June 22, 2020 / 2:25 PM / 18 days ago

Polish fashion chain LPP warns of second quarter loss as pandemic hits

WARSAW, June 22 (Reuters) - Poland’s biggest fashion retailer LPP is likely to report a net loss for the second quarter as fewer shoppers visit shopping malls after they reopened in May, a senior company executive said.

The group, one of Poland’s biggest companies and a home-grown rival to the likes of H&M and Inditex has been hit by the lockdown to stop the spread of the coronavirus but also by customers’ reluctance to visit shops in person and spend money. LPP is preparing for a slump in annual revenues in 2020, after years of continued growth.

“This year our revenues will fall. We had a loss in the first quarter, we will likely have one in the second quarter too, so we will conclude the first half of 2020 with an operating and a net loss,” Przemyslaw Lutkiewicz, vice-president of LPP’s management board, told Reuters.

LPP reported an operating loss of 265 million zlotys ($66.9 million) for the first quarter of its financial year, which runs from February to April.

Lutkiewicz said the number of customers visiting shopping malls after they reopened on May 4 accounted for 50-60% of 2019 figures and he said it was unlikely to return to pre-pandemic levels. LPP is thus negotiating lower rents with mall operators.

Lutkiewicz said that it was difficult to assess whether the group will deliver on its 2020 forecasts for a 30% fall in revenues and a gross margin of 47-49%.

“Today, because of COVID-19 many industries have ceased to operate normally... People have less money, especially for clothes shopping ... This is why it seems that the time of prosperity are behind us and a couple of years will be needed for demand to rebuild,” Lutkiewicz also said.

LPP employs around 24,000 people.

$1 = 3.9628 zlotys Writing by Agnieszka Barteczko. Editing by Jane Merriman

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