VRG with a record-breaking net profit for first half of 2023

During the first half of 2023, the VRG S.A. Group generated a net profit of PLN 50.9 million (compared to PLN 36.4 million in the first half of 2022). This record result was mainly driven by positive exchange rate differences in the first half of 2023. VRG achieved at the end of June this year. 602.3 million in revenue (+2.9 per cent y/y), with a higher gross margin on sales (56.6 % at the end of June). The gross margin remained above 50% each month of the year, driven primarily by higher margins in the apparel segment. At the same time, the Group ended the first half of the year with a lower y/y EBIT of PLN 48 million (compared to PLN 65.2 million in the same period last year).

VRG closed the second quarter of 2023 with sales of PLN 335.3 million (1.9% lower than the previous year). In the April-June period, revenues of the apparel segment decreased by 12.8% y/y, reaching PLN 167.5 million. Revenues of the jewellery segment in the second quarter of this year amounted to PLN 167.8 million (up 12.3% y/y). The gross margin on sales in Q2 was 56.3%. During this period, a record 60% margin was achieved by the apparel segment, while the jewellery segment's margin remained at a similar level.

VRG's jewellery segment showed favourable sales growth in every month of the first half of the year. The apparel segment, on the other hand, struggled with weakening demand, despite a strong start of the year. Janusz Płocica, CEO of VRG, points out that the segment's lower overall sales were largely influenced by the difficult macroeconomic conditions and the high base effect. There was also a noticeable decline of interest in purchases in the online channel, where the company pursued, different from previous years, an economical discount policy.

The Group's CEO also notes that customers have not reacted positively to the relatively high share of older collections in the clothing brands' Spring and Summer 2023 offerings. – Due to the evolution process of our clothing brands, the cautious approach to orders for the current year, as well as the drive to reduce inventory, we had a relatively high share of products from previous collections in shops. This, combined with a reduction in promotions, had a negative impact on customers' perception of the offer and contributed to declines in sales dynamics, already under pressure from the difficult macroeconomic environment. In the jewellery segment, we observed stable demand for jewellery and watches and, as a result, continued sales growth in the W.KRUK brand. – points out Janusz Płocica, CEO of VRG.

Implementing the Group's development strategy

Published in June this year, the VRG Group's development strategy for the coming years assumes, among other things, significant changes in the brands ID of the clothing segment Vistula, Bytom and Wólczanka, on which the company is currently working. These aim to broaden and rejuvenate the target group of customers and to enter more strongly into the offer for women. In the apparel segment, a greater emphasis on diversifying the collections of individual brands is evident, and the common factor will be the increasing proportion of quality and more sustainable materials. Further effects of the changes in the collections and the modification of the target groups of the brands, will be visible in the Autumn/Winter 2023/24 collection. The changes should be fully visible in the Spring/Summer 2024 collections.

Autumn/Winter 2023 season under the sign of new collections and strategic brand changes

As part of the evolution of the Vistula brand, it is now targeting younger customers and expanding its women's fashion offer. At the end of the first half of this year, Vistula WOMEN's share of brand sales was 4 % (compared to 1 % last year). In November, it is planned to open the brand's first store in the latest store concept with a larger area and the possibility of better merchandise display. The Bytom brand continues to develop modern formalwear that is a combination of elegance and comfort. It has planned the launch of its ambassador collection for autumn. In addition to its flagship product, shirts, Wólczanka is developing a "total look" offer aimed at younger customers.

In the jewellery segment, in line with the strategy, W.KRUK continues to develop its luxury and popular offer in parallel. Thus, the brand's offer includes products from prestigious jewellery manufactures, like: BIRKS Bijoux, Chopard or Nanis, exclusive Rolex or Patek Philippe watches (W.KRUK is the only distributor in Poland), but also products of the author's brand Picky Pica. June saw the debut of the new W.KRUK ambassador collection with Martyna Wojciechowska - this time of perfumes and scarves. Freedom AIR, EARTH, FIRE and WATER are four compositions inspired by the elements. The brand is planning to launch another ambassador collection in September.

Following the publication of the results for the first half of the year, VRG's Board of Directors upheld the long-term objectives of the Strategy, which are to develop modern brands in an omnichannel model, improve margins and share profits with shareholders. On 28 June, the General Meeting of Shareholders, on the recommendation of the Board of Directors, resolved to pay a dividend of PLN 0.20 per share. The dividend payment will be made on 15 December 2023.