Poland’s leading fashion retailer Reserved expands into Western Europe

Reserved, Poland’s top fashion retailer, is taking its international expansions plans up a notch, according to its parent company’s, LPP, financial chief officer.

Tough competition H&M and Zara, and unfavourable weather in July and August, forced LPP to introduce discounts that dented its third quarter profits. The company’s management agree on the consensus analysts’ thought that LLP has reached saturation point in its home market.

Establishing a wider presence in Western Europe, however, is central to its ambitions to become a global brand and the company said it would have 20 stores in Germany by the middle of next year, up from 15 currently, and open its first store in London.

"We don't want to be just a company from Eastern Europe. We want to go to other continents, to other geographies, so from that perspective we need to have a global brand," Chief Financial Officer Przemyslaw Lutkiewicz explained in an interview with Reuters.

He said business had begun to pick up last month and it expects to turn a corner in 2017. The retailer has a strong presence in eastern and central Europe, the Balkans and Russia and will also open its first stores in Belarus, Kazakhstan and Serbia next year, he said.

H&M and Inditex "are trend setters and they are global companies. In the long run we would definitely like to be the No. 3, but it's a long way ahead of us," he said.

LLP to focus on mass market’s brand Reserved after premium’s clothing line fiasco

Lutkiewicz added that Tallinder – the premium men's and women's clothing brand that LLP launched last February - "was not perceived well from the beginning".

Analysts polled by Reuters say weak profitability in its home market will make the company's expansion plans harder to fund.

After six months, LLP abandoned Tallinder to focus on mass market line Reserved, which generates half of its revenue. The group’s CFO told Reuters that LPP will stay away from premium brands for now.

The company's net profit tumbled to 24.2 million zlotys ($6.1 million) in the first half of the year from 99.3 million in the same period a year earlier.

LPP sees net income little changed in the third quarter because of hefty discounts on its summer collections. But Lutkiewicz said he believed the company's gross margin - revenue minus the cost of sales - would increase next year.

The margin was 46.1 percent in the first quarter of 2016 and 49.9 percent in the second quarter. Lutkiewicz said he expects the margin to increase by another 2-3 percentage points in 2017 helped partly by Russia, the company's second-biggest market, where it was seeing durable, double-digit growth in turnover after rivals withdrew from the country.

Image:Reserved