VRG expects a good end of the year

After three quarters, the company maintains positive sales growth and doubles operating profit. The Board promises further sales growth and network expansion in 2023.

VRG Group today released its financial data after three quarters of 2022 (IFRS16):

• Sales: PLN 905 million (+25.5 percent year-on-year)

• EBIT: PLN 98.5 million (+124.4 percent year-on-year)

• Net profit (loss): PLN 45.6 million (+72 percent year-on-year)

• Gross margin: 53.2 percent (+1.1 p.p. year-on-year)

• Selling, general and administrative expenses (SG&A): PLN 382.8 million (+17.8 percent year-on-year)

After three quarters of 2022, apparel and jewelry group VRG generated an operating profit of PLN 98.5 million (against PLN 43.9 million in the same period of 2021). In July-September, the company earned a net profit of PLN 9.2 million and recorded rising sales growth in each month, despite the cooling of consumer sentiment. The Group's Board of Directors is looking optimistically at the fourth quarter. It also hopes for further sales increases in both segments in 2023.

- Given the economic environment, we took into account the scenario of decelerating sales in the fall. During the summer, we decided to sell deeply at the expense of realized margins in the apparel segment, in order to avoid a burden on inventory during the announced downturn. There were no signs of a significant reduction in demand in September or October. The Group maintained positive sales growth and recorded a net profit - highlights Janusz Płocica, CEO of VRG.

For the fourth quarter, brands belonging to the VRG Group's clothing segment have prepared special seasonal and occasional offers. In addition, Vistula, in partnership with the Polish Football Association, introduced a special collection related to the World Cup in Qatar. The brand, which is the official tailor of the national team, has created formal outfits for the Polish team. In connection with the event, a special line of products, inspired by the World Cup monolock of the "red and white," has appeared in stores and the online store.

In turn, W.KRUK, for which December is historically a month of record annual sales, will offer customers a wide range of gold and silver jewelry. The brand's customers will find in its stores and e-store, among others, an assortment from the Longplay ambassador collection, created by Natalia Kukulska and Michał Dąbrówka, the first-ever author's Lunapark luxury jewelry collection, and an expanded range of watches from different price levels.

- A very strong nine months are behind us. We are now focusing all our attention on the fourth quarter, traditionally our best quarter. We have prepared an attractive offer for customers, and our network is prepared for increased traffic. In a few days, Black Friday, which traditionally starts the period of intensive Christmas and New Year's shopping - highlights Janusz Płocica.

On the occasion of the release of its third quarter results, the company reiterated its previously announced goals for this year, which are to maintain double-digit sales growth, improve gross margins based on an effective discount policy, increase operating margins, improve the Group's year-on-year performance and maintain a secure liquidity position.

Revenue strong quarter for VRG

In the third quarter of this year. VRG earned a net profit of PLN 9.2 million, compared to a profit of PLN 23.7 million last year. The lower year-on-year result was significantly impacted by rent settlements from the COVID-19 era. In accordance with the COVID Law, companies with stores in shopping centers were not charged rents for the period of forced closure in the first half of 2021. These exemptions were delayed to be settled by the malls in the third quarter, which ultimately translated into lower rents and increased financial results in the period. After nine months of this year, the Group's net profit amounted to PLN 45.6 million, more than 70 percent higher than in the same period a year earlier.

Sales in the third quarter of this year were 4.7 percent higher than a year earlier, reaching PLN 319.4 million. Revenues in the jewelry segment increased by 11.9 percent year-on-year, reaching PLN 152.7 million. Sales in the apparel segment amounted to PLN 166.7 million (1.1 percent less year-on-year). As of the end of October, the VRG Group's cumulative sales for the current year amounted to PLN 994.9 million (23.6 percent more y/y). Gross margin on sales after the three quarters of this year was 53.2 percent, up 1.1 p.p. y/y.

The company maintained a strong liquidity and financial position, maintaining a safe level of debt. VRG had cash of PLN 57.8 million at the end of the third quarter of this year (compared to PLN 50.9 million a year earlier), despite the allocation of PLN 39.9 million in July to pay dividends to shareholders.

Plans for 2023

On the occasion of the publication of its third quarter results, the company's Board of Directors presented its goals for 2023. It promises to achieve better year-on-year results, continue growth in both segments, increase gross margins in a high-inflation environment, and maintain a secure financial position.

- Our main ambition and assumption for 2022, but also for the following year, is to achieve better year-on-year results and to continue revenue growth in both segments. The uncertain market situation requires us to continuously monitor the sales and margin performance of all brands. Depending on the circumstances, the Board of Directors will flexibly adapt activities to the market situation - emphasizes Janusz Płocica.

For 2023, VRG has also announced further investments in the development of its stationary sales network. The Group plans to continue to introduce revised store concepts in the Vistula and Wólczanka brands, operating on larger spaces and enabling attractive display of an increasingly wide range of brands. In the jewelry segment, new locations will be opened for both owned and franchised stores. Next year, the retail space of the entire Group should grow by about 4% year-on-year.

As part of its omnichannel strategy, the company is enhancing delivery and returns capabilities (including express delivery) and developing the functionality of its sales websites and applications by introducing more intuitive 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.

The VRG Group's planned capital expenditures for 2023 are approximately PLN 42 million.

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VRG S.A. (former name Vistula Group S.A.) is a company listed on the Warsaw Stock Exchange S.A. since 1993.

VRG Group S.A. specializes in the design and distribution of high-quality fashion collections for men and women and jewelry. It owns highly recognizable trademarks in five major lines: Vistula, Bytom, Wólczanka, Deni Cler Milano and W.KRUK. The VRG S.A. Group focuses on brand management, apparel and jewelry design and the development of its own sales network in both main segments (apparel and jewelry).