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Baltika losses ascribed to slowdown in growth

15
May '08
The revenues of Baltika Group totalled 266 million EEK in the 1st quarter of 2008; retail sales grew by 6% and sales area by 15% yoy. The company earned a net loss of 11 million EEK in the 1st quarter.

According to the Chairman of the Management Board of Baltika Group, Mr. Milder, the loss in the 1st quarter is the price that Baltika has to pay for slowing down its growth. “It is very difficult in the clothing retail business to earn profit without sales growth in the most complicated quarter of the calendar year,” he said when commenting on the situation.

According to Mr. Milder, the first steps were already taken to improve the efficiency of the existing retail system during the second half of last year, by slowing down the speed of opening new stores. “We're already experiencing the first results – the efficiency indicators of larger markets have improved considerably during the 1st quarter – comparable store sales in local currency grew by 11% in Russia, 6% in Poland and even by 14% in Ukraine,” Mr. Milder explained.

“Unfortunately,the growth of larger markets was not sufficient to compensate for the lag caused by the long, cool spring and lost consumption security in the Baltic States. The considerable weakening of the rouble and hryvnia against the euro has also contributed to the loss. This is how we ended up with a minus,” Mr. Milder admitted.

According to Mr. Milder, the most difficult period of the year should now be over forBaltika; nevertheless, growth is expected to accelerate during the second half of the year when Baltika plans to open 14-18 new stores and add more than 4,000 square metres of store space.


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