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1. Company Snapshot

1.a. Company Description

LPP SA designs, manufactures, distributes, and retails clothing for women, men, and children.It offers apparel, accessories, and footwear under the Reserved, Cropp, House, Mohito, and Sinsay brands.The company sells its products through 2,244 stores, as well as through online stores in Poland and internationally.


LPP SA was founded in 1989 and is headquartered in Gdansk, Poland.

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1.b. Last Insights on LPP

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1.c. Company Highlights

2. LPP's Q2 Earnings: Strong Revenue Growth and Margin Stability

LPP's Q2 revenue grew 17% to PLN 5.6 billion, driven by a 2% like-for-like sales increase in stores and a 16% rise in e-commerce sales to PLN 1.4 billion in constant currencies. EBITDA grew at the same pace as revenue, thanks to the Sinsay brand's strong performance, which added 253 new stores, a 2.5x increase from the previous year. The gross margin remained stable at 54%, and the company reported a positive EBIT of nearly PLN 700 million and a net profit of nearly PLN 0.5 billion. The actual EPS came out at 251.63, beating estimates at 206.25.

Publication Date: Oct -26

📋 Highlights
  • Q2 Revenue Growth:: Revenue surged 17% to PLN 5.6 billion, with e-commerce sales rising 16% to PLN 1.4 billion.
  • Sinsay Expansion Impact:: EBITDA growth matched revenue, driven by Sinsay’s 253 new stores (a 2.5x YoY increase).
  • Earnings Stability:: Positive EBIT of PLN 700 million and net profit of PLN 0.5 billion, with 54% stable gross margin.
  • Q3 Sales Momentum:: Sales jumped 22% YoY, maintaining 2025 core business sales target of PLN 10.5 billion.
  • Investment and Leverage:: PLN 1.2 billion invested in logistics/stores, with leverage at a safe 1.3x debt-to-EBITDA.

Operational Highlights

The company's investment expenditure was over PLN 1.2 billion, with a focus on logistics and new store openings. LPP's leverage remains safe, with a debt level of 1.3. In the third quarter, the company reported a 22% year-on-year increase in sales, driven by a strong back-to-school period and a positive response to the autumn/winter collection.

Guidance and Outlook

LPP maintains its targets for 2025, with sales from core business expected to reach PLN 10.5 billion. The company expects to update its guidance and share results for the third quarter around December. The current guidance hasn't been updated, but the company is observing the situation with the exchange rate, particularly the zloty to dollar rate, which could impact the third quarter.

Valuation Metrics

With a P/E Ratio of 17.77, P/B Ratio of 5.68, and ROE of 35.9%, LPP's valuation multiples indicate a relatively high growth expectation. Analysts estimate next year's revenue growth at 15.9%. The Dividend Yield stands at 3.82%, providing a relatively attractive return for income investors.

Russian Receivables and Insurance Claims

The company expects to write off around PLN 900 million in Russian receivables but is trying to recover these resources. LPP also expects to receive PLN 351 million in property insurance and is assessing business interruption compensation, which could be around PLN 10 million monthly.

Store Expansion and E-commerce

LPP plans to open around 200-250 new stores in the third quarter and 400-450 in the fourth quarter, mostly under the Sinsay brand. E-commerce sales grew by 14.5% in the third quarter, and the company is working on a new e-commerce platform, although a launch date has not been announced.

Investment Expenditure and Refinancing

The company's investment expenditure for next year is expected to be similar to this year's, around PLN 1 billion, with a focus on store development and logistics. LPP is in the process of complex refinancing, which is expected to be completed by the end of October or beginning of November, aiming for a stable and competitive financing structure for the next 5 years.

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.65%)

6. Segments

Sinsay

Expected Growth: 10%

Sinsay's 10% growth is driven by increasing online presence, expanding into new markets, and targeting younger demographics. Strong brand recognition, competitive pricing, and a wide range of trendy clothing options also contribute to its growth. Additionally, LPP SA's effective supply chain management and strategic marketing efforts support Sinsay's expansion.

