Polish Retailers: FX wind of change (CCC stays BUY, LPP stays SELL)
We maintain our preference for CCC over LPP, reiterating our BUY for CCC, with a new price target (PT) of PLN 345 (down from PLN 351) and our SELL for LPP, with a new PT of PLN 8,089 (up from PLN 5,528). In this report, we focus on the exposure to the recovering USD, which we see as a much smaller results swing factor for CCC than for LPP. At the same time, we see the former as better-positioned from other angles as well: i) an e-commerce share in sales of 14% for CCC vs. 5% for LPP (in 2017); ii) more space for the restructuring of labour costs and working capital management; and iii) the positive impact of M&A. Going forward, we expect all these factors to allow CCC’s 2017-20E earnings to grow at a CAGR of 35%, strongly above the 10% we forecast for LPP. In this light, we see our 2018/19E P/E multiples for CCC, at 32x/22x, as much more attractive than our 33x/31x for LPP.CCC is engaged in the wholesale and retail trade of clothing and footwear. Co. offers its products to wide range of consumers, from demanding clientele of trendy boutiques to value-oriented medium segment customers, to less wealthy customers seeking reasonably priced quality footwear. Co. pursues a strategy of brand diversification, which is reflected in its three autonomous distribution channels: a chain of official CCC stores, BOTI footwear shops and QUAZI boutiques. Co. offers more than 2,500 designs of footwear. Co. also owns more than 67 proprietary brand names e.g. Lasocki.
LPP SA Gdansk is clothing manufacturing group based in Poland. Co. is engaged in the design and distribution of clothing. Co.'s headquarters is located in Gdan'sk, including designing resources for all its brands. Co.'s stores offer its customer products that include jackets, shirts, sweaters, dresses, skirts, trousers, jeans, underwear and garment products. Co. also sells promotion clothing under a special selected brand. Co.'s product offering is addressed to a variety of customers for whom separate brands and chain stores are set up. Co. launches clothing under such brand names as: RESERVED, CROPP, MOHITO, HOUSE, and PROMOSTARS.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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