7 Other CEE 84.0
Slide 82: Reserved an important revenue growth driver
Reserved an important revenue growth driver REVENUE GROWTH BY BRANDS REVENUES BY BRANDS PLN m 2016 2017 2018 2018/19 2019/20 LPP GROUP 6,019.0 7,029.4 8,046.8 8 755,9 9,899.2 Reserved PL 1,407.0 1,560.5 1,740.1 1,883.6 1,769.0 PLN m Reserved EX 1,285.9 1,599.0 1,838.3 1,996.9 2,277.8 747 -12 895 9,8
Slide 83: New regions fuel revenue growth
New regions fuel revenue growth REVENUE GROWTH BY REGIONS REVENUES BY REGIONS PLN m 2016 2017 2018 2018/19 2019/20 LPP GROUP 6,019.0 7,029.4 8,046.8 8,755.9 9,899.2 PLN m 1,063 240 1 9,899 CEE 4,038.6 4,572.1 5,114.6 5,562.4 5,851.2 180 583 531 Poland 3,511.4 3,906.0 4,274.5 4,647.4 4,793.3 1,282 6,
Slide 84: Three design centres
Three design centres Design centres CRACOW • Design centre for House and Mohito brands. • Cooperation with designing schools. WARSAW • Design centre responsible for Gdansk HQs Reserved (support for Gdańsk design centre, special occasion projects). • LPP’s largest design centre. • Showroom of all bra
Slide 85: Stages of the designing and supply process
Stages of the designing and supply process STAGE 1: Preparation of project STAGE 4: Analysis of previous STAGE 2: STAGE 3: 1 models and sending seasons and Inspirational meeting Preparation of projects Projects sent documentation to suppliers determination of demand to suppliers STAGE 8: STAGE 5: ST
Slide 86: Gross profit margin follows collections quality
Gross profit margin follows collections quality QUARTERLY GROSS PROFIT MARGIN 2019/20 PURCHASES BY REGION NEW INVENTORY MANAGEMENT POLICY Poland Other Turkey 3% 1% 7% 59.7% 59.9% 59.3% 58.0% 56.9% 53.4% China 36% 49.9% 50.8% 51.0% 49.0% 49.6% 45.6% 45.1% 46.1% 47.1% 43.4% Far East 53% 2019/20 gros
Slide 87: US$ impact on gross profit margin
US$ impact on gross profit margin Some 90% of goods is sourced from Asia with US$ being the settlement currency. Hedging of 70% of open position/ payments Open currency position i.e. amounts on US$ invoices V VI VII VIII IX X XI XII I II III T- 6 months T T + 4 months Ordering of goods with Goods be
Slide 88: Costs of own stores depend on rentals
Costs of own stores depend on rentals COSTS OF OWN STORES/ m2 2019/20 COSTS OF OWN 0% (PLN monthly, IAS17) STORES SPLIT 2016-19/20 CAGR 200 214 207 207 200 Other costs 29% Rental costs 44% 49 55 58 58 59 56 62 57 57 53 94 97 93 93 89 HR costs 2016 2017 2018 2018/19 2019/20 27% Rental costs HR costs
Slide 89: We control SG&A/ m2
We control SG&A/ m2 SG&A/ m2 SG&A COSTS (PLN monthly, 2019/20 IFRS16) (PLN m, 2019/20 IFRS16) 2,609 3,100 3,532 3,822 4,213 2,959 291 287 289 2,555 2,751 280 251 2,377 2,080 977 1,071 1,254 528 723 2016 2017 2018 2018/19 2019/20 2016 2017 2018 2018/19 2019/20 HQ Costs of all stores Costs of stores
Slide 90: Group FX exposure (excluding IFRS16)
Group FX exposure (excluding IFRS16) REVENUES COSTS 86% US$ Stores in Poland PLN 10% EUR MANUFACTURERS & Wholesale 48% PLN REVENUES 4% PLN 52% FX REVENUES Stores in Czech Rep., Hungary, Bulgaria, Romania, LC/PLN Croatia, Serbia, UK LPP Stores in Slovakia, Lithuania, (Parent company) Latvia, Estonia,
