Year 2019: Growth of the scale of operations and high dynamics of online sales.The digital transformation and value-enhancing and the Group's profitability changes

2019 was a period of intensive and bold investments, thanks to which we built a strong, unique omnichannel trading platform. After a period of massive investment in the Group's digitalization, floor space expansion and acquisitions, we are focusing on integration and organic growth. Now we want to monetize the changes introduced. The basis of our business is a product that we are constantly improving. The portfolio of products available in CCC stores was expanded in 2019 with new private labels, branded sports shoes and suitcases and accessories. Particularly noteworthy is the DeeZee brand, which, as a traditional online business model, appeared in CCC's offline stores last year, recording record sales of 1.3 million pairs of shoes, becoming the Group's best-selling first-priced brand. From a similar perspective, we should assess Gino Rossi, thanks to which a product from a new, higher price range, distinguished by its quality and classic form, appeared in CCC stores. Its total sales in the offline channel are about 400 thousand pairs in 2019 - based solely on the autumn-winter collection - and our aspirations for this brand reach much further. Eobuwie.pl also expanded its product range - by taking over the Rage Age brand, creating a collection of shoes signed by the Hollywood star - Eva Longoria, or developing the MODIVO project. We have made a huge progress in the whole product offer, which we will fully see in the AW20 collection, but already now, in the current SS20 collection, many product novelties will be available to our customers. This would not be possible without the huge commitment of Product and Purchasing Teams, for which I thank you very much. The large availability of various and attractive products will allow the CCC Group to rebuild its historical sales levels per m² of floor space. - says Dariusz Miłek, Chairman of the Supervisory Board of CCC S.A.

 

INCREASE IN FLOOR SPACE OF STORES

In 2019, the Group's floor space increased by 15% to 760 thousand square metres. 2019 was a record year in terms of new store openings (+111,000 sqm) and closures (-18,000 sqm). The increase in openings was mainly due to the increase in the area of CCC stores, eobuwie and the acquisition of Gino Rossi. The closures of 18 Karl Vogele stores in Switzerland were related to the restructuring of the Swiss company.

According to GO.22 strategy, 2019 was the last year with such a large number of openings. In the years to come, we will make maximum use of the potential that we have built up by applying a selective approach to mature markets. We will also limit our plans to expand the space - we will focus on selected, most prospective markets and smaller formats of CCC stores (500-800 m2) and hybrid e-shops. In 2020, we will also work on minimising the link between the product and the weather impulse. This is one of the key areas of GO.22. The dynamic growth of e-commerce in 2019 shows that we can adapt to market changes. The investments exerted pressure on the Group's profitability, but at the same time equipped us with tools that are now our competitive advantage. The most important of them are the extremely popular CCC application, the unique service esize.me - available in CCC stores and eobuwie.pl and several dozen IT projects implemented in 2019, which have completely changed the company's IT architecture and which support our multi-channel trade model. As a result, we have gained tools for constant contact with customers and generating satisfactory revenues in all sales channels. We have a committed team motivated to achieve the set goals, and this is one of the major market advantages - says Marcin Czyczerski, President of the Management Board of CCC S.A.

DYNAMICALLY GROWING E-COMMERCE

One of the most important areas of the CCC Group's activity in 2019 was the expansion
in the e-commerce segment, whose main component remains eobuwie.pl, responsible for 93% of its revenues. A key project in the development of online sales channels was the launch of e-commerce ccc.eu - a fully functional, offering the delivery of products from the CCC offer directly to customers' homes. The next, natural stage in the development of this sales channel was to launch the mobile application CCC (1.4 million downloads), allowing the Company to enter the path of omnichannel business.

The undertaking supporting the development of e-commerce channels in the CCC Group in 2019 was the construction of a new logistics center of eobuwie.pl, which exceeds the capacity of the existing one more than three times. The facility equipped with the latest technologies, such as automatic collecting robots, will provide comprehensive logistics services to all the Group's online channels, and will allow for a reduction in its unit cost. - says Dariusz Miłek, Chairman of the Supervisory Board of CCC S.A.

In the fourth quarter alone, the Group recorded a 7% increase in revenue to PLN 1.7 billion, including a 40% increase in e-commerce revenue. Gross margin increased in all sales segments (retail and e-commerce). In the fourth quarter, the Group recorded consolidated gross margin at a similar level y/y (50.6%) and net profit of PLN 136 million.

2019 was a difficult year as a result, but there were several one-off events that did not allow the CCC Group to release its full potential. In particular, it concerns the problems with newly implemented IT systems, the start-up of which made it difficult to properly load the stores, so that the sale of the spring-summer 2019 collection was not optimal. In 2019, significant decisions were also made regarding the Group's presence on the markets of Western Europe - their common denominator is the search for profitability by reducing the sales network and focusing on the most prospective stores. In the case of the Swiss subsidiary Karl Voegele, the changes go even deeper and also concern the elimination of local logistics processes or the centralisation of corporate functions, which will translate into huge cost savings. In 2019, the CCC business model was still vulnerable to changing weather conditions, but in a challenging year, several measurable successes were achieved. The age structure of inventories, their level per square meter of area, and consequently the rotation of inventories has improved significantly. At the end of 2019, the cash conversion cycle dropped to a record low of 110 days, and the demand for working capital was consistently decreasing.

The share of domestic CCC ecommerce sales vs. CCC stores in Poland has increased from 3% in January to 6% in February and we are satisfied with this, it will directly affect the growth of like-for-like sales from the entire omnichannel network in Poland. But we are going for more - we are implementing projects that give even more engaging stores and relevant customer experience also in the physical space.  And we also hope that we will manage to keep the coronavirus as CCC relatively well, thanks to, among others, sources of supply located mostly outside China. And how will the customer behave - for this we all have to wait until the end of the season - says Karol Półtorak, Vice-President of the Management Board of CCC S.A. for Strategy and Development.

At the end of 2019, the CCC Group was present in 29 countries - 23 sales are conducted in more than 1200 offline stores and 15 through the online channel. Last year, CCC customers purchased over 50 million pairs of shoes in all sales channels.

 

SELECTED FINANCIAL DATA - CONTINUED OPERATIONS:

 

	FY						Q4
	2018		2019		RDR		2018		2019		RDR
REVENUE	4 726		5 845		24%		1 603		1 717		7%
GROSS MARGIN	50,1%		49,4%		-0,7 p.p.		50,7%		50,6%		-0,1 p.p.
OPERATING PROFIT	373		133		-64%		149		127		-15%
EBITDA	904		849		-6%		308		317		3%
EBITDA MARGIN	19,1%		14,5%		-4,6 p.p.		19,2%		18,5%		-0,7 p.p.
NET PROFIT FROM CONTINUING OPERATIONS	223		18		-92%		102		136		33%