Lpp S.a. · GPW:LPP
Lpp — Q4 2016 Earnings Presentation
60 slides from Lpp's earnings presentation, Feb 23, 2017
Slide 1: Financial Results for 4Q16
F I N A N C I A L R E S U LT S FOR 4Q16 G L O B A L A S P I R AT I O N S W A R S A W, 2 3 r d F E B R U A R Y 2 0 1 7
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: Agenda
AGENDA Executive summary 4Q16 financial results Key corporate events 2017 outlook Q&A 3
Slide 4: Over PLN 6 billion revenues in 2016
Over PLN 6 billion revenues in 2016 1,703 +6.4% STORES LFLs PLN 6,021m 18 +9.2% R EVENUES +17% COU NTRI ES m2 48.8% +7.3% GROSS P ROFI T SG&A / m2 PLN 229m EBIT MARGI N 4
Slide 5: Key 4Q16 achievements
Key 4Q16 achievements SERBIA Stores in new shopping Important openings 4 brands on-line Preparations for mall in Poznan in Russia in 5 countries Serbian launch Stores of 5 brands 7 new stores in Russia 4 brands on-line in Czech Step forward to opening in Posnania mall in Poznan (Moscow and St. Rep.,
Slide 6: Over 1,700 stores worldwide
Over 1,700 stores worldwide NO. OF LPP STORES 26 296 31.12.2016 No. of stores YoY growth 19 LPP GROUP 1,703 +76 28 RESERVED 461 +12 1,017 Cropp 379 +7 16 @ 72 House 330 +11 @ 80 @ 62 @ MOHITO 290 +10 18 @ 34 @ SiNSAY 198 +28 17 Tallinder 9 +9 12 KUWAIT Outlets 36 -1 1QATAR 1 2 xx Number of stores 1
Slide 7: Agenda
AGENDA Executive summary 4Q16 financial results Key corporate events 2017 outlook Q&A 7
Slide 8: Dynamic LFL growth
Dynamic LFL growth LFLs in LOCAL CURRENCIES LFLs in LOCAL CURRENCIES data for the group data for the group 9.2% 6.4% 5.1% 6.6% 4.2% 5.1% 4.6% 2.8% 1.5% 0.6% -1.7% -0.8% -1.5% -3.5% -2.5% -6.9% 2014 2015 2016 LFLs were positive in each month in 4Q16. All brands showed positive LFLs in 4Q16. RESER
Slide 9: Floorspace growth in Poland
Floorspace growth in Poland F L O O R S PA C E G R O W T H 4 Q 1 6 F L O O R S PA C E ths m2 by regions by regions 950 ths m2 4Q15 4Q16 YoY +4.4 +3.0 0.0 920.7 +25.4 LPP GROUP 843.5 920.7 9.2% 900 888.0 Poland 465.0 496.6 6.8% Europe 179.0 209.5 17.1% 850 +32.8 ths m2 CIS 193.9 207.0 6.7% ME 5.5 7.6
Slide 10: RESERVED brand – the growth leader
RESERVED brand – the growth leader F L O O R S PA C E G R O W T H 4 Q 1 6 F L O O R S PA C E ths m2 by brands by brands 950 ths m2 4Q15 4Q16 YoY +3.7 +1.9 +1.5 +4.6 0.4 -1.2 920.7 LPP GROUP 843.5 920.7 9.2% +21.9 RESERVED 461.3 509.1 10.4% 900 888.0 Cropp 114.5 120.4 5.2% House 99.7 105.7 6.0% 850 M
Slide 11: Fast top-line growth continues
Fast top-line growth continues GROUP REVENUES GROUP REVENUES PLN m by regions PLN m by brands in 4Q16 2,000 17.8% 40% RESERVED 828 + 10% r/r 31.7% 12.1% 18.0% 1,600 10.9% 16.4% Cropp 269 + 15% r/r 11.4% 9.0% 2.2% 30% 19.6% 17.2% House 245 + 13% r/r 1,200 6.1% 25.9% 20% MOHITO 211 + 21% r/r 800 SiNSA
