Baltika Group ends second quarter with nearly 0.4 million euros net profit
Baltika Group ended the second quarter with 346 thousand euros in net profit, increasing profits nearly threefold in comparison with the same period last year. Sales revenue from Baltika Group’s Andmorefashion.com online store grew the most, increasing 12% in the second quarter, but good results were also posted by wholesale and franchising sales, which grew in the second quarter by 6% in comparison with the same period last year. Thanks to the good results in these areas, as well as improved gross margins and stronger cost controls, Baltika Group reduced net losses compared to the first half of last year to 147 thousand euros, or by almost ten times.
Baltika Group’s sales revenue in the second quarter of 2016 totalled 11.8 million euros, falling by 0.26 million euros or 2% compared with the same period last year. Wholesale and franchise sales grew by 6% in the second quarter.
“Revenue growth in wholesale and franchise sales are mostly due to the transfer of retail stores in Russia to the management of the franchise partner and the arrival of sales of the Monton women’s collection in the Peek & Cloppenburg department store chain in Germany,” said chairman of the Baltika Group board Meelis Milder, commenting on the results. Monton’s partnership with Europe’s top department store chain began at the end of 2015, and the 2016 Spring/Summer collection was on offer in three Peek & Cloppenburg department stores in Germany. In July this year, the number of Peek & Cloppenburg department stores offering the Monton collection grew to 13, and in 2017, all 25 Peek & Cloppenburg stores will offer the Monton Autumn/Winter women’s collection in Germany, Austria, the Czech Republic, Bulgaria, Croatia, Poland, Hungary and Romania. Revenues from the international online store for Baltika Group’s fashion brands, Andmorefashion.com, grew by 12% compared to the same period last year to 252 thousand euros, with clothing from Baltika fashion brands being delivered through the e-store to 29 different countries.
The Baltika retail network was boosted with the addition of one new store in the second quarter – at the end of May, a Monton and Mosaic brand store was opened in Tartu’s new Kvartal shopping centre. Baltika Group’s sales in the three retail markets of Estonia, Latvia and Lithuania fell by 4% compared with the same period last year, and totalled over 10 million euros. However, due to more efficient management of the purchase price and smaller discounts, there was a continued increase in the gross profit margin, growing by 2.8 percentage points from 55.2% to 58.0%. In addition to retail sales, the gross profit margin also grew in the e-store and in wholesale and franchise sales, thanks to which the gross margin of Baltika Group as a whole grew – in the second quarter, the gross margin was 52.3%, which is 1.3 percentage points higher than the margin of 51% from the same period last year.
“Baltika’s second-quarter results give confidence that the difficult decisions made and the direction chosen last year have been vindicated given the current situation. Now, before the start of the most important season for Baltika, it is important to sustain efforts and further develop so as to continue profitable growth in the competitive fashion business,” said Meelis Milder.
In addition to the exit from the unprofitable Ukrainian and Russian market, inventory management has become more efficient and management costs have been reduced compared with previous years. In the second quarter, management costs decreased by 3% compared with the same period last year.
Baltika Group is the leading fashion design company in the Baltic States, and is made up of five internationally renowned brands – Monton, Mosaic, Baltman, Bastion and Ivo Nikkolo. The Baltika retail network comprises 130 brand stores in Estonia, Latvia and Lithuania, and in addition, items from the collections can be purchased through Baltika’s e-store, Andmorefashion.com, which supplies goods to 44 countries around the world. Thanks to wholesale and franchise partners, collections from the Baltika brands are on sale all over Europe, including in one of the oldest and best-known department store chains, Peek & Cloppenburg. Baltika Group employs almost 1100 people in the Baltic States. Baltika Group shares are listed on the Tallinn Stock Exchange, which is part of the NASDAQ OMX group.