The Redan Group, the operator of the Top Secret fashion chain, released its results for the first quarter of 2020, posting more than PLN 33 million in revenue. Radosław Wiśniewski’s declaration to provide up to PLN 10 million to finance the purchase of a new collection will improve business security, with the Group expecting to further improve its sales margin and consistently increase revenue.
In the first quarter of 2020, the Redan Group’s revenue was slightly more than PLN 33 million. This represented a 39% decline year on year, net of the discount segment, whose performance had not been consolidated since July 2019. The key factor that weighed on sales was the SARS-CoV-2 coronavirus epidemic. In connection with the closure of stores at shopping centres and a radical drop in visits at other stores, the Top Secret chain suffered approximately PLN 6.6 million in lost sales. The scale of the clearance campaign in 2020 for the autumn-winter collection was also smaller, which had a positive effect on the sales margin. “We entered the new year with a collection that was modified in such a way so as to give it a more commercial nature at lower purchase prices. These measures had a positive effect on resale and margin on the spring-summer collection, which in the period from 1 January to 8 March (when the coronavirus epidemic did not visibly affect performance yet) grew 12 p.p. year on year. This trend has also been recorded since May, after the ban on trading in clothing in shopping centres was lifted,” said Bogusz Kruszyński, the President of the Redan Management Board.
In the first quarter of 2020, the Redan Group also cut direct costs by PLN 6.5 million (24% year on year). As a result, after eliminating the effect of the discount segment on comparable data, in the first three months of this year the Group incurred a gross loss of PLN -6.0 million, which was PLN 5.2 million worse than in the previous year.
For many years Top Secret has employed flexible management of procurement by ordering goods from suppliers on a just-in-time basis. This makes it possible to change the size of the order relatively late. In the recent period, this also enabled successful reduction of the value of deliveries of items for the summer (by 30%) and holidays (by 45%). As a result, at the beginning of May 2020 the value of stock of the spring-summer collection was lower by 43% compared to the same period in the previous year. “This helped us minimise the risk of overstocking at the end of the season and we did not have to make a major clearance,” stressed Bogusz Kruszyński.
However, the outbreak of the COVID-19 epidemic forced us to modify sales plans and the related purchase budgets. In the worked-out sustainable option, in 2020 at Top Secret stores in Poland expect sales to drop by 43% compared to the original plan for 2020 and by 41% relative to 2019. We adjusted the size of deliveries of goods to that plan to maintain an optimum stocking of stores. “The performance of Top Secret is heavily impacted by the margin on the sale of goods. The margin generated in May was consistent with the assumption in the adjusted sales plan, in June it was higher by approximately 6 p.p. and in the first three weeks of July – it was higher by some 2.7 p.p. Also, sales recorded in May, June and the first three weeks of July 2020 exceeded our plans by approximately 7%, 20% and 25%, respectively,” added the President of the Redan Management Board.
In the next few months, the Management Board of Redan expects the sales margin to grow and head office costs to be further reduced. Concurrently, no non-recurring transactions are anticipated, which last year had an adverse effect on performance. “We expect that for the whole year the Redan Group’s performance will be significantly better than last year. The declaration made by Radosław Wiśniewski, the main shareholder, to provide up to PLN 10 million to finance the purchase of a new collection, will play a crucial role in improving the security of our business. In subsequent periods, when the risk related to the epidemic will be lower, we will return to the strategy of extension of the store network in Poland (by approximately one-third) and expansion of Top Secret’s product range, which will contribute to further growth in sales also in the e-commerce,” concluded Bogusz Kruszyński.