Reserved

Expected Growth: 12%

LPP SA's 12% growth is driven by increasing demand for affordable fashion, successful expansion into new markets, and effective cost management. Strong brand recognition, particularly among younger consumers, and a well-executed omnichannel strategy also contribute to the company's growth momentum.

Other

Expected Growth: 8%

LPP SA's 8% growth is driven by increasing demand for affordable fashion, successful expansion into new markets, and effective cost management. The company's focus on e-commerce and omnichannel strategy also contributes to its growth. Additionally, LPP SA's strong brand portfolio, including Reserved, Cropp, and House, helps to attract and retain customers, further fueling growth.

Mohito

Expected Growth: 11%

Mohito's 11% growth is driven by increasing popularity among young women, successful expansion into new markets, and effective marketing strategies. The brand's focus on trendy, affordable, and high-quality clothing resonates with its target audience, leading to strong sales growth. Additionally, LPP SA's efficient supply chain and cost management enable Mohito to maintain its competitive pricing, further fueling growth.

Cropp

Expected Growth: 9%

Cropp's 9% growth is driven by increasing demand for fashion apparel, particularly among young adults. LPP SA's successful expansion into new markets, effective marketing strategies, and strong e-commerce presence have contributed to the brand's growth. Additionally, Cropp's focus on sustainability, quality, and affordability has resonated with consumers, leading to increased brand loyalty and repeat business.

House

Expected Growth: 13%

LPP SA's 13% growth in the House segment is driven by increasing demand for affordable fashion, successful expansion into new markets, and effective marketing strategies. Additionally, the company's focus on e-commerce and omnichannel presence has contributed to the growth. Furthermore, LPP SA's ability to adapt to changing consumer preferences and its strong brand portfolio have also supported the segment's growth.

7. Detailed Products

Reserved

A fashion brand offering a wide range of clothing and accessories for women, men, and children

Crocodile

A children's clothing brand offering a wide range of clothing and accessories for kids

House

A home decor brand offering a wide range of home textiles, furniture, and decorative items

Mohito

A fashion brand offering a wide range of clothing and accessories for women

Sinsay

A fashion brand offering a wide range of clothing and accessories for young women

8. LPP SA's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for LPP SA is moderate, as there are some alternatives available in the market, but they are not very attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers is low, as LPP SA has a strong brand image and customers are loyal to the brand.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate, as LPP SA has a diverse supplier base, but some suppliers have a higher bargaining power due to their size and importance.

Threat Of New Entrants

The threat of new entrants is high, as the fashion industry is attractive and there are low barriers to entry, making it easy for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry is high, as the fashion industry is highly competitive, and LPP SA faces intense competition from other fashion retailers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 48.54%
Debt Cost 5.92%
Equity Weight 51.46%
Equity Cost 9.89%
WACC 7.96%
Leverage 94.33%

11. Quality Control: LPP SA passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Van de Velde

A-Score: 6.8/10

Value: 5.9

Growth: 4.2

Quality: 7.4

Yield: 9.4

Momentum: 5.5

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
LPP

A-Score: 5.7/10

Value: 3.8

Growth: 8.0

Quality: 5.7

Yield: 6.2

Momentum: 6.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Hugo Boss

A-Score: 5.5/10

Value: 7.4

Growth: 5.1

Quality: 5.6

Yield: 4.4

Momentum: 5.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Moncler

A-Score: 5.2/10

Value: 3.2

Growth: 7.4

Quality: 8.1

Yield: 3.8

Momentum: 3.5

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Redrow

A-Score: 4.9/10

Value: 6.7

Growth: 3.8

Quality: 7.4

Yield: 4.4

Momentum: 4.0

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Zegna

A-Score: 4.3/10

Value: 4.4

Growth: 5.6

Quality: 4.4

Yield: 2.5

Momentum: 6.5

Volatility: 2.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

21100.0$

Current Price

21100$

Potential

-0.00%

Expected Cash-Flows