- VRG closes the half-year with an increase in revenues and margins, but worse net profit.
- The Group ended the half-year with a good June sales. It slightly improved the operating profit in the clothing segment. In the jewellery segment, jewellery sales grew at the expense of watches, while maintaining positive margin growth dynamics.
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VRG with a drop in net profit
The clothing segment recorded a gross margin of 60.6% in this period, with a slightly lower margin in the jewellery segment (52.3%). The Group ended the first half of the year with a higher gross profit on sales (PLN 341.1 million, +4.6% y/y) year on year, with a simultaneous decrease in net profit compared to the first half of 2023 (PLN 30.4 million, -40.2% y/y). This result was primarily influenced by a less favourable y/y balance of financial activities and the result of the clothing segment, whose results were significantly below expectations.
Positive sales dynamics in the jewellery segment
The jewellery segment showed positive sales dynamics in each of the last 6 months, thanks to the development of the offer and sales network, including the entry into the Hungarian market. In the clothing segment, the Group had to deal with variable demand, with sales growth recorded in February, March and June. The key period for sales was traditionally the second quarter, when VRG Group brands accompany customers on important family occasions. This year, in addition to special occasional collections prepared by all brands, the Group also initiated activities aimed at using the potential of brand synergy, offering Bytom and Vistula customers special promotions on W.KRUK products and vice versa when purchasing, among others, watches or suits.
The market, especially in the clothing segment, does not support dynamic sales growth, and consumers are making purchases with greater caution, especially in brands with higher price positioning. In terms of demand, we have seen positive trends in jewellery throughout the first half of the year, with a decrease in interest in the most luxurious watch brands in the jewellery segment. In this respect, W.KRUK's results are consistent with the trend prevailing on the global watch market. Cooling demand for the premium offer can also be seen, for example, in the results of Deni Cler. At the same time, the Bytom brand showed very good sales results per sq m and online. In Wólczanka, which is in the process of network optimisation, we achieved the highest sales growth per sq m and a large increase in revenues in the online channel. Unfortunately, we cannot boast good results in our flagship brand Vistula, the men's collection was received worse than in sister brands, and the women's collection does not meet expectations either – comments Mateusz Kolański, President of the Management Board of the VRG Group.
VRG growth in the online channel
The half-year results show a clear rebound in online sales dynamics (up to 48.3% y/y in June). The share of the online channel in the Group's revenue in June was 13.4% (+3.5 pp). The Group's e-stores recorded double-digit growth in online sales in each of the six months of 2024. At the same time, the Company optimized the retail space in the clothing segment, where, among others, the large Wólczanka salons with the total look offer, which weigh the most on the result, will be closed by the end of August. At the end of June this year, the Group's surface area amounted to 51.0 thousand m2 (-1.2% y/y).
Summing up the first half of this year, the Group’s president also draws attention to numerous changes and new initiatives that the company implemented with a view to increasing sales efficiency and stimulating demand, primarily in the clothing segment.
– We have a very intensive six months behind us. During this time, we managed to successfully implement the idea for the Wólczanka brand, which has returned to its roots and is already showing very good sales dynamics both online and offline. We achieved this by "slimming down" the offer and focusing on the key value of the brand for customers – a shirt for every occasion, as well as significantly reducing the costs of this brand's network. We tried to make the most of the important season of family celebrations, offering the Bytom collection, which was well-received by customers, supported by effective marketing communication, and great collections of seasonal W.KRUK jewelry – enumerates Mateusz Kolański.
– The brand we are currently devoting a lot of time to is Vistula, our flagship in the clothing segment. We are looking for the right balance between image, offer, sales promotion, the operation of the stationary network and the online channel – in order to fully use the sales potential of this brand. We hope that the second half of the year will bring the first visible changes not only in the quality of the collection and store stocking, but above all in the results. We hope that the new collection will better meet the expectations of customers from the start of the autumn-winter season – emphasizes the president of VRG.
VRG keeps an eye on costs
This year, the Management Board has been strongly focused on managing rising operating costs (rent and wages) and eliminating areas of low efficiency. Among other things, a review of store sales results was carried out, which resulted in the closure of permanently unprofitable locations or the implementation of corrective actions. The Company also initiated the development of a multibrand network – the first such salon in the franchise model opened in August. Wólczanka boutiques in a new version are also appearing in top galleries, replacing large stores with a total look offer, from which the Company decided to withdraw in December 2023 after several seasons of unsatisfactory results. At the same time, the team responsible for the development of omnichannel worked intensively on the optimization of e-shops and mobile applications for the Vistula, Bytom and Wólczanka brands. In the coming months, the company plans further investments in the development of omnichannel, primarily through the implementation of marketing automation tools, micro-personalization and a new CRM.
VRG SA has been a company listed on the Warsaw Stock Exchange since 1993. The VRG SA Capital Group specializes in designing and distributing high-quality fashion collections for men and women, as well as jewelry and luxury watches. It is the owner of very well-recognized trademarks in five main lines: Vistula, Bytom, Wólczanka, Deni Cler Milano and W.KRUK.
