Top Secret’s upward trend continues

In the first three quarters of 2018, Top Secret posted an operating profit of PLN 1.8m, with revenue at PLN 173.2m, having improved on the previous year’s figures. Better results are primarily attributable to an ever improving choice, which translates into higher sales of new collections. The discount segment also performed better in the period under review. Looking at both segments combined, the Redan Group’s profit on sales in the first nine months of 2018 advanced by PLN 4.7m year on year.

In the first three quarters of the year, the fashion segment generated PLN 173.2m in revenue, up 2.8% compared with the corresponding period of the previous year. The sales margin grew considerably faster, by 9.8% year on year, while distribution costs and administrative expenses increased somewhat slower, by 8.2% year on year. As a result, in the first nine months of 2018 Top Secret generated an operating profit of PLN 1.8m, which was PLN 1.3m more than in the previous year. The fashion segment generated profit before tax of PLN 0.6m, while a year before it incurred a PLN 1.4m loss before tax.

“We’re seeing a healthy growth of the apparel chain. The key growth driver has been our largest and most important distribution channel – Top Secret stores in Poland. The positive changes are primarily attributable to an ever improving choice, which translates into higher sales of new collections and higher margins. The improved figures in the period were achieved despite abnormal weather conditions. In the second half of February and in March, the temperatures dropped significantly, providing no impulse for customers to buy typically spring items. Moreover, the very long summer season with a very warm September suppressed demand for the fall collections (jumpers, outdoor clothing). This shows that in terms of the structure of our offering we still have the potential to prepare better for the periods between seasons and further optimise margins and improve performance,” said Bogusz Kruszyński, the President of the Management Board of Redan S.A.

In the first three quarters of 2018, revenue of the Top Secret store chain in Poland went up
by PLN 9m. Concurrently, LFL sales grew by 4%, while the sales margin advanced by 10%, which resulted in an increase in Top Secret’s net profit by PLN 3.3m.

The e-commerce segment is also on a positive growth path. With an increase in online sales by 5% year on year, a significant 21% growth in sales of the new collection was recorded. At the same time, the collection prepared especially for the e-commerce channel attracted significant interest. All this contributed to an increase in the volume of the sales margin by 25% year on year and higher profitability of this distribution channel. On the downside, revenue related to foreign operations, mainly in Ukraine and Russia, dropped by 13%. The decline was recorded in local currencies and its impact was augmented by unfavourable exchange rate movements.

In the first three quarters of the year, the TXM discount segment posted revenue of PLN 249.7m, down 6.5% compared to the same period of the previous year. The sales margin grew by 2.4 percentage points year on year, to 41%. Concurrently, distribution costs and administrative expenses were down by PLN 5.8m. In effect, TXM’s operating result improved by more than PLN 3m compared to the same period of the previous year and amounted to PLN -24.2m.

“In the period under review, the discount segment achieved a number of successes, e.g. in terms of sales margin improvement or cost reduction. The business also benefited from an additional contribution of PLN 32m, which made it possible to update the product offering. However, this was not enough to reverse the trend in sales, which has continued to decline. This calls for a change in strategy. We have to modify it in such a way so as to ensure that TXM achieves the break even point and stabilises cash flows without having to push sales per square metre above current levels,” said the President of the Management Board of Redan S.A.

Taking into account the results of both segments, in the first three quarters of 2018 the Redan Group’s consolidated revenue reached PLN 422.9m, having dropped by 2.9% year on year. However, the profit/loss on sales improved year on year by PLN 4.7m. In the fashion and in the discount segment, the profit/loss before tax improved by PLN 2.0m and PLN 1.1m, respectively. Ultimately, the Group incurred a net loss of PLN 28.8m compared to PLN 27.1m a year before. The net loss deepened chiefly due to corporate income tax. The net loss attributable to owners of the parent amounted to PLN 17.2m and was relatively flat compared to that recorded in the corresponding period of the previous year.