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 +8% YoY 10% PLN (monthly) 4Q15 4Q16 YoY 800 755 680 610 608 663 567 535 631 580 567 0% LPP GROUP 611 659 7.8% 600 536 462 468 Poland 698 718 2.8% 400 -10% Europe 589 649 10.1% 200 CIS 446 543 21.8%
Slide 13: Triple-digit e-commerce growth
Triple-digit e-commerce growth ON-LINE SALES ON-LINE SALES PLN m PLN m +144% YoY +118% YoY 80 73.0 5% 60 4% 41.2 +22% YoY 23.4 27.4 31.6 3% +143% YoY 40 173.1 18.0 17.4 30.0 16.1 12.8 2% 11.5 12.4 13.9 20 79.3 1% 64.8 26.7 0 0% 2013 2014 2015 2016 E-commerce revenues % of group sales On-line sales
Slide 14: December inventory sell-off
December inventory sell-off F I N A N C I A L S TAT E M E N T S Obsolete inventory valued at PLN 138m was I M PA C T O F T H E T R A N S C AT I O N sold for PLN 26m in December 2016. 4Q16 no 4Q16 incl. The inventory was stocked in post-season PLN m transaction YoY transaction YoY warehouses in P
Slide 15: New inventory management policy (1)
New inventory management policy (1) C. PLN 3bn PLN of goods purchased annually. 3-4% of goods remain unsold, i.e. c. PLN 90-120m. C. PLN 80m of goods sold C. PLN 10-40m of goods (mostly in outlets with no loss (no need from foreign subsidiaries) sold to make write-offs). to third parties (write-off
Slide 16: New inventory management policy (2)
New inventory management policy (2) FORMER CURRENT Change in Price as key purchase trigger. Clients increasingly reluctant customer Possibility to sell goods from to accept old stock. Limited ability preferences previous seasons. to liquidate unsold goods in outlets. Mid-season promotions Co
Slide 17: Adjusted gross profit margin improvement
Adjusted gross profit margin improvement GROSS PROFIT MARGIN vs PLN/US$ 2016 PURCHASES by regions PLN/USD 0.40 70% Far East Turkey 31.5% 8.9% 60.5% 57.7% 0.35 59.0% Poland 60% 1.5% 54.8% 0.30 Other 50% 2.3% 0.25 50.8% 0.20 40% China 55.8% PLN/USD rate (T-2 quarters) Gross profit margin (%) Fall in
Slide 18: Higher costs per m2
Higher costs per/ m2 COSTS of OWN STORES/ m2 SG&A/ m2 +3% YoY +6% YoY 235 220 222 220 202 205 201 296 66 189 187 186 195 191 202 270 274 274 271 54 57 57 254 254 258 49 53 236 230 232 244 237 52 46 47 48 55 46 48 58 56 57 56 57 53 50 48 47 52 52 56 59 111 110 108 107 97 93 93 90 89 93 98 99 89 Renta
Slide 19: December sell-off's impact on 4Q numbers
December sell-off ’s impact on 4Q numbers PLN m 4Q15 4Q16 YoY Dynamic revenue growth (positive LFLs and floorspace increase). Revenues 1,575.0 1,855,0 17.8% Decrease in gross margin: impact of Gross profit on sales 862.8 943.1 9.3% December 2016 obsolete inventory sell-off. Gross profit margin 5
Slide 20: Impact of write-offs on 2016 numbers
Impact of write-offs on 2016 numbers PLN m 2015 2016 r/r Dynamic revenue growth (positive LFLs and higher floorspace). Revenues 5,130.4 6,020.6 17.4% Continuation of trends on gross profit Gross profit on sales 2,742.8 2,935.3 7.0% margin: new inventory management policy. Gross profit margin 53.
