CCC Group in Q1 2023: revenue growth and stable EBITDA year on year in a turbulent business environment

“As expected, we had to face numerous macroeconomic challenges in the last quarter (inflation, growing energy prices and minimum wage, falling real wages, etc.). The retail market was also significantly affected by the prolonged winter and cold spring. However, in recent years we have improved the efficiency and effectiveness of all important business functions, which has bolstered the Group’s ability to respond flexibly and effectively to volatile business conditions,” said Marcin Czyczerski, President of the CCC Group Management Board. 

In the first quarter of 2023, the CCC Group generated revenue of PLN 2.1bn, up 10% year on year. The share of e-commerce in total sales remained high at 53%.  

“I believe that the most difficult quarter this year is behind us. Consumer sentiment has been consistently improving over the past six months. The slowing inflation and pause on the interest rate hiking cycle offer hope that the macro environment may soon stabilise, ’Marcin Czyczerki added. “We are hoping for a spell of relief that will allow us to fully demonstrate the strength of our business post-transformation. 

In April this year the Company presented an outlook for 2023. The Group plans to generate more than PLN 10bn in revenue and deliver higher margins in each segment (CCC, eobuwie.pl, MODIVO, HalfPrice).

 

CCC 

CCC has been consistently monetising the investment in a thorough transformation of its business model which this business line has undergone in recent years. The segment’s revenue in the first quarter of 2023 went up by 4% year on year, with continued rightsizing of inventory levels (down 27% year on year). Digital transformation of the offline network and optimisation of the retail space led the segment to record its ninth consecutive quarter of omnichannel/m2 sales growth (up 5% year on year). ccc.eu’s online sales are also growing consistently (up 39% year on year), and so is its share in the business line’s revenue (to 24%, up 6pp year on year).  

“CCC is the segment that has undergone by far the most extensive changes among all of our segments in recent years. Today it is a mature, innovative and, above all, extremely agile business line that consistently responds to the challenges posed by the external environment,” said Marcin Czyczerski. “Due to the prolonged winter in the first quarter of 2023, we maintained high availability of the winter collection at CCC in February. The higher year-on-year share of this collection reduced the quarterly gross margin, but at the same time led to very good resale levels and inventory structure. Pressure on the margin was more than offset with our continued efforts to improve cost efficiency.  

CCC is consistently implementing a cost reduction programme. Selling and administrative costs went down 4% year on year despite higher sales and the abovementioned inflationary business environment. 

CCC tripled its EBITDA in the first quarter of 2023 on a year-on-year basis, posting an EBITDA margin of approximately 10%.

 

HalfPrice 

The CCC Group’s youngest business line continued the international expansion of its offline chain in the period under review. At the end of April this year, the chain comprised 101 stores and launched operations in its ninth market, Latvia. HalfPrice’s revenue went up 112% year on year in the first quarter of 2023, with a 60% year-on-year growth in retail space. 

The business line’s performance was significantly bolstered by like-for-like store sales, which rose 26% year on year. The key growth drivers were expansion of the product offering, improved inventory levels and an approximately 13% year-on-year increase in footfall.  

“What attracts people to our stores today are quality products from well-known and popular brands sold at ultra-attractive prices as well as a distinctive customer communication style. Last week we launched a pioneering advertising campaign co-created with artificial intelligence,” said Adam Holewa, President of the HalfPrice Management Board.  

Although the first quarter of a year is typically the weakest quarter on the off-price market, HalfPrice delivered positive EBITDA of PLN 9m for the period. 

“Today the HalfPrice chain comprises more than 100 stores, providing solid contribution to profitability growth. The business line’s costs rose almost twice slower than revenue in the first quarter of 2023. In the coming quarters, this effect should be even more pronounced as the business scale and like-for-like sales grow,” said Łukasz Stelmach, Managing Director of Finance at the CCC Group.

 

Modivo Group 

In the first quarter of 2023, the Modivo Group posted revenue of PLN 1,023m, a year-on-year increase of 11%. Both Modivo (+47%) and eobuwie (+4%) contributed to the revenue growth. Sales in both business lines were in an uptrend during the quarter. 

The fast-growing Modivo is consistently expanding its contribution to the Group’s revenue (up 6pp to 23%), which is further supported by marketplace expansion. The marketplace already accounts for 10% of the business line’s GMV in Poland, significantly supporting the breadth of Modivo’s range without having to tie up own capital in the inventory.  

In the past quarter, selling and administrative costs were mainly driven by variable costs, rising in proportion to revenue, and a market increase in unit costs of services and materials (including forwarding, packaging and performance marketing). At the same time, the Company significantly reduced its fixed cost base, mainly in the ATL marketing costs category. 

The Modivo Group’s increased inventory levels (up 28%) in the first quarter of 2023 were attributable chiefly to the fast growth of the Modivo business line. The Group has embarked on a major inventory turnover optimisation project expected to free over PLN 300m in the second half of 2023. 

In the first quarter of 2023, seasonally the weakest quarter of a year, the Modivo Group reported a PLN 26m quarter-on-quarter improvement in EBITDA.