Redan released its financial report for the first three quarters of 2019. The fashion segment’s performance in this period was driven by sales of stocks from previous seasons and a resulting drop in margin. The Company has posted strong sales of Top Secret’s new autumn and winter collection launched in the third quarter of 2019. Moreover, product turnover at stores has improved by 37%. All this bodes well for a rebound in performance in subsequent quarters.
In the first three quarters of the year, the fashion segment generated PLN 172.6m in revenue, which was virtually the same as in the corresponding period of the previous year. However, the sales margin fell in the period by 22.2%, to PLN 64.6m, withheld chiefly by a greater share of goods from previous seasons in total sales. Also, distribution costs and administrative expenses went up 3.4% year on year, as a result of which in the first nine months of 2019 Top Secret’s operating result went down by PLN 21.6m relative to the previous year.
“Worse performance of the fashion segment results from significantly greater sales of items from previous seasons relative to the last year. This was mostly the consequence of the volume of season-end stock of the autumn/winter 2018 collection, which was greater than expected and recorded in prior years, as well as insufficient share of items from the current autumn/winter 2019 collection at stores in the third quarter of 2019,” said Bogusz Kruszyński, the President of the Management Board of Redan S.A.
In the third quarter of 2019, Top Secret recorded a significantly faster turnover (shortened by 37%) of items from the new autumn and winter 2019 collection. Strong sales continued in October and November. “This shows that the collection has been well received by customers, which is a crucial success factor for an apparel company. It also offers hope for improved performance in the periods to come,” added Mr Kruszyński.
The ordered quantities of items for the autumn/winter 2019 and the spring/summer 2020 collections have been closely tailored to the size of the distribution channels and current sales volumes. This largely reduces the risk of being left with unsold items after the season ends. Having analysed changes in the market, the Management Board also adjusted the existing price strategy. Taking into account the consistent drop in retail prices in the clothing market in Poland, a decision was made to reduce the offered prices compared with the 2019 collection. This will also entail lower procurement prices and expenditure on goods. “The change in our strategy in subsequent quarters will allow us to reduce markdowns to customers. It will improve the sales margin, while enabling us to maintain comparable sales prices and speed up turnover of products, whose prices will be more attractive from the very beginning,” stated Bogusz Kruszyński
In the first three quarters of 2019, the entire Redan Group (in July 2019, control over TXM S.A. w restrukturyzacji (subject to restructuring) was lost and since then the results of the TXM Group have been consolidated using the equity method) posted consolidated revenue of PLN 295.9m, which was lower by 23.7% year on year. However, total comprehensive income attributable to owners of the Parent was up by PLN 6.7m relative to the previous year. The increase was driven by a one-off transaction related to the loss of control, which contributed to a PLN 40.4m result on the loss of control over the TXM Group (subject to restructuring) disclosed in the consolidated financial statements.