Slide 21: Dynamic fall in inventory/m2
Dynamic fall in inventory/ m2 INVENTORY CASH CYCLE PLN m PLN/ m2 225 181 177 207 188 191 2,000 1,684 1,621 1,634 167 168 165 168 168 1,443 1,355 1,600 128 1,600 1,669 1,275 150 158 1,507 1,575 106 1,383 1,527 1,516 1,200 1,200 87 1,444 1,374 75 75 1,320 1,336 82 107 93 102 94 82 1,167 1,438 66 68 52
Slide 22: Record high operating cash flow
Record high operating cash flow 4 Q 1 6 C A S H G E N E R AT I O N 4Q16 CASH FLOW PLN m PLN m +281.5 539 800 265 +70.1 600 +180.3 365.8 103 101 -84.4 +85.9 400 265.9 -30.7 200 -37 -39 -402.8 -125 0 -399 4Q15 4Q16 Operating CF Investing CF Financing CF Total CF Operating cash flow YoY increase th
Slide 23: 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 621m PLN 144m 250 1.6 194 172 0.9 200 1,200 1.0 160 125 153 1.2 104 150 117 800 101 109 0.8 0.3 89 84 561 100 62 400 0.5 315 50 36 0.4 284 0 195 0 0.0 -224 -366 -400 0.0 4Q15 4Q16 Short-term de
Slide 24: 2016 executive summary
2016 executive summary 1 Improvement in RESERVED collection for women. Work in progress. 2 Strong results of MOHITO, SiNSAY, Cropp and House brands. 3 Acceleration of e-commerce dynamics. 4 New inventory management policy. 5 Net working capital improvement. 24
Slide 25: Agenda
AGENDA Executive summary 4Q16 financial results Key corporate events 2017 outlook Q&A 25
Slide 26: New openings in Russia
New openings in Russia STORES IN RUSSIA END-2016 Floorspace Brand Stores (ths m2) RESERVED 82 89.3 Cropp 73 27.5 House 53 19.8 MOHITO 63 23.6 SiNSAY 23 9.0 Outlets 2 0.8 7 new stores in Russia in 4Q16: 4 stores in Moscow RESERVED store in St. 3 stores of two brands: Cropp and SiNSAY in St. Pet
Slide 27: Dynamic e-commerce development
Dynamic e-commerce development L P P ’s O N - L I N E S T O R E S 4 Q 1 6 S TAT U S 4 new brands on-line: Cropp, House, MOHITO, SiNSAY in 5 new countries: Czech @ Rep., Slovakia, Hungary, @ Romania, Germany @ @ @ @ E-stores of 5 LPP brands: RESERVED, Cropp, House, MOHITO, SiNSAY in 6 countries a
Slide 28: 6 new markets on-line in 2017
6 new markets on-line in 2017 L I T H U A N I A , L AT V I A , E S T O N I A Launch of on-line store in each of these countries in 1H17. RESERVED, Cropp, House, MOHITO, SiNSAY RUSSIA Start of on-line store UK in 2H17. On-line store to be opened RESERVED, Cropp, before the launch UKRAINE House, MOHIT
Slide 29: New RESERVED brand
New RESERVED brand Redefining the DNA of our Emphasis on a consistent brand image at the product and flagship brand. store level. A refreshed brand image. Focus on on-line marketing, especially social media. 29
Slide 30: RESERVED - a new approach
RESERVED - a new approach SPEED New models in stores twice a week. Must-haves produced in no more than 6 weeks. FRESHNESS We boldly adapt the latest trends. We focus on creativity. BALANCE We maintain the right proportions while preparing the models: fashion forward, new basic and bestsellers. 30
Slide 31: Agenda
AGENDA Executive summary 4Q16 financial results Key corporate events 2017 outlook Q&A 31
Slide 32: Double-digit floorspace growth in 2017
Double-digit floorspace growth in 2017 2017 2017 Floorspace YoY 12% YoY floorspace growth in 2017. 2016 previous current (ths m2) growth target target RESERVED stores in 22 countries at the end of 2017. 4 new countries in 2017: BY BRANDS Serbia and the UK in Europe (own stores); RESERVED 509.1
Slide 33: Strengthening the CEE region position
Strengthening the CEE region position POLAND CENTRAL EASTERN EUROPE Poland should remain the key market in 2017. POLAND A mature market – focus on: increasing LFLs (especially RESERVED), opening stores of five brands in new concepts 1,017 in attractive locations. CZECH REP. @ Closing the T
Slide 34: Stronger entry into the SEE
