CCC Group Konferencja wynikowa Q3'24 - Dariusz Miłek Łukasz Stelmach

Good morning everyone. I won't say anything unusual, just explain how our business model looks today and what future benefits we can expect. A lot is happening in the company, so I want to share where we are heading. I'll show a few slides to make it more visual. Our model is omnichannel with five banners: CCC (shoes), eobuwie, Modivo, Half Price, and now WarBox. All channels sell high-margin own and licensed products. Off-price allows us to clear old collections profitably. Let me talk about profitability. The dotted line marks when I returned to the board. Profitability has been rising steadily. Our most profitable pillar is CCC, with over 20% EBITDA margin. I compare it with the apparel industry; leading apparel players achieve similar or higher margins, but footwear is more complex. Our margin is growing: we've added over 4 percentage points and I believe we will permanently exceed 60%. Why? Because of own production and licenses. Licenses drive like-for-like growth, especially abroad. We have top licenses like Reebok, which is already 6-7% of our turnover. Licenses are long-term, 10+10 years. We can produce many products under license. Reebok has iconic products that are simple to repeat. We also have licenses for Juicy Couture, Marc O'Polo, Tommy Hilfiger, Karl Lagerfeld, and more. We are adding Nautica and Spider Active. We aim to have 45% of CCC's sales from licensed brands, up from 24% now. Our margin targets: 70% on licenses (after royalties), 67% on own brands, 52% on partners. We will reduce partnerships to only the best. Our first price is high and we need minimal markdowns. For Half Price, we plan to reach 45% licensed products, which will boost margins. The off-price market in Europe is underdeveloped; we are pioneers. We will expand in Central Europe: 400+ CCC stores, 200+ Half Price stores, and a new fashion chain, WarBox. WarBox is sport-casual apparel for small and medium cities. We have licenses to produce apparel under our existing brands. We are launching with a franchise partner using their 150 stores. WarBox stores will be about 700 sqm, offering 60% apparel, 20% footwear, 20% accessories. Initial margins are very high. For example, a t-shirt can be produced for $1.80-3 and sold for 99-139 PLN under licensed brands. The concept is proven. We are confident this expansion will be highly profitable. Thank you.

I want to replace it. I want to create a physical store. Why? Look: e-commerce's share in clothing and footwear is only 20%, 80% is still sold through retail customers who have returned to stores. The entire e-com is maybe 9%, but 27%? Why is there so much? There are no stores. Can you buy Lacoste, Boss, Armani, Geox in a town like Suwałki? No, there are no branded mono-brand stores – there is only CCC. If we create an offer on 400 square meters, of which 100 is the back room, with good lease terms because we mix it with others, it works. There's an unwritten rule that retailers get better terms; I want good terms. I have behind me every store, 100 million in inventory in Zielona Góra – I can put that in 50 large stores. If we run the business to make 200 stores and fulfill from them, I don't even want results yet – I had a store in Zielona Góra that performed well but I closed it because I said all must be modern. We return to traditional retail: we set up a display, sell mainly via e-com, but if something doesn't sell, we have Half Price. Support from partner firms in the store will be around 30 partners – nothing more. The most important brands – 20/20/20 – the ones that generate 80% of our business, that won't change. Shoes that don't sell and don't rotate, we end up with a few percent margin after paying 19% for traffic. That's why we're changing this model. Maybe it's good. We are now Modivo, and I listed the best operators in Europe, in Poland – one sells in pounds, another in zlotys. Their annual EBIT is 68%, 27%, 14%. We look in vain for net profit in this business. I don't want such a business; we must change the sales formula in Modivo to make it more profitable. Let me put it differently: sales leaders like Zara, LPP, Ikea have their own omnichannel; they don't rely on e-com for 32% of their business, we have 6%. So what must we do? These are our results: 97% [EBITDA?]. I don't care if someone clapped – it was 3, that's not my concern. Let's forget we'll run the business that way. We pay [commissions], right? Now, how should Modivo look in the future? Licensed brands and partner brands – only those that let us make money. If someone doesn't let a partner make money, they're not a partner. They're not with me and won't be. I keep those who understand my model: first, I have to earn; second, they have to provide support. If that's not there, there is no brand. And we're winners because Modivo will serve all the brands in the group, not counting Half Price. That was a very good move – I removed e-commerce; it wasn't making money and wouldn't. You know that sending shoes is different from sending sandals, from stools, toys, or food – it's completely different, and gifts require well-recognized logistics that