(Reuters) -Polish fashion group LPP plans to double its store numbers over the next three years led by its budget brand Sinsay and aims to boost the company's overall sales volumes.
LPP, which trades in 39 countries, aims to have 4,755 stores by the end of 2026, including 3,248 Sinsay stores, it said in a presentation alongside publication of its 2023 results.
"Only in the next three years, we plan to double our traditional network and, in the meantime, generate twice as much sales volume as we do today," CEO Marek Piechocki said in a letter to shareholders released with the company's annual report.
For its 2023 financial year, LPP's revenue rose 9.3% to 17.41 billion zlotys ($4.38 billion), in line with preliminary figures it reported last week. Net profit increased 85.5% to 1.61 billion zlotys, also in line with earlier estimates.
Piechocki told a conference call for investors, analysts and media that the market was saturated in large cities, and the Sinsay concept allows for a large store rollout.
As part of the growth plans, the company aims to increase its logistics network floor space by nearly 50% in 2024-25.
It plans to propose a dividend of 610 zlotys per share, up from an earlier proposal of at least 570 zlotys.
LPP shares were up nearly 7% at 1416 GMT.
RUSSIA RESPONSE
On March 15, the Gdansk-based company's shares plummeted after a Hindenburg Research report questioned the sale of its business in Russia, part of a divestment in response to Russia's invasion of Ukraine.
LPP again denied the report's allegations and said it had no operating or trading activities in Russia after selling the business in June 2022.
"I assure you that the allegations made by the intelligence service against the LPP Group are untrue," Piechocki said in the letter to shareholders.
LPP reiterated that as part of the sale agreement of the Russian business, it delivers goods to trade agents during the transition period.
LPP sold the stores in Russia for $135.5 million paid over four years until 2026, and sold inventory for 1.2 billion zlotys also paid in tranches. It has so far received about 700 million zlotys, LPP said.
In the results presentation, LPP said it had applied a 0% margin on its settlements with the trade agents since January and plans to end sales to the agents in the fourth quarter of 2024. The company reported a 21% gross margin on these sales in 2023.
CFO Przemyslaw Lutkiewicz said the margins in 2022 and 2023 served to cover costs incurred to support the Russian business.
($1 = 3.9778 zlotys)