Baltika Group ends second quarter with 199 thousand euros net profit
The Baltic States’ largest fashion brand house, Baltika Group, earned 199 thousand euros in profit in the second quarter of this year. The group’s sales revenues reached slightly under 12 million euros, decreasing by 1% compared with the second quarter last year. In total over the first half of the year, however, the group’s sales revenue increased by 1% year-on-year, with both Baltika Group’s exports and e-sales seeing continued growth. Retail and franchise sales increased 17% in the second quarter, totalling nearly 1.4 million euros. The Andmorefashion.com e-store saw sales of Baltika Group fashion brands increase by 47% over the second quarter of last year, reaching 371 thousand euros.
The Estonian retail division was the best-performing organisation out of the Baltika Group’s retail markets, but retail sales in the Baltic States as a whole fell by 4%. “In the retail markets, our goal is to keep stable results from quarter to quarter, so we cannot be entirely satisfied with the sales numbers from the second quarter of this year. As the company’s growth engine, however, we still see sales revenue increases through wholesale and franchise partners as well as the Andmorefashion.com e-shop – the results of both last year and this half-year confirm that changes in the business model and processes have justified themselves and we are moving in the direction we are planning, while much remains to be done,” said Chairman of the Baltika Group Management Board, Meelis Milder.
Thus the Baltika Group’s wholesale and franchise sales grew 17% in the second quarter and totalled 1,3 million euros. The sales growth has been supported by the success of Baltika’s largest brand, Monton, in the German-based Peek & Cloppenburg department stores across Europe, as well as entry into the new franchise market in Serbia. “We have made a significant contribution to activities related to design export over the last 18 months, and investments to promote exports have also grown. The first breakthrough in central Europe has been achieved; compared with the same period last year, Monton sales in Peek & Cloppenburg have multiplied and thanks to this, we have achieved a credible partnership position in the eyes of one of central Europe’s strongest and most important department store chains. The next step is to find new partners and thereby grow exports,” said Meelis Milder. In the first half of the year, wholesale and franchise sales grew 9% to 3,2 million euros.
Sales revenues from Baltika Group’s e-shop Andmorefashion.com grew 47% in the second quarter and totalled 371 thousand euros. In total, orders for goods were placed from 31 countries. Estonia, Latvia, Lithuania, Russia and Finland remained the countries with the largest sales volumes from the e-shop. The most popular brands were Monton and Mosaic – Baltika’s two largest brands made up 34% and 31% respectively of the e-shop’s total sales. Like wholesale and franchise sales, the e-shop showed growth in the first half-year: sales revenues grew 43% compared with the same period last year and totalled 720 thousand euros.
The company’s gross profit margin was 51.3% in the second quarter, falling 1 percentage point compared to the same period last year. The reduction in the gross profit margin is primarily due to the larger discounts in the retail business. “The unexpectedly low sales results in April and May resulted in higher levels of inventory, which is why we started with the end of season sales at the beginning of June this year, which ensured good sales results for June but bigger discounts than in previous years,” commented Meelis Milder. The quarter’s gross profit was 6,01 million euros, which is 165 thousand euros less than last year’s comparable result. The total gross profit for the first half of this year was 11,2 million euros (first half of 2016: 11.49 million euros). The insufficient gross profit is partially offset by the company’s expenditure control – Baltika Group’s second-quarter marketing and general administrative expenses remained at the same level as the same period last year. The ratio of marketing and administrative expenses to sales revenues was 48.7%, or, in a year, due to reduced sales revenue, the expense-to-sales revenue ratio has increased by 0.4 percentage points, but a summary of the first six months shows the expense-to-revenue ratio has fallen by 0.2 percentage points.
• Baltika Group will also present the results from the second quarter and first half of the year in a web seminar, which will take place on 10 August at 15.00. The results will be presented by Chairman of the Baltika Group Management Board, Meelis Milder, and Financial Director, Maigi Pärnik-Pernik, and they will also answer any other questions after the presentation. More information about the web seminar is available on the Nasdaq Baltic homepage: https://attendee.gotowebinar.com/register/9081096715850840579 and in the News section of the Baltika Group homepage
• At the same time, all Baltika Group shareholders as well as investors, analysts and other interested parties have the opportunity to present questions and receive prompt answers to them via the Baltika Q&A web environment at http://www.baltikagroup.com/faq/ Questions will be answered and published as soon as possible, but no later than within five business days.