Stronger entry into the SEE R O M A N I A , B U L G A R I A , C R O AT I A , S E R B I A SOUTH EASTERN EUROPE Entry into the fourth country in the region in 2017 – first store in Belgrade in 4Q17. CROATIA New store openings planned for 2017 in each ROMANIA of the four countries. 17 34 @ Develo
Slide 35: Acceleration in the CIS
Acceleration in the CIS OWN STORES CIS DEVELOPEMENT 2017 plans: 30 ths new m2 in Russia, +18% YoY floorspace BELARUS RUSSIA growth (development of stores of 5 brands), almost 8 ths new m2 in Ukraine, up 21% YoY. 296 @ FRANCHISE STORES 72@ First store in Belarus planned for 2017 – RESERVED st
Slide 36: Further WE expansion
Further WE expansion GERMANY WESTERN EUROPE 19 stores in Germany by the end of 2017 (first UK GERMANY store opened in September 2014). 20th store in 2018. Flat YoY marketing budget at EUR 4m aimed 16 at strengthening the RESERVED brand recognition. @ E-commerce acceleration (on-line stores of
Slide 37: Development potential in the ME
Development potential in the ME FRANCHISE-BASED DEVELOPEMENT MIDDLE-EAST Solely franchise based development in the Middle-East (no need for capex on LPP’s side). LEBANON 2017 plans: new stores in Egypt and Qatar. KUWAIT JORDAN 1 Revenues from the Middle-East reached PLN 31.4m in 2016. EGYPT BA
Slide 38: 2017 outlook
2017 outlook Revenue growth should exceed floorspace growth (positive LFLs 2017 at 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
Slide 39: Net working capital improvement
Net working capital improvement S U P P LY C H A I N F I N A N C E - S C F (SUPPLIER FINANCING PROGRAMME) BENEFITS FOR LPP BENEFITS FOR SUPPLIERS Extended payment Possibility to discount invoices periods on invoices for for LPP before the payment goods purchased. deadline (low discount rate BANK
Slide 40: Agenda
AGENDA Executive summary 4Q16 financial results Key corporate events 2017 outlook Q&A 40
Slide 41: Back-up
= Back-up RESERVED LPP 41
Slide 42: Network development
Network development Floorspace (ths m2) 31.12.2014 31.03.2015 30.06.2015 30.09.2015 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 RESERVED 389.7 402.7 416.3 435.7 461.3 467.1 473.8 487.2 509.1 Poland 209.2 215.2 219.0 223.4 232.5 230.9 235.1 232.0 248.7 Europe 83.9 90.1 95.1 106.5 120.2 124
Slide 43: 2017 network development details
2017 network development details FLOORSPACE NO. of STORES 31.12.2016 2017 TARGET Nom. growth YoY growth 31.12.2016 2017 TARGET Nom. growth YoY growth (thsm2) RESERVED 509.1 578.1 69.0 14% RESERVED 461 468 7 2% Poland 248.7 264.8 16.1 6% Poland 236 229 -7 -3% Europe 144.1 168.3 25.1 17% Europe 116 12
Slide 44: Revenues by countries and regions
Revenues by countries and regions TOP5 COUNTRIES by REVEN UES TOP5 COUNTRIES by REVEN UES 4Q16 data 2016 data PLN m PLN m Poland 1,087 Poland 3,511 Russia 293 Russia 1,044 Czech Rep. 100 Czech Rep. 280 Germany 68 Ukraine 226 Ukraine 63 Germany 194 0 200 400 600 800 1,000 1,200 0 500 1,000 1,500 2,00
Slide 45: Group 4Q16 revenue growth contributors
Group 4Q16 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands 2,000 PLN m +91 -3 1,858 PLN m 4Q15 4Q16 YoY +100 1,800 +92 LPP GROUP 1,575.0 1,855.0 17.8% 1,575 1,600 RESERVED PL 436.4 435.6 -0.2% RESERVED EX 317.7 392.4 23.5% 1,400 Cropp PL 137.2 142.1 3.6% 1,200 Cropp EX 97.1
Slide 46: Group 2016 revenue growth contributors
Group 2016 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 7,000 +245 +9 6,021 PLN m 2015 2016 YoY +353 6,000 +284 LPP GROUP 5,130.4 6,020.6 17.4% 5,130 RESERVED PL 1,421.5 1,407.0 -1.0% 5,000 RESERVED EX 1,012.3 1,285.9 27.0% 4,000 Cropp PL 467.8 497.4 6.3% Cropp EX 3
Slide 47: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS PLN m PLN m +19% r/r 2,608 125 153 2,192 131 115 119 528 120 103 103 90 411 +28% r/r 537 546 455 434 444 493 476 521 +17% r/r 2,080 409 1,781 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2015 2016 Costs of stores HQ Costs of stores HQ Costs of stores e
