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LPP Fashion poised to achieve impressive FY2017 numbers

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Listed fashion retailer LPP remains on track to hit its full slate of FY2017 goals, including sales growth in excess of floor space growth and margins at some 52-53%, CFO Przemyslaw Lutkiewicz told PAP.

"We do not change our full-year goals," Lutkiewicz told PAP. "We maintain a target of achieving 52-53% gross margin on sales and the goal of sales growth in excess of retail space growth, meaning by far more than 10%. We maintain our goal of LFL sales growth."

In January-May sales of the LPP group increased by about 16% y/y to PLN 2.45 bln. Retail floor space at the end of May amounted to app. 928k sqm, about 7% y/y increase.

LPP announced that it wants to increase retail space by about 11% this year. Group capex for this year is expected to amount to PLN 430 mln, of which PLN 370 mln will be spent on store base.

Q2 is bringing an improvement on the prior year sales and margin figures and hopes are high that the firm can prove its mettle on the autumn collection, where work is advancing well, Lutkiewicz indicated.

"The second quarter will definitely be better y/y in terms of results thanks to a better collection and higher margins," Lutkiewicz told PAP, comparing to a prior year where poor reception lead to a weak H1 where the sell-off began in May.

"March-May margins show that the spring-summer collection has been well received by customers and what started off is continuing in June," Lutkiewicz said of the improvement in the current year. "We continue to improve margins throughout the spring-summer season." The 2017 discount season will begin this week and run through July and August, he indicated.

That success builds hope for the autumn collection where teams are integrated and designers on hand, Lutkiewicz suggests. "It is important that customers have noticed the improvement in the collection and came back." Dollar weakening should also boost margins on the autumn collection, he indicated.

LPP is not planning further wage increases this year, Lutkiewicz added.

"The wage hikes took place in the first quarter; we do not see any additional pressure there," he said. "We continue to maintain that SG & A costs may rise this year at a high single digit pace."

2017-06-20



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