LPP (GPW:LPP) Q2 2026 Earnings Call

0:00 Every great story begins with a drawing One line One idea A whole world comes to life Filled with wonder Powered by imagination Ready to explore Draw, dream, discover

0:28 It's been a busy day. Yeah, I'm heading out of work now. See you in the evening. Every

2:09 great story begins with a drawing. Every great story begins with a drawing.

4:32 One line. One idea. A whole world comes to life. Filled with wonder. Powered by imagination. Ready to explore. It's been a busy day.

4:56 Yeah, I'm heading out of work now. See you in the evening. Every

6:39 great story begins with a drawing. One line. One idea. A whole world comes to life. Filled with wonder. Powered by imagination. Ready to explore. It's been a busy day.

7:09 Yeah, I'm heading out of work now. See you in the evening. Every great story begins with a drawing.

8:57 One line. One idea. A whole world comes to life. Filled with wonder. Powered by imagination. Ready to explore. It's been a busy day.

9:21 Yeah, I'm heading out of work now. See you in the evening. Every

11:04 great story begins with a drawing. One line. One idea. A whole world comes to life. Filled with wonder. Powered by imagination. Ready to explore. It's been a busy day.

11:34 Yeah, I'm heading out of work now. See you in the evening. Every great story begins with a drawing.

13:22 One line. One idea. A whole world comes to life. Filled with wonder. Powered by imagination. Ready to explore. It's been a busy day.

13:47 Yeah, I'm heading out of work now. See you in the evening.

14:17 Good afternoon, Monika Wszeborowska. Let me welcome you today to the results presentation of the LPV group. We apologize for the slight delay we've all suffered. Unfortunately, some technical glitches occurred that we couldn't have predicted. Hopefully, everything will go right. Marcin Bojko, CFO, is going to run the meeting today together with Magdalena Kopaczewska, Investor Relations Director. Ladies and gentlemen, our today's meeting is going to start with a summary of 2Q26 and for the first half of the year, but we would like to proceed. To referring the results of operational changes that we introduced into the Sinsay brand and that we announced three months ago during the previous result presentation that took place in June. These are the modifications that we introduced to increase the sales potential of the brand. The first results are already visible and this is what we would also like to share with you today.

15:22 We will also refer to our current financial targets for the current year and the entire meeting is going to be completed with a Q&A session. You have a chat box window to use and this is something that will be available to you throughout the meeting. I do feel encouraged to ask your questions. We will of course be at your disposal via media at lpp.com and also the contact to investors relations lpp.investor.relations at lpp.com. So much for me ladies and gentlemen. Let us proceed to the summary of the results for the second quarter. Thank you. Good afternoon. Without further ado let us go straight to discussing the results.

16:12 Summary of the second quarter. In the second quarter we opened 230 new stores. In the first half 351 openings of all the stores and all the brands including 314 in the Sensei brand. So we are following the revised plan that we announced when we met you. Last time, which means that by the end of the first half we had over 4,000 stores in the entire group, including nearly 2,700 in the Sensei brand. And we are acting to our plan. I'm quite certain that by the end of the year we will have over 3,000 stores in our youngest brand that is Sinsay. The development of offline stores, these are not the only initiatives that we've been implementing.

17:06 Officially at the beginning of September we launched our marketplace also in the Sinsay brand. Now the platform has been operational in Poland only, but it is still in the very early stage. We'll keep developing it. At this early stage, what matters to us most is for this development to be quality development, well thought over for the products that we offer. Thank you very much. Over half a billion was spent on investments in the second quarter. Most of it is CAPEX investment expenditure concerning the openings of new locations, but as much as in 2025, Most of our investments go for logistics in the second quarter, 150 million, and an important piece of operation-related information.

18:16 At the end of last year, we launched a fulfillment center in Romania. In July, a distribution center in Romania. So that's our second location, which means that we are fully operational in terms of assets in Romania after 2020. The fire that we suffered, because these two locations replaced what we lost in the fire. So we have those assets. In Romania, we start improving our operations, shifting certain operations from Poland to Romania. First deliveries go to Constanta, so we are shortening the transportation route. It goes straight to Romania, to the newly opened DC, and the target markets are ready. Slawomir Loboda, Marcin Bojko, Slawomir Ronkowski, Magdalena Kopaczewska 1.7 billion in EBITDA, 1.1 on operating profit and nearly 800 million of net profit.

