GDANSK (Reuters – Poland’s top fashion retailer LPP has a surplus this year due to closing its Eastern European stores. The loss of these sales will drive down profits and reduce margins by 2022. Przemyslaw Lutkiewicz, the Chief Financial Officer, spoke at a news conference on Thursday.

Lutkiewicz explained that “We had planned for a totally different year. We were counting on Eastern market operations and that our sales will exceed 20 Billion Zlotys ($4.70B)”. We don’t have any sales in the Eastern markets, which is why this surplus.”

The company expects to make 16 billion Zlotys in revenue for the year ending Jan 31, 2023. This is after Russia invaded Ukraine in February.

Lutkiewicz indicated that excessive inventory will make the first half difficult. According to Lutkiewicz, the company plans on selling its spring stock by the end of the year and then selling the remainder to Poland and other “countries in which we are currently operating”.

The company has reduced its merchandise orders by 25%-30% in the second half year to compensate for the closing of stores.

However, the company stated that they do not see any supply chain problems despite China’s restrictions on pandemics.

LPP projects a drop in operating margin in 2022. It plans to increase capital expenditures during that year by 1 billion zlotys. That’s up from 1.33 million zlotys last year.

Company plans to increase its presence in Europe by 2022.

LPP claimed that the quarter had been good in spite of the challenges posed by the war in Ukraine.

Lutkiewicz stated that the company had “good sales” in March and April. Sales grew by 30-40% year-over-year

The company made a net profit in the 12 months ending Jan. 31 on 14.03 billion Zlotys of revenue.

($1 = 4.2549 zlotys)