Redan Group’s margins go up

Redan Group has published its financial statements for H1 2020, according to which it generated PLN 62.5 million in revenues in that period. Changes in the collection and appropriately tailored sales policy improved the Group’s margin by 12.1 pp, which increased the profit on operating activity by PLN 9.4 million. Under the current business model, Redan’s operations are based on cooperation and provision of logistics and IT services to Top Secret.

In H1 2020, Redan Group’s revenues reached PLN 62.5 million. This represented a 45.8% decline y/y, net of the discount segment, whose performance had not been consolidated since July 2019. Although the Group’s loss on sales was PLN 5.0 million, this means that its performance improved by PLN 7.8 million compared with the analogical period of the previous year. At the same time, due to the increase of the trading margin by 12.1 pp to 50.9%, the profit on operating activity improved by PLN 9.4 million y/y.

Both the sales and the results in H1 2020 were mainly affected by the SARS-CoV-2 pandemic. In April, the revenues in Top Secret stores dropped by 94% compared to the previous year, followed by a drop of 46% in May, 30% in June, and 12% in July and in August. “The deviations in sales were mainly due to a decrease in the number of customer visits and a reduction in store space. However, based on our experiences from previous seasons, we revised our planning model, collection design rules and pricing policy. The aim was to optimize sales and end stock levels and to modify the nature of the collection to a more commercial one. In our spring/summer 2020 collection, we introduced greater differentiation of products in terms of quality and price, which effectively translated into increased customer interest in the product groups covered by this strategy. Also the launch of our fall/winter 2020 collection was positively received by customers,” said Bogusz Kruszyński, President of Redan’s Management Board.

Unlike in the previous year, in the past six months there was no need for a wholesale sale of stock. This led to a lower turnover, but it secured the level of the generated trading margin.  Sales to wholesale customers, i.e. mainly to the Russian market and to export customers, also decreased by 45%. On the other hand, the increase in the share of new collections in online sales and the possibility to apply lower discounts resulted in an improvement of the e-commerce margin by 7.5 pp and by 1/3 in terms of value y/y. At the same time, the decrease in marketing expenses positively translated into the profitability of online operations.

The level of direct costs in H1 2020 dropped by 36%, i.e. PLN 20.8 million y/y. This resulted from lower costs of franchise fees, reduced own costs of stores, decrease in the costs of foreign operations and lower costs of logistics and savings on the head office, as well as e-commerce, costs. At the end of June, the total store area of Top Secret, Troll and outlets amounted to 29,200 m2, i.e. down by 21% y/y. The retail chain has about 190 stores located exclusively on the Polish market.

After the sale of shares in the Top Secret subsidiary at the end of August, Redan’s operations have been still closely related to the clothing industry. In particular, they include various services for the Top Secret brand, such as all logistics operations, IT services and back-office support. Redan also holds a call option entitling it to repurchase its shares in Top Secret Sp. z o.o. after 1 September 2022.

The main objective of Top Secret for the coming periods is a gradual increase in sales and a return to profitability. In the long term, it is planned to adjust the distribution channel map to the new operating conditions after the pandemic, which has already changed the consumers’ buying habits. The Group also plans a sustainable development of the store chain.