19:33 Slawomir Loboda, Marcin Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska A bit more detail on how we made it happen. And we will start with sales. Traditionally, second quarter, 18% of growth on revenues, nearly 19% in the first branch, the stronger ones, so the offline stores, and over 16% of increase in online sales, and particularly online sales following the hard first quarter marked by poor weather conditions.

20:27 Slawomir Ronkowski, Magdalena Kopaczewska Just one remark here. Southern Europe also noticed improvement, but in the first quarter that was minus 0.5. Now it's minus 4.5. We can see that this dynamics, this negative dynamics, is the only one in the region sustained. Romania keeps improving, but anyhow, what we are focusing on is to keep on operating, be the best in the hard market conditions.

21:21 So we are very active about our offer. and about our logistics, certainly that will bring results. Now looking at like for likes as such, another piece of good news following two quarters and negative LFL results, we have plus 1.8 at the group level, so a return to positive dynamics. In terms of brands since, say, minus 1.2, I believe that it is for the first time that we can really say that minus 1.2 is not comparable with minus 1.67, because, well, we did face certain challenges concerning our offer, but now we started the sales... Marek Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska So everything now is heading in the right direction following the sales period.

22:32 The remaining brands 5 and 4 and reserved our second biggest brand eight quarters in a row with very good positive like-for-like dynamics. And what is also a source of our satisfaction is that our smaller brands House and Crop for four quarters now have noted positive dynamics concerning like-for-likes and Crop in the last quarter has even reached really high. So single digit or low double digit results, so really nice. Another component that keeps shaping our result is gross margin, gross profit margin, as I mentioned, 3.7 percentage point over the previous year, sustained trend from the first quarter, that was 4.5%.

23:20 Thank you very much. Marcin Bojko, Marek Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska Influence on the effective management of SG&A costs. The work we carried out last year now gives results. We have lean basis and we can again boast the drop of costs per square meter as well as versus profit and revenues. The greatest components is this logistical CAPEX that I mentioned at the beginning. It performs really well in terms of OPEX so that means that we keep increasing our efficiency and quality of our operations and those return periods really are now reduced to the window of a few months we can see that reflected in OPEX and the other big leverage is the increasing share of the Sensei brand. This concept pretty naturally in terms of stores and the costs of stores constitute the greatest group in terms of our P&L.

24:50 Thank you for watching! We have a number of initiatives. We planned them in June. We will show you the status, but looking at performance marketing, some buying advertisements online, that constitutes a high group of costs. And with our good profits and the lean cost basis, we now see that the moment has come to spend a bit more on performance marketing. The July changes in the European Union concerning subsidies for Asian platforms, 3 euro per product line. At the beginning of July we did not see the results and this is what we expected in May last year when similar regulation was announced. Marcin Bojko, Slawomir Ronkowski, Magdalena Kopaczewska Transcription by CastingWords Thank you very much.

26:53 Slawomir Ronkowski, Magdalena Kopaczewska Out of the record profit, we finance investments in terms of capex. After the first half, it's over 1 billion zlotys. And as mentioned, over a half of this billion is the stores over the first six months and over 440 is logistics. Now, versus the entire year, the capex spent on the stores will, of course, result from the number of openings and in terms of logistics.

27:48 Thank you very much. Thank you very much. 1,633 zloty per square meter. We are entering now the autumn-winter season. We had to buy more products and well, mid-September we will have reached this level of stocks and starting from the end of September, October, this level will gradually Slawomir Loboda, Marcin Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska

28:57 Good profit and good inventory management are also good financial and cash flow results in terms of liquidity improvement year over year, net debt to EBITDA on leverage on level one. Slawomir Loboda, Marcin Bojko, Slawomir Ronkowski, Magdalena Kopaczewska We also are at the maximum level of the payment of dividend.

