LPP shares surge on strong profit growth, raised full-year targets

LPP shares experienced a significant surge of over 6% on Friday following Poland's premier fashion retailer's impressive financial performance. The company's second-quarter net profit soared by 64% to 768 million zlotys ($202.50 million), propelled by robust revenue growth across both its online and offline platforms. Operating profit followed suit, increasing by 63% to 1.13 billion zlotys, surpassing the company's initial projections.

Revenue rose by 18.4% in the quarter, primarily driven by a rise in offline sales. The company's core brand, Sinsay, contributed the majority of this increase.

E-commerce revenue also showed promising growth, expanding by 16.4% year-on-year, aided by the restoration of full logistics capacity in Southeastern Europe, including a recently launched distribution center in Romania. Additionally, the gross margin improved by 3.7 percentage points to 57.7%.

In response to the company's strong first-half sales growth, LPP decided to raise its targets for the end of 2026. The retailer now anticipates a gross margin of 56.5%-57%, an EBITDA margin between 24.0%-25.0%, and a net profit margin of 10.0%-11.0%. For the longer term, LPP expects revenue to reach 30 billion to 31 billion zlotys in 2027, with a projected gross margin ranging between 55.0% and 56.0%.