LPP, the largest fashion retailer in Poland, is confronting significant obstacles in the first half of 2022 as it grapples with an oversupply of products. The company had initially anticipated a prosperous year, with operations in Eastern markets and sales exceeding 20 billion zlotys ($4.70 billion). However, the closure of stores in Eastern Europe due to Russia’s invasion of Ukraine in February has resulted in a surplus of merchandise and diminished revenue projections.

During a news briefing, LPP’s Chief Financial Officer, Przemyslaw Lutkiewicz, acknowledged that the excess inventory will pose challenges in the first half of the year. To address this issue, the company intends to sell its spring stock in the autumn and redistribute the remaining products to Poland and other countries where they are currently operating. Moreover, LPP has significantly reduced merchandise orders for the second half of the year by 25-30%, aligning them with the reduced number of stores following the closures.

Despite store closures and the surplus of products, LPP has not encountered any supply chain issues due to pandemic-related restrictions in China. The company predicts a decrease in operating margin for 2022 and plans to allocate 1 billion zlotys for capital expenditure during the year, compared to the previous year’s 1.33 billion zlotys. Additionally, LPP aims to expand its presence in the European Union throughout 2022.

Nevertheless, LPP has reported positive performance in the first quarter of the year, despite the challenges related to the conflict in Ukraine. Lutkiewicz highlighted that the company achieved “good sales in March and April,” with a noteworthy year-on-year increase of 30-40% in sales. For the fiscal year ending on January 31, 2023, LPP recorded a net profit of 953.5 million zlotys on revenue of 14.03 billion zlotys.

Overall, LPP is actively managing the surplus of products and store closures in Eastern Europe. The company is implementing strategies to sell excess inventory and adjusting merchandise orders to align with the reduced number of stores. With a focus on expanding in the European Union, LPP remains determined to overcome the current challenges and sustain its growth trajectory in the fashion retail industry.

Useful links:
1. Reuters
2. FashionUnited