29:46 We are also able to operate a very stable financial foundation. The cash flow is improving. The closer we get to the end of the year and in 2027 we expect permanent The increase of cash and we will be comfortable with financing the cash six months, good results, comfortable situation in terms of cash flow and working capital and very good liquidity situation that is improving as well. Thank you very much. First of all, despite the high base last year, this year, we are very happy with the back to school season.

30:58 It was a very strong season. What we could see was that it was stronger online, practically in all the brands online. And we also prepared a couple of numbers for you. It's worth mentioning here that it is a period analyzed in the 17th September. August is the time when parents and children start thinking about school. Till the 6th of September is the time when people still do back to school shopping. We divided the data into two groups. The first group is purchase in reserves and Re-Kids brand and Sensei brand. There you can see that in the omnichannel there was a 23% growth year over year in offline plus 19% and online as I mentioned as much as 30% growth year over year. The second group that we analyzed against the back to school period were the brands dedicated to teenagers.

32:10 In Omnichannel, the growth was 20% year-over-year, in offline 18% year-over-year and online 42% year-over-year. Short notes to finish this off with. In Sensei we noted in this period there was more interest in products in a higher price point level, whereas in the Kroppenhaus brands we noticed that teenagers were more interested in products, in viral products.

32:57 This is a very brief overview of the back-to-school season. Thank you. This is what we observed in the last couple of weeks in the back-to-school period. What happened over the last couple of weeks and months, as Monika mentioned, in June we presented to you our initiatives We are focused on increasing the dynamics of sales in the Sensei brand. We split it into five areas. Some of the things I already discussed, I will not go through all of them. But I would like to comment the areas that we have not touched upon yet in terms of collection. We can see that our back to fashion and smart value approach works at the beginning of the autumn. So our focus on the middle Thank you very much.

34:14 Slawomir Loboda, Marcin Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska The initial results show that this works as well. We will be doing that constantly. And now more than 500 stores have self-service checkouts. On Monday I did shopping in a resort myself here in Gdańsk. and apart from me four more customers used the self-service checkouts and a colleague from our customer service team had a time to look to the sales Thank you very much. Thank you very much.

35:26 Marek Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska The positive information is that the only department in the Cincinnati branch in every month of the SS26 period we saw positive likes. Maybe the base was not too demanding, but it is a good forecast for the future and we also move in the right direction here in terms of logistics.

36:13 Thank you very much. The first half of September, 20% increase in omnichannel. In online, similar dynamics and positive LFL of 4%.

37:10 And my note is that this trend is very positive and it is improving the first half of August. We saw less summer in our offering. We worked more on the margins of the likes for likes. We are slightly below the numbers in the table. The second half of August in the first part was better, and the first part of September was the strongest. We are happy about that, but in the window of a month and a half, it looks quite good. We also saw a good margin, the gross margin above last year, and in terms of our opening plans for the second half, they remain unchanged. They stay within the goal that we planned in June and the payment of the dividend is very comfortable situation. We share our profits with them and by the end of October we will pay the second tranche of 500 Polish lotto pay share.

38:09 If I remember correctly, the payout date is the 9th of October, so you still have time to buy shares, which we encourage you to do. Summing up the last six months, the last month and a half, and our initiatives looking at the entire year, our guidance for this year remains mostly unchanged. The only change in plus is the gross margin we can see after the results of the second quarter and what we are observing now by mid-September. Thank you very much. and the net debt and EBITDA.

39:04 We expect to improve slightly against the latest estimations and we would like to end with this positive note and now we move to Q&A. What are the total group likes for the first half of 2026? Let me open the data. Let me display the right slide. The first half of 2026 minus 0.3. Next question. The impact of foreign exchange rate, dollar versus dollar. Recently we can see a reversing trend where the Polish lot is losing against the dollar. How do you...

39:52 Prepare yourself for the situation. If the dollar costs circa four zlotys, will it significantly affect the future margin of the company? Yes, this is a very good question. I think we saw it on the slide where the margin from 3.7 in the second quarter. It was even shown in the commentary. Right now, SS at 26 is 360. Last time, the exchange rate was 4 zloty, so from the 3.7 point, the stronger Polish zloty with the same purchase prices is circa 3 percentage points, so this is the impact. And what we see now is 3.71 to 3.75. So the impact, if it materializes next year, would be in mid-year.

