VRG gears up for a good first half of the year

New Board is determined to breathe new energy into the Group

In the first quarter of 2022, VRG recorded sales of PLN 243.8 million (up 41.6 percent year-on-year), exceeding pre-pandemic sales levels. For the first time ever, the jewelry segment's revenue exceeded the sales of apparel brands.  The Group generated a margin of 50.5 percent during this period. The return to active social life, especially for family and professional celebrations, resulting in increased demand for formal wear and customer interest in jewelry, is building a good sales outlook for the Group for the second quarter and the rest of the year. On the day of the publication of the first quarter report for 2022, VRG's Board of Directors also approved a decision to adopt a dividend policy.

VRG has had a solid start to the year, despite an apparent reduction in store traffic in the first three months as a result of the fifth wave of COVID-19 cases and the outbreak of war in Ukraine. In April and the first weeks of May, the Group is reporting a significant increase in store traffic and rising sales and margins.

The Group's jewelry segment had a particularly strong first quarter, with sales of PLN 128.4 million (more than 49 percent more year-on-year). The apparel segment, which is more sensitive to consumer sentiment, also maintained a double-digit growth rate (PLN 115.3 million in revenue, up 34 percent year-on-year). Noteworthy is the growing gross margin on sales, which reached 50.5 percent in the first quarter (up 3.1 percentage points year-on-year). The company's result under IFRS 16 was significantly better than a year earlier. The Group's EBITDA increased to PLN 32.6 million, more than tripling compared to the first quarter of 2021.

- In an unfavorable sales environment, we were able to see the resilience of our business model, based on the two segments of jewelry and apparel. W.KRUK successfully built sales and beat revenue records. Strong bridal jewelry collections will support the continuation of this trend in the next quarter. In this period, traditionally filled by family celebrations, we also expect an increase in demand for formal wear, which remains the DNA of our group - highlights Janusz Płocica, the new CEO of VRG Group.

New energy for change and VRG’s ambitions

On February 18, VRG's Supervisory Board completed the process of completing the Group's new Board of Directors, appointing Janusz Płocica as CEO, effective April 19, 2022. Thus, the current VRG Board of Directors was constituted, consisting of: Janusz Płocica as CEO, Marta Fryzowska as Vice President in charge of the fashion segment, and Michał Zimnicki, acting as Vice President and CFO of the company. After a period marked by a pandemic to stabilize the business, the new Board is determined to breathe new energy into the Group.

- Our ambition is to strengthen our strong position in the jewelry market and in the segment of modern formal and everyday fashion, guaranteeing consumers the best possible shopping experience across all channels. We want our brands to be synonymous for consumers with quality, durable and timeless products, sourced as much as possible from domestic, Polish production and produced in a sustainable way - says Janusz Płocica, CEO of VRG.

Following the release of first-quarter results, VRG's Board of Directors upheld its goals for 2022, which are to maintain double-digit sales growth (both offline and online) improve gross margin based on an effective discount policy, increase operating margin, improve the Group's year-on-year performance, and maintain a secure liquidity position.

One of the goals of VRG's Board of Directors will also be to share profits with shareholders through the payment of dividends. On May 18, 2022, VRG's Board of Directors adopted a dividend policy of recommending an annual payout in the range of 20-70 percent of consolidated net profit, assuming a net debt/EBITDA ratio of less than 2.5 at the end of the fiscal year. Each time before making a recommendation to the general meeting, the Board of Directors will take into account the Group's financial position, investment needs, liquidity situation, growth prospects in a given market and macroeconomic situation, acquisition plans and banking covenants.

Optimistic outlook for second quarter

The second quarter of the year is traditionally a time of many family celebrations, resulting in increased demand for formal wear and interest in jewelry. However, in the past two years, it has also been a time marked by restrictions and administrative lockdowns related to the COVID-19 pandemic. In the current year, VRG's Board of Directors is determined to take advantage of the opportunities presented by the resurgent demand for individual brands' offerings after the pandemic to further improve performance.

- The market favors us. The end of the epidemic state means a return to busy social life, including family celebrations, which traditionally strongly build our apparel and jewelry sales in the second quarter. We are ready for this on the offer and marketing side. Our goal is to continue the positive trend in revenues and, above all, in margins - says Marta Fryzowska, VRG Vice President in charge of the fashion segment.

The strong start to the second quarter is confirmed by the Group's communicated revenue estimates for April, in which VRG's sales amounted to PLN 108.5 million, more than triple the same period a year earlier.

- We've had a solid start to the spring-summer collection. In recent weeks, we have seen clearly increasing store traffic and a thaw in our key category, elegant apparel. This is a good forecast for us for the entire second quarter - adds Marta Fryzowska.

Long-term development plans

The VRG S.A. Group is currently in the process of implementing a series of strategic initiatives initiated in late 2021 and early 2022. They are aimed at generating further growth impulses in sales and margins, improving efficiency and identifying further areas for business development. The company sees great potential for improvement in the apparel segment, while investing in the further development of W.KRUK through expenditures on network development and marketing communications. Vice President and CFO of VRG Michał Zimnicki points out the effects of the activities carried out so far.

-The effects of our ongoing strategic initiatives are already visible. An example of this is the growing profitability of the business and the gradual improvement in the gross margin on sales, which is already at a level higher than in 2019. The improved results achieved by the VRG Group are not solely the result of the recovery in demand after the pandemic. We are pursuing a deliberate policy of optimizing prices and promotions or optimizing retail space. We believe that we will be able to continue the good trends in the coming quarters and realize our growth potential - says Michał Zimnicki.

The VRG Group plans to continue the gradual introduction of new store concepts in the Vistula and Wólczanka brands, operating on larger areas and enabling attractive display of the brands' entire current assortment. In both cases, modern sales support solutions are used (e.g. large screens in the display windows, enabling the presentation of the brands' marketing campaigns). The company has also focused on environmentally friendly solutions in interior design and lighting. - When planning new concepts, we focused on making shopping decisions as easy as possible for the customer. That's why we are monitoring the results generated in these stores particularly closely in order to be able to make decisions on the further development of such a formula - says Marta Fryzowska.

The company also announces further development of omnichannel, in the direction of maximizing shopping convenience for customers. Among the activities announced in this area are the implementation of mobile sales applications in all VRG brands, as well as loyalty systems combining online and offline customer activities. Interactive sizing tools will appear in apparel segment e-stores. Cooperation with Zalando will also continue.

VRG's portfolio strategy for fashion brands in the fashion segment is also a challenge. The first effects of these activities will be visible in the autumn-winter collection, while the first collections developed in accordance with the brands' new concept will be seen in stores in spring 2023.