Overdressed with clothing firms
A spate of three listings in the early nineties was followed by a lapse until 1999, when local legend LPP, owner of the 'Reserved' and 'Cropp Town' brands, debuted. The phenomenal success of LPP, whose share price has risen nearly 1,000 percent over the last five years, has now set off a rush to the floor from a new generation of clothes retailers eager to float their stock. The sixth clothing company to go public, Artman SA, is, at time of writing, collecting subscribers for its own IPO this June. And the fifth, Redan, only debuted last October. But is there room for so many 'LPP-wanna-be's' on the market? Top retail space in prime shopping malls is short, and the market is increasingly crammed with global competition, say market insiders, who warn that 2004 is not 1999.
Hip-hop fashion producer Artman's sales have seen growth rates of 40 percent over the last few years, a figure that puts the firm well into the same dynamic class as such peers as youth-fashion retailer Redan, Modextil (to debut before too long), and, indeed, LPP, all of which are enjoying similar rates. For anyone expecting Artman to repeat the meteoric rise of LPP over the next five years, it appears to be a very attractive investment. The question is, will it?
"Comparisons are misleading," says Jacek Siwick, partner at Enterprise Investors, Central European private equity fund, which controls a 11.74 percent share in LPP. In his view, the relative merits of upcoming rivals aside, times have changed, and no one in the sector can now hope to repeat the success of LPP.
"People who didn't discover LPP on time shouldn't hope to find the golden nugget now," he says, adding that the small number of companies on the Warsaw Stock Exchange (WSE), which, though the biggest in the region, is still tiny by international standards, may encourage eager investors to put their money where, given more choice, they wouldn't have.
Even the much-marveled-at LPP, which recently reported Q1 sales of zł.100.8 million, is finding it much harder to expand in neighboring markets than it did when taking over Poland five years ago. The reason being, according to Jacek Siwicki, is that in other new EU countries, just as in Poland, the clothing market has filled up since 1999 - when there was no H&M and no Zara, to name just a couple of the global chains that have hit the region in recent years.
"The best space in the Galeria Mokotow and Zloty Tarasy equivalents of Slovakia and the Czech Republic is often taken, just as it is in Poland," says Jacek Siwicki.
"There are risks," says Marcin Materna, an analyst at DM Millenium Bank, who says one factor that could trip up the company is long time-lines between production based in Asia and outlets in Poland, which makes flexibility in response to customer demand hard to achieve. This could be particularly crippling for a company aiming at one of the most fickle target groups known to man: teenage trend-setters.
Marcin Materna says the company's hopes lie in its extensive outlet networks and the fact that none of its predecessors on the WSE have aimed at precisely Artman's target - cutting-edge teens - although he admits that LPP's new brand 'Cropp Town' is aimed at broadly the same category.
Meanwhile, at least two of the three clothing companies that made up the first spate of WSE listings in the early nineties have recently shown signs of tiring, while one, Próchnik, is reportedly teetering on the edge of bankruptcy. Wolczanka, a shirt producer that only two years ago was enjoying 31 percent growth rates, saw net profits drop to zł.1.5 million in 2003. Vistula, which sells suits for men and women, meanwhile, incurred losses of zł.3 million last year. But better prognoses for both Vistula and Wolczanka for this year, as well as rumors of mergers, suggest that Modextil, a shirt producer targeting sophisticated professionals, might be meeting with regenerated local, as well as international, competition by the time it gets round to its own IPO.
Hip-hop fashion producer Artman's sales have seen growth rates of 40 percent over the last few years, a figure that puts the firm well into the same dynamic class as such peers as youth-fashion retailer Redan, Modextil (to debut before too long), and, indeed, LPP, all of which are enjoying similar rates. For anyone expecting Artman to repeat the meteoric rise of LPP over the next five years, it appears to be a very attractive investment. The question is, will it?
"Comparisons are misleading," says Jacek Siwick, partner at Enterprise Investors, Central European private equity fund, which controls a 11.74 percent share in LPP. In his view, the relative merits of upcoming rivals aside, times have changed, and no one in the sector can now hope to repeat the success of LPP.
"People who didn't discover LPP on time shouldn't hope to find the golden nugget now," he says, adding that the small number of companies on the Warsaw Stock Exchange (WSE), which, though the biggest in the region, is still tiny by international standards, may encourage eager investors to put their money where, given more choice, they wouldn't have.
Even the much-marveled-at LPP, which recently reported Q1 sales of zł.100.8 million, is finding it much harder to expand in neighboring markets than it did when taking over Poland five years ago. The reason being, according to Jacek Siwicki, is that in other new EU countries, just as in Poland, the clothing market has filled up since 1999 - when there was no H&M and no Zara, to name just a couple of the global chains that have hit the region in recent years.
"The best space in the Galeria Mokotow and Zloty Tarasy equivalents of Slovakia and the Czech Republic is often taken, just as it is in Poland," says Jacek Siwicki.
"There are risks," says Marcin Materna, an analyst at DM Millenium Bank, who says one factor that could trip up the company is long time-lines between production based in Asia and outlets in Poland, which makes flexibility in response to customer demand hard to achieve. This could be particularly crippling for a company aiming at one of the most fickle target groups known to man: teenage trend-setters.
Marcin Materna says the company's hopes lie in its extensive outlet networks and the fact that none of its predecessors on the WSE have aimed at precisely Artman's target - cutting-edge teens - although he admits that LPP's new brand 'Cropp Town' is aimed at broadly the same category.
Meanwhile, at least two of the three clothing companies that made up the first spate of WSE listings in the early nineties have recently shown signs of tiring, while one, Próchnik, is reportedly teetering on the edge of bankruptcy. Wolczanka, a shirt producer that only two years ago was enjoying 31 percent growth rates, saw net profits drop to zł.1.5 million in 2003. Vistula, which sells suits for men and women, meanwhile, incurred losses of zł.3 million last year. But better prognoses for both Vistula and Wolczanka for this year, as well as rumors of mergers, suggest that Modextil, a shirt producer targeting sophisticated professionals, might be meeting with regenerated local, as well as international, competition by the time it gets round to its own IPO.