Slide 91: Capex supports LPP's development
Capex supports LPP’s development CAPEX SPLIT 2019/20 CAPEX SPLIT (PLN m) (PLN m) 272 442 799 932 1,004 Other 14% 275 312 Logistics 308 13% 66 42 729 620 489 376 Stores 230 73% 2016 2017 2018 2018/19 2019/20 Store capex Logistics & other Our store capex encompasses outlays for new stores as well as
Slide 92: Further logistics development
Further logistics development FULFILLMENT CENTRES DISTRIBUTION CENTRES Stryków //46 ths m2 e-commerce, rented Pruszcz Gdański //91 ths. m2 traditional stores, owned Gdańsk // 20 ths m2 Brześć Kujawski e-commerce, rented //120 ths. m2 traditional stores, owned planned Moscow //8 ths m2 e-commerce, re
Slide 93: LPP's streamlined logistics
LPP’s streamlined logistics Distribution Centres (DC) Fulfillment Centres (FC) DC + FC LPP’s logistics after the impact of COVID-19. GLOBAL ASPIRATIONS 93
Slide 94: Modern Pruszcz Gdański distribution centre
Modern Pruszcz Gdański distribution centre LOGISTICS 8.5 m 212 ths pieces shipped weekly cartons sent weekly (up to 1.84m daily) 240 1,000 employees in distribution containers admitted weekly centre MINILOAD 1,177 ths 18m We have the largest and most modern clothing distribution storage positions fo
Slide 95: Further capex reduction
Further capex reduction 2020/21- PLN m 2020/21 2021/22 2022/23 2022/23 Stores 300 600 500 1,400 Stores domestically and abroad 300 600 500 1,400 HQs 30 20 130 180 New HQs Gdańsk Łąkowa – Building 2 20 20 0 40 New HQs Gdańsk Łąkowa – Building 3 0 0 130 130 New offices in Cracow 10 0 0 10 Logistics 20
Slide 96: Freeing up working capital
Freeing up working capital CASH CYCLE WORKING CAPITAL (days) (PLN m) -PLN180m 144 153 -PLN 131m 147 146 129 130 141 139 104 122 125 2,101 1,921 95 1,210 1,341 9 9 7 7 5 2016 2017 2018 2018/19 2019/20 2018/19 2018/19 2019/20 2019/20 Receivables (days) Inventory (days) Liabilities (days) Inventory Tra
Slide 97: Optimisation of NWC
Optimisation of NWC SUPPLY CHAIN FINANCE - SCF (SUPPLIER FINANCING PROGRAMME) BENEFITS FOR LPP BENEFITS FOR SUPPLIERS Extended payment periods Possibility to discount invoices on invoices for goods BANKING for LPP before the payment purchased. deadline (low discount rate based PLATFORM on LPP’s
Slide 98: Change in the fiscal year from 2019
Change in the fiscal year from 2019 A/W Spring/Summer Autumn/Winter 2019/2020 SELL-OFFS FULL PRICE SELL-OFFS FULL-PRICE SELL-OFFS 1Q 2Q 3Q 4Q I II III IV V VI VII VIII IX X XI XII I 2020/2021 1Q 2Q 3Q 4Q The aim behind the fiscal year The fiscal year in 2019 was The first 12-month financial year cha
Slide 99: IFRS16 impact summary on 2019/20 numbers
IFRS16 impact summary on 2019/20 numbers EBITDA PLN 655.8m of additional amortisation of right of use asset. 2019/20 EBIT 62% of rentals under IFRS16 (PLN 655m). These are replaced with 2019/20 amortisation of right of use asset. NET INCOME Financial costs related to the asset (-PLN 119.9m) and FX g