pack well and make money. Returns? We don't have that issue. Everyone is happy we're moving forward with opening physical stores, and the organization is satisfied. We have the channel going down, but WarBox, CCC, Board Riders – that's about premium; maybe we'll think of something in that pyramid. We have top ideas too, but not today. Those are very marginal businesses. The most important focus is CCC, and it will be handled on one platform. Modivo – can you imagine that? Every one of these brands – WarBox, CCC, Board Riders – had their own apps; now they enter the world of CCC and at the end get a message: final sale carried out by an entity from the Modivo group, and they get all the terms, club subscription, benefit card, and everyone is integrated in one big e-commerce, like Inditex or LPP do. But they don't write Inditex or LPP; they sell brands, each brand has its own. I want to create one e-com for all brands. If we lose some of these partners, no one will cry because it's not a business that makes money. I want to create a business with over 20% EBITDA margin, and it's slowly working. Last month was very good because there were many new ideas. CCC will be the service center – customer service, transport, logistics for the group. Remember that the business will grow; Modivo will have one customer club. In CCC, customers will be enrolled in the Modivo club. I have 20 million club members across various networks; now there will be one club called Modivo, one paid subscription – something like Amazon Prime but for clothes and shoes. That means a customer from TPC will be encouraged to pay 60 PLN a year for the subscription; two pairs of boots and it's already paid off. They'll have many privileges. The club will collect points and discounts. Today we have a common club for CCC and Half Price – it works very well: a CCC customer gets a discount; if they buy for 250 PLN, they get 50 PLN discount in Half Price. They added 120 PLN, bought more, so we bought the customer for 20 PLN – much cheaper than paid traffic. We bought a turnover of 130 PLN, and it works because these are future discounts. That's how we realize the customer. Today, the club for WarBox, CCC, Board Riders, footwear – you can buy premium brands on Modivo like Furla, Pinko, etc. That will work well. In total, we spent 600 million on paid traffic in 2024 – that's a joke for 17-18% of turnover. I intend to reduce that to 200 million very quickly. I want to spend 50 million on advertising – TV, radio, cinema – to tell about Modivo, the subscription, the single club. And of course, zero CRM – we have one of the best in Poland, we know everything about the customer. With one click we move the customer to the Modivo club. We cannot pay 18% for a customer; that's impossible. If 3 million people subscribe, that's 200 million – we'll give it back in discounts, but we have a loyal customer who will come to the next network. We'll fish where someone only wants CCC, not Modivo, but 30 people prepare for purchases by looking at the app before coming to the stores. So they look at shoes, come and buy physically or online, and at the end they get a message: served by an entity from the group. I won't introduce myself again, but I'll mention Jamie Salter – a great authority for me, with ideas even I wouldn't think of. He never stops. I know what he's already planning; the beneficiary of most of his ideas will be our network in Central Europe. Big things are coming, but not today. Something big will happen. The Go 25 strategy – we practically forgot about it because it was unfeasible. Three years ago we talked about it; after the kids, we gathered strength and said nothing can happen now, we go ahead, pumped up with revenues in Modivo – on paper it was supposed to be 10 billion, something like that. But look how poor it was – 8, 10, and that was modest. I'll throw in more: we're trying to realize almost everything. Look at store square meters – there are fewer but larger stores in footwear. What did Go 25 say? It said about 20 billion in revenue – unfeasible. But it said about 12 billion and 12% EBITDA – we published that two and a half years ago. If our target is 20% EBITDA next year and 12 billion revenue, as you analysts estimate, then it's achievable. You estimate 12 billion next year – that's weak for me, not ambitious enough. 200,000 square meters gives 2 billion turnover plus positive likes we plan again. So maybe it's a challenge for next year. Don't bury the strategy; it was supposed to be something, but we won't call it up now. I sell myself for 3-5 years. For the shareholders: 5 years I won't leave this chair, unless you throw me out. My humble person and Jamie Salter's – you will see the effects. I want to bet with you that I won't leave for 5 years because the company needs me. Second, I won't take any salary for 5 years. I have a modest one now, but you can value that the CEO of companies that bring big results should be compensated. I don't want to be the highest-paid CEO in Poland; I want to be the most effective CEO. We'll discuss a motivational program that I promised my colleague – as Americans ask about stock. I made a preliminary program: if we