Slide 48: New inventory write-off policy
New inventory write-off policy INVENTORY SOLD XII `16 P R E V I O U S LY by COLLECTIONS older, 10% SS16, 11% Unsold goods were shifted to post-season SS14, 8% warehouse and outlets. The goods returned to stores in the next season. AW15, Inventory older than 3 years was written-off. AW14, 32% 23%
Slide 49: Other operating activity and net financials in 4Q16
Other operating activity and net financials in 4Q16 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 4Q15 4Q16 PLN m 4Q15 4Q16 Inventory excess (write-ups) 3.8 6.1 FX gains 0.0 -8.7 Gain on sale of assets 6.1 10.3 * Interest 0.0 0.4 Other operating revenues 7.7 18.3 Financial reve
Slide 50: Other operating activity and net financials in 2016
Other operating activity and net financials in 2016 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 2015 2016 PLN m 2015 2016 Inventory excess (write-ups) 13.1 18.2 FX gains 0.0 0.0 Gain on sale of assets * Interest 1.8 0.9 6.9 17.7 Other operating revenues 24.2 39.4 Financial re
Slide 51: Historical quarterly numbers
Historical quarterly numbers PLN m 1Q15 1Q16 2Q15 2Q16 3Q15 3Q16 4Q15 4Q16 YoY Revenues 1,002.6 1,174.8 1,291.3 1,502.4 1,261.5 1,488.4 1,575.0 1,855.0 17.8% Gross profit on sales 543.6 541.8 673.4 749.7 663.2 700.6 862.8 943.1 9.3% Gross profit margin 54.2% 46.1% 52.1% 49.9% 52.6% 47.1% 54.8% 50.8%
Slide 52: Balance sheet remains stable
Balance sheet remains stable PLN m 31.12.2015 31.12.2016 Higher YoY fixed assets due to investments Non-current assets 1,797.0 1,840.6 in stores. intangibles (including goodwill) 324.4 330.6 fixed assets 1,258.8 1,292.9 Stable YoY intangibles due to investments Current assets 1,768.2 1,839.9 in
Slide 53: RESERVED brand profile
A fast fashion brand with a broad customer base; PLN m REVENUES wide range of collections. 754 828 635 676 666 661 627 Target customers: women, men and children. 479 576 580 493 560 538 Established in 1998. First brand in Germany and the Middle East. Advertised by international stars (Geor
Slide 54: Cropp brand profile
A casual streetwear brand. PLN m REVENUES Target customers: teenagers (boys and girls). 234 232 246 269 221 220 217 199 194 196 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
Slide 55: House brand profile
Urban fashion brand with folk and vintage PLN m REVENUES elements. 245 216 Target customers: teenagers (boys and girls) who 175 200 189 189 158 165 160 170 144 like brave fashion choices. 111 127 Established in 2001 (in LPP Group since 4Q08). Participates in multiple artistic events and spon
Slide 56: MOHITO brand profile
A brand that combines comfort and elegance PLN m REVENUES for business and informal meetings. 211 Target customer: young women. 175 183 192 144 132 134 146 146 151 150 112 115 Established in 2008 (in LPP’s Group since 4Q08). Anja Rubik created a limited collection for AW2014/15. Zuzanna Bijo
Slide 57: SiNSAY brand profile
Clothes for every day inspirations and original PLN m REVENUES party outfits. 135 117 120 Target customers: teenagers – girls only. 105 83 83 88 77 Established in 2013. 55 59 58 37 33 The brand stands out for original T-shirts with extraordinary prints. In AW15/16 singer Margaret designed
Slide 58: 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. 5 First stores: February 2016. 3 4 All stores closed down in February 2017. 1 SS16 collection advertised by a well-known football player
Slide 59: 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
Slide 60: 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: Ipp@lppsa.com MEDIA CONTACT INVESTOR RELATIONS CONT