40:43 What is the exact cost of the share program on the first and second quarter? Is it presented in the functional layout? And what cost do you expect for the second half year of 2026 and for 2027? The costs are assumed as reserve mostly. Most of it is booked in July to the second quarter, but the exact amounts, I will not mention the exact amounts. The programme is constructed in the same way in terms of indicators and bonus KPIs for our teams. Now the option is to replace that into the share. So in terms of costs or calculation or approach, nothing has changed, so still the most important are the business goals and There is a share program for the achievement of business goals.

41:40 So with these results, of course, these amounts are significant and positive. But by the end of the end, they motivate our employees to work hard. And we share the success of LPP also with them. Next question is about insurance. Thank you very much. This is a very specific question. We have recovered more than 250 million Polish zlotys from insurance damages.

42:37 As the additional cost for the second quarter, they are minimum. As I mentioned, we are close to the optimum network and the second quarter is for maximum 5 million zlotys. But for now, it has expired by now. In P&L, profit and loss, we have about below 350 million posted. The liquidation process is ongoing. Now we have recovered more than 250 millions. We are still talking to the consortium and to the insurer. So once we close this case, we will let you know. Can you tell us a little bit more about the 4% like of the group Since August, for the broken down in the brands, have you confirmed to return to the positive dynamics? Yes. With every two weeks, it was improving. Mid-August, it was still negative.

43:41 The second half of August, it was 0.5. Thank you very much.

44:16 The question concerns gross profit margin. Gross profit margin was 57.7 in the second quarter and in the third quarter it is still higher versus last year. Can you tell us how much of this improvement results from FX sourcing and freight and how much from better management of sales, bargains and prices? How come it dropped to 56 that you envisage for 2027? A good question. I guess more from the perspective of 2027. Indeed, when discussing the results, I focus on 2026, but I'm happy that this question was heard. Starting from the beginning, the first part of the question, as mentioned, out of 3.7 percentage point of improvement year on year, half a percentage point is our efficiency and around 0.2 is the remaining impact, including logistics.

45:16 The rest is strong as Lottie with similar sourcing costs. How do we perceive it? You can see that macro is certainly helpful here in the second half of the current year. As we already see in September, the margin is over that from the last year. That shows our efficiency, particularly in smaller brands like Reserved, but also in Sensei. The FX impact is actually The second part of the question, 2027, quite naturally, I believe that was the second question in the Q&A session. In our plans, we envisage the weakening of Zloty as we observe in the market, so say one and a half percentage point. This is the impact Thank you very much. Thank you very much.

46:40 Thank you very much. Thank you very much. There were periods, particularly the first half of this year when this collection of sinsays, as reflected by likes, actually lagged behind the market, so we had to work with a lower margin. So when we add up our efficiency, that is where the result for the coming year comes.

47:25 Well, it looks worse against 2026, but when you actually go back to 2025, 2024 or 2023, then this level in the long run, we consider to be repeatable, repetitive, so 50 plus, and we find it comfortable. The current situation in the Red Sea may potentially impact the timeliness of the deliveries, what percentage of products go via the Red Sea and what percentage goes around Africa. Prior to the conference with our logistics team, we verified the status. We cannot see any delays, so that's the good news. And even after all the havoc and the outbreak of war in Iran, we never had any issues with delivering on time.

48:17 We learned of the first crisis on the sea, so we are planning everything well in advance, so lead times are really good. And as part of the world, as the return to the Suez Canal goes, most of our ship owners actually go around Africa, if not all of them. There are single voices that claim that they would wish to return to Suez. That would, of course, reduce the time needed to cover the distance. But this is just the first voices. The ship owners keep exploring that space. and I guess mid-November we are going to sit and discuss the freight rates for next year. Everything will become clear then. The media talk about the shortages of gas in Bangladesh and India.

49:02 The shortages do impact the operations of factories. Can that impact our production? We do not have such information reaching us as of now. Now the orders for the first half of the next year. We've placed the orders. There is no worrying information. The only thing is awaiting the decisions on the higher prices that we actually did take into account in our guidance for next year. The question concerns likes of Sensei. Can you give us the specificity? as per country concerning Sensei Likeful Likes.

