Shabby appearance

Clothier Vistula & Wólczanka (V&W) had consolidated revenues of zł.113.7 million and a 5.56-million net loss in Q2, as compared with revenues of zł.106.74 million and a zł.10.05-million net profit the year before.

The company explained that the negative figures were the result of one-off expenses such as the payment of debts worth zł.8 million and almost zł.1 million in executive severance agreements. But even after these events are taken into account, the results are still 40 percent worse than last year's, according to Łukasz Bugaj, an analyst with financial advisory Xelion.

Bugaj added that V&W had raised investors' hopes over the last few months with its acquisition of jeweler W.Kruk. But the publication of its Q2 results has significantly challenged expectations that a large luxury goods distributor could emerge from the deal.

The firm also saw a worrying increase in operational and sales costs. Moreover, V&W took on a significant amount of debt for the purchase of W.Kruk. "This is bad news for V&W's shareholders," Bugaj said.

If V&W wants to increase its profits, building up a network of outlets isn't the way to do it, said Marcin Materna, an investment advisor at DM Millennium brokerage. The company would be better served by working to increase its profit margins, he said.

According to Materna, Q3 will be challenging for V&W too. "This is a traditionally weaker season for this kind of business," he said, adding that Q4 might bring better results.

A new strategy for the company might also be to introduce a mid-market line of jewelry in its W.Kruk outlets in smaller cities, the Rzeczpospolita daily reported.  "W.Kruk could step down into the mid-market segment rather than stick to premium brands," Materna said.