Slide 100: Consistent growth in operating line
Consistent growth in operating line 2016 2017 2018 2018/19 2019/20 PLN m YoY IAS17 IAS17 IAS17 IAS17 IFRS16 Revenues 6,019.0 7,029.4 8,046.8 8,755.9 9,899.2 13.1% Gross profit on sales 2,933.8 3,727.1 4,401.3 4,628.3 5,145.7 11.2% Gross profit margin 48.7% 53.0% 54.7% 52.9% 52.0% -0.9pp. SG&A costs
Slide 101: Balance sheet increasingly strong
Balance sheet increasingly strong 31.12.2016 31.12.2017 31.12.2018 31.01.2019 31.01.2020 PLN m IAS17 IAS17 IAS17 IFRS16 IFRS16 Non-current assets 1,838.7 2,041.4 2,417.8 5,279.5 5,870.7 fixed assets 1,291.3 1,478.2 1,818.3 1,821.1 2,312.4 intangibles (inc. goodwill) 330.6 351.2 376.7 379.8 413.3 rig
Slide 102: Strong operating cash flows
Strong operating cash flows 2016 2017 2018 2018/19 2019/20 PLN m IAS17 IAS17 IAS17 IAS17 IFRS16 Pre-tax profit 194.1 563.7 723.7 656.8 665.2 D&A 267.4 293.4 349.2 426.9 1,093.8 NWC 255.9 101.3 125.2 469.1 268.8 Operating CF 718.2 893.2 1,212.0 1,600.0 1,848.3 Capex -271.8 -441.6 -798.9 -931.8 -1,003
Slide 103: LPP's success story
LPP’s success story CORPORATE MILESTONES No. of stores 1991 Creation of Mistral company by Marek Piechocki and Jerzy Lubianiec 1995 Mistral transformed into LPP 10 1997 Opening offices in Shanghai 1998 Launch of Reserved – first retail store opened 2001 IPO on the Warsaw Stock Exchange 50 2002 Start
Slide 104: Key corporate events of 2019/20 (1)
Key corporate events of 2019/20 (1) March/ April 2019 August 2019 NEW COUNTRY: B&H NEW COUNTRY PLANNED We launched our operations in Bosnia and EXPANSION OF FC Hercegovina, 24th on-site store market, by NEW MARKET ON-LINE: We decided to enter 26th IN STRYKÓW opening retail stores of our CROATIA on-s
Slide 105: Key corporate events of 2019/20 (2)
Key corporate events of 2019/20 (2) October 2019 October 2019 MARKETING: KENDALL NEW FC: ROMANIA We opened a warehouse We launched NEW MARKET: (Fulfillment Centre) PAN EUROPEAN FINLAND ON-LINE STORE Reserved international in Romania, supporting our campaign starring the top e-commerce channel model
Slide 106: Corporate governance
Corporate governance GENERAL • appoints Supervisory Board members SHAREHOLDER • approves annual financial statements MEETING • grants discharge to the Management and Supervisory Board members appoints • reviews financial statements • 5 to 6 members • assesses financial standing SUPERVISORY • appoint
Slide 107: LPP's founders
Founders actively involved in the business MAREK PIECHOCKI JERZY LUBIANIEC CHIEF EXECUTIVE OFFICER PRESIDENT of SUPERVISORY BOARD LPP’s FOUNDERS Present in the retail business since 1989. • 1991 - 1997 ran Mistral company as a sole trader • In 1991 together with Jerzy Lubianiec, founded (LPP’s pre
Slide 108: Management with long-term vision
Management with long-term vision Since 1989 in the retail business. MAREK PIECHOCKI (59) Founded LPP’s predecessor in 1991. CEO of LPP since 2000. CEO & FOUNDER Responsible for LPP’s strategy and development of all brands. At LPP since 2008. PRZEMYSŁAW LUTKIEWICZ (49) Since 2015 LPP’s CFO.