49:48 Yes, we will give you the precise data in a moment. As for the entire SS26 season, That was the group level. So at the level of Sinsei, minus 3.8, the first half of 2026. And actually all the regions were underwater. The only positive exception was Europe. This was Eastern Europe, Kazakhstan, Ukraine. So after the weaker previous year, we saw them rebouncing this year. The other part of the question is whether the negative like in Sensei results from the growing competition, collection or any other factors and what does the situation look like in terms for Sensei like in the third quarter.

50:55 As for the reasons, I guess there are multiple factors. We tried to address them in our initiatives that we outlined to you and the status of which we reported to you earlier today. Slawomir Loboda, Marcin Piechocki, Slawomir Ronkowski, Slawomir Loboda, Marcin Bojko, Slawomir Ronkowski, Magdalena Kopaczewska The logistics will keep on heating up. We'll keep on optimizing our order placing process, display of collections in the stores and our work on the home collection. In the third quarter, after the month and a half, so half of the quarter, we can see that the like is behaving well.

52:15 It is above the The average level expected in August, we worked more with the margin. We had more of autumn than summer, so the first half of August was lost. So ever since, the likes have really grown higher. I wouldn't like to give you a very precise level because still we have the other half of Q3 ahead. But as I said, in September, we are reaching those Slawomir Loboda, Marcin Piechocki, Slawomir Ronkowski, Magdalena Kopaczewska We perceive it as a natural segment, a pretty different segment, something that was mentioned right at the beginning when the entire board talked to you in Warsaw.

53:16 This market is a different segment. I believe there is a place for them to grow and for us to grow, including since there are other brands of ours like Reserved House has been showing it for a year that you can actually grow very fast. and for two quarters also CROP has been showing that you can actually produce very good dynamics following our model. You've increased guidance for 2026 but at the same time you kept the one you had for 2027. Is this conservative approach related to the period being distant and to there being a lot of uncertainty or simply you've exhausted certain Thank you very much.

54:17 Thank you very much. We'll keep emphasizing that in the long run 55-56% is the safe and repetitive result and this is something that as this year has proven is a very good year that we know how to use in terms of In the long run, what is our main goal behind our initiatives is to grow on sales to offer repeated positive LFLs at a more balanced margin. How about the demand in Ukraine and the Baltic states?

55:16 And the question is whether in Romania you can see a lower level of competition. Is the demand in Romania stabilizing? It is stabilizing starting from the last part of the question, the retail consumption there. This is still much different from the historical data, but further forecasts say that the closer to the end of the year or the half of the next year, we are to expect a rebound, so we hope that the likes will follow. This is what would historically happen. The market is equally challenging to everybody. We simply need to be the best amongst everybody else in these conditions, and this is what we are trying to deliver. As for the other countries, well, those are actually very good questions.

56:04 When you look at the Sensei brand, I'm looking at likes. The Baltics and the Eastern Europe beat the second quarter on now. These are the markets with very strong likes. at a very good level so well ukraine it is the second biggest market now a capital group following a very good year 2024 it was nicely stabilized and we know that it was around one and a half a percentage point it was taken away by ukraine in the entire since a brand now there is a reversal of the situation there is certain standardization in terms of numbers so the likes are Performance marketing related question. Has the cost of performance marketing changed when the tariffs were introduced and the pressure from Chinese players has decreased?

56:54 Cost-wise per click, there is a slight positive effect, but I guess the entire market is benefiting from it because we can see, as mentioned, The regulations have been in force since July, and we see that since, as reflected in browsers, we of course looked at the entire market, but we saw that since it has been doing pretty well and the cost of performance can Slawomir Loboda, Marcin Bojko, Slawomir Ronkowski, Magdalena Kopaczewska These turnovers are pretty similar in Sensei.

58:03 Owing to the volume and lower price point, it is two weeks faster, I'd say. And the question concerns the category of home.

