VRG's record half-year

Krakow, August 26, 2022. In the first half of 2022, the clothing and jewelry VRG Group generated a net profit of PLN 36.4 million (against a net profit of PLN 2.8 million in 2021). The Group's record results were driven primarily by sales and margins achieved in the second quarter of the year. VRG's apparel brand stores recorded an increase in demand for formalwear - resulting in a significant improvement in margins. The Group's jewelry segment and the W. KRUK brand also had an excellent second quarter.

VRG closed the second quarter of 2022 with sales of PLN 341.8 M (more than 40 percent higher than in the previous year). In the April-June period, apparel segment revenues rose 36.9 percent year-on-year, reaching PLN 192.1 M. Revenues of the jewelry segment amounted to PLN 149.6 M (up 44.4 percent year-on-year). In the entire first half of the year, the VRG Group earned a net profit of PLN 36.4 M (compared to a net profit of PLN 2.8 M in the same period last year). The gross margin on sales for the first half of this year was 54 percent, up 2.9 p.p. year-on-year.

Janusz Płocica, CEO of VRG, assesses that the Group made good use of the resurgent demand after the pandemic and the period of numerous family and business celebrations.

- We are very pleased with the results generated in the second quarter. We can say that it was an exemplary quarter for us, in which both segments - fashion and jewelry - contributed highly to a very good result. We recorded a significant increase in purchases in stationery stores and growing sales and margins in all brands. In terms of sales and margins, we have rebuilt ourselves strongly in the fashion segment. There was a clear thaw in formal wear, which is the DNA of some of our Group's brands. W.KRUK also made great use of the second quarter by achieving further sales increases - points out Janusz Płocica, CEO of VRG.

July and August are marked by sales

The turn of the first and second half of the year passed in Poland under the pressure of strongly rising inflation and deteriorating consumer sentiment. In July, VRG's revenues increased by 1.5 percent year-on-year. During this period, the Group ran summer sales in stores (stationary and online).

- Summer is a time when it is difficult to assess real demand. We will find out about its intensity in the following months. In the pessimistic scenario, we expect a mild decline in demand in the following periods. We want to enter the new seasons as healthy as possible, so we are actively selling off post-season inventories to avoid a situation where we will be simultaneously under pressure from declining demand and high inventories - says Janusz Płocica.

In order to alleviate the slope pressure, VRG has opted for heavy discounting. As the CEO emphasizes, the management is monitoring the economic environment and taking measures to best prepare the Group for a possible downturn scenario.

VRG ready for the autumn-winter season

Following the publication of the first-half results, VRG's management reiterated its goals for 2022, which are to maintain double-digit sales growth, improve gross margins based on an effective discount policy, increase operating margins, improve the Group's y/y performance and maintain a secure liquidity position.

Starting in mid-August, VRG began introducing its fall-winter collection. In the clothing segment, the offer is to be the quintessence of combining elegance with wearing comfort. The fashion segment's brand teams are strongly focusing on the functional qualities of individual models. These are to be ensured by the use of natural fibers and fabrics (such as cashmere, silk, and organic cotton), as well as the sewing quality characteristic of the products in the VRG portfolio. From a marketing perspective, an important event for VRG will be the World Cup in Qatar in the second half of the year, for which Vistula will prepare formal attire for the Polish National Team (the brand is the Official Partner of Polish Football Association).

In the jewelry segment, W.KRUK is betting on further diversification of its offer and development of the luxury segment, both in terms of jewelry and watches. The stores will feature new collections in gold and silver (including an ambassador collection), a wide range of jewelry with precious stones, and a new installment of Picky Pica fashion jewelry, aimed at younger customers. W.KRUK announces new additions to its luxury segment watch offerings and the development of a portfolio of luxury jewelry brands such as Bijoux Birks, Recarlo, Pasquale Bruni, Marco Bicego, Nanis, and Hulchi Belluni.

As part of its omnichannel strategy, the company is enhancing its delivery and returns capabilities (including express delivery) and developing the functionality of its sales websites and applications by introducing more intuitive and easy-to-read tools. The company is also working on programming its own solutions to enable interactive sizing in the brands' e-stores. Cooperation with Zalando will also continue.

Changes in authorities and the first dividend in 23 years

The current composition of the VRG Group's Management Board has taken shape in recent months. The Supervisory Board completed the process of selecting VRG's CEO on February 18, appointing Janusz Płocica to the position. He began performing his duties on April 19. Thus, for most of the second quarter, the Company was managed by a team consisting of Janusz Płocica in the role of CEO, Marta Fryzowska as Vice President responsible for the fashion segment, and Michał Zimnicki as Vice President of the Management Board and CFO of the Company. On July 7, 2022, the Supervisory Board of VRG S.A. decided to appoint Łukasz Bernacki as Vice President of the Group's Management Board. A new vice president is a person with many years of experience in the industry and in the Group. For the past two years, he has served as CEO of W.KRUK. He will now combine it with sitting on the Group's Management Board, overseeing the operations of its jewelry segment.

- The current Management Board consists of managers responsible for the Group's key business divisions and an experienced CFO. The composition of the Board currently transparently reflects the Group's operating model based on two business segments - clothing and jewelry - comments Janusz Płocica, VRG's CEO.

One of the goals of the Group's management is to share the generated profit with shareholders. On May 18, the board decided to adopt a dividend policy, and on June 21, the General Meeting of Shareholders, in accordance with the board's recommendation, passed a resolution to pay a dividend of PLN 0.17 per share for the first time since 1999. The dividend payment was made on July 29.

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VRG S.A. (former name Vistula Group S.A.) has been listed on the Warsaw Stock Exchange since 1993. The VRG S.A. Capital Group specializes in the design and distribution of high quality fashion collections for men and women and jewelry. It owns highly recognizable trademarks in five main lines: Vistula, Bytom, Wólczanka, Deni Cler Milano (DCG S.A.) and the oldest jewelry brand in Poland W.KRUK (W.KRUK S.A.). The VRG S.A. Capital Group focuses on brand management, design of clothing and jewelry and development of its own sales network in both main segments (clothing and jewelry). Since 2000, the basis of VRG S.A.'s strategy has been to realize the vision of a "House of Brands" and a distributor in the retail market.

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