Slide 109: Co-founder sits on the Supervisory Board
Co-founder sits on the Supervisory Board Since 2000 President of the Supervisory Board of LPP. JERZY LUBIANIEC (60) PRESIDENT & FOUNDER 1995 – 2000 CEO of LPP. 1991 – 1997 ran Mistral company (LPP’s predecessor). Since 1999 member of the Supervisory Board of LPP. WOJCIECH OLEJNICZAK (64) 199
Slide 110: A family company controlled by its founders
A family company controlled by its founders SHAREHOLDERS BY EQUITY SHAREHOLDERS BY VOTES total no. of shares: 1,852,423 total no. of votes: 3,234,417 Semper Simul Foundation Free- 17.2% float 39.9% Semper Simul Foundation 31.5% Sky Foundation 12.2% Treasury shares 0.0% Treasury shares Free-float 1.0
Slide 111: A Polish socially responsible company
A Polish socially responsible company POLISH COMPANY Our roots are in Poland All strategic decisions are taken in Poland All our concepts are designed in Poland We pay all due taxes in Poland FAMILY-RUN COMPANY Created and managed by Polish entrepreneurs– SOCIALLY RESPONSIBLE COMPANY partn
Slide 112: A history of CSR actions
A history of CSR actions Second ACCORD agreement Establishing First integrated of factory report 2013 audit division 2015 2017 2019 Resignation from Resignation from Launch of Eco angora natural furs Aware collection Joining the ACCORD Setting up offices Stronger New CSR Strategy alliance in Dhaka s
Slide 113: Eco Aware collections
Eco Aware collections % share of Eco Aware in collections in 2019/20 Reserved 16.65% Cropp 0.62% House 3.36% Mohito 7.93% Sinsay 1.68% Since October 2017 till the present day, we have reduced the consumption 2025 target: 50% of e-commerce packaging by 8.3m units, of Reserved which translates into el
Slide 114: We control our supply chain
We control our supply chain PLN 25.4m outlays for audits of working conditions in Bangladesh factories, especially for costs of on-site inspections, audits of working conditions and membership fees for ACCORD and Rana Plaza Trust Fund since 2013. ACCORD control results: • 97% of factories had their
Slide 115: We measure our carbon footprint
We measure our carbon footprint LPP Group GHG emissions in tonnes of CO2E, Scope 3 GHG emissions of LPP Group by sources 2019 Scope 1+2 2% 1% 1% 3% 145,023 17% Scope 3 1,360,267 Total LPP Group GHG emissions per item sold in 53% kilos of CO2E 23% 2018 Clothing production Other (packaging materials,
Slide 116: Presence in key indices
Presence in key indices Key index for international institutions POLAND The most important index of the WSE WIG20 investing in Poland MSCI Member since March 2014 Encompasses 20+ companies from WSE c. 5.6% LPP’s weight LPP member since August 2014 INTERNATIONAL INDICES The sole clothin
Slide 117: Double-digit share price growth
Double-digit share price growth 11,000 LPP’S SHARE PRICE RELATIVE TO WIG 20 INDEX 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 LPP WIG20 relative TICKERS PERFORMANCE MARKET DATA WSE LPP 1Y +1% Price (31.01.20) PLN 8,465 Bloomberg LPP PW 3Y +44% Min 1Y PLN 6,945 Reuters LPPP.WA 5Y +16% Max 1Y PLN
Slide 118: Broad analytical coverage
Broad analytical coverage INSTITUTION ANALYST E-MAIL BDM Adrian Górniak [email protected] BNP Paribas BM Michał Krajczewski [email protected] BofA/ML Ilya Ogorodnikov [email protected] BOŚ DM Sylwia Jaśkiewicz [email protected] Citi Handlowy Rafał Wiatr [email protected]
Slide 119: Investor relations' calendar
Investor relations’ calendar KEY DATES IR CONTACT 03.08.2020 2Q20/21 trading update Person: Magdalena Kopaczewska IR Manager 08.10.2020 2Q20/21 results publication E-mail: [email protected] [email protected] 02.11.2020 3Q20/21 trading update Phone: + 48 693 904 337 17.12
Slide 120: Glossary
Glossary Poland Retail sales in Poland and other revenues of LPP SA. CEE Region including: Czech Republic, Slovakia, Hungary and Poland unless otherwise stated. Baltic Region including: Lithuania, Latvia, Estonia. CIS Region including: Russia, Ukraine, from 2017 Belarus and from 2018 also Kazakhstan
Slide 121: Headquarters and contact details
GDANSK HEADQUARTERS CRACOW BRANCH DISTRIBUTION CENTRE MEDIA CONTACT LPP SA LPP SA LPP SA Email: [email protected] Łąkowa 39/44 Street Bagrowa 7 Street Tczewska 2 Street 80-769 Gdansk, Poland 30-733 Cracow, Poland 83-800 Pruszcz Gdański, Poland Tel. +48 58 76 96 900 Tel. +48 12 39 25 000 IR CONTACT Fax