58:14 We already mentioned the home category, but the question is what categories in general in the home collection are the strongest and which are the weakest? And what are the sales The Home Collection was the only department in SINSEI that in every month of the first quarter of this year noted positive likes for likes. I don't want to tell you which product groups are the best or the worst and on which we focus because this is some kind of market information. I think that the information that I shared with you is that we focus on optimizing the extension of the brand. We reduce the extension of the brand and we increase the depth of the brand, so we will increase the choice in the best products.

59:06 When can we expect the first results of the Place brand that you recently launched? Will there be any data in the report for the third quarter? We are thinking how to report that. But the scale, even according to reporting requirements, is still negligible in the GNV scale. It's just hundreds of thousands of Polish lotos in the month scale rather than millions or billions. It is a very early stage. We focus on quality growth. We want to select categories wisely so that they fall into, since it already offers, we can see that it already works, quite many customers Thank you very much.

1:00:11 But the ambition is we shared 40, 50 million a bit for next year as our goal. 50 would be more than our, above our expectations. 40 would be very good, but whether that would be 25 or 30, it still would mean that we are going Could you make a note about the situation in Bangladesh and the diversification of production markets? To sum up the situation in Bangladesh once again, the situation in Bangladesh is The end of the transition period in January 2025, the transition period ended, and since then the company that bought the Russian part of the LPP business, for their own account, LPP paid its own invoices, but I think that we all remember it was a very hard time.

1:01:10 Thank you very much. Thank you very much. There were quite a lot of media mess was about that and our employees had some unpleasant bullying from the authorities and we cannot anything bad happen to our employees they are the most important especially that everything was clear so that was the reason why you made that decision to stop and others for two weeks and in that period many communication channels opened. Winnie explained a lot of questions with the local authorities. We issued a shared statement with the biggest organization in the garment sector and our positive narration made its way that we have big orders in Bangladesh.

1:02:39 Thank you very much. The situation forced us to more actively look for diversification of sources. This will continue to be local markets around Asia. We enter new markets in Central Asia. I will not mention which, but we see some positive options that we are exploring the possibilities there to operationalize and to make the offers more in-depth and specific.

1:03:30 I think we have a very broad group of suppliers and we will be keeping you updated but the situation is addressed so we can focus on designing and 2027 and deliveries of good collections. Another question is about Sinsate. What return on investment comes from the open store of a Sinsate and what is the policy for closing unprofitable stores and how much time do you give them? As we mentioned repeatedly, communicated repeatedly, we show the paybacks that we earn on this concept. At the moment it's about 17 months.

1:04:16 We target payback period below 24 and margin EBITDA of at least 25%. These are the border conditions but we have some safety margin and we give ourselves a bigger buffer as to closing whatever is unprofitable in the flows is currently analyzed and is cut off at the first possible opportunity. When the first lease period expires, we did not extend the lease period and will be optimizing it on a current basis. And we were analyzing subsequent years for SimSe and in June when showing results for the first quarters, we showed expectations for the prospects beyond 2027. We looked at that and for now the quality of the SimSe Bright is good enough and the results are good.

1:05:13 Thank you very much. Our leasing team looks at the results on an ongoing basis and when a store is permanently unprofitable, we close it. Allegra opened an office in China. Are you planning to do that? And if so, what is the reasoning behind that? We have a very big office in China for many years and a big office in Bangladesh. These are our two main markets in terms of supplies.

1:06:01 We are very active for the online supplies. We are only optimizing these activities. We want to optimize the value for the customers from there, but the teams that are there constantly Monitor and audit the factories so the cooperation must be on an adequate level and according to our standards. No custom juices from India from the beginning of 2027. Have you calculated the impact on margin? Have you already moved production to India? We will be calculating that and communicating it to you. We already have the first margins calculated for the first half of 2027. It is also included in the guidance, so for now the answer is yes.

1:06:55 But we will see how the situation develops. It was the last question from our today's Q&A session. Thank you very much. For your time, for your involvement into the Q&A session, we hope that we answered all the questions that you had. At the same time, we would like to note the date of the 3rd of December. So save 3rd December, we will have another conference summarizing the third quarter. So please save this date and join us on the 3rd of December. Once again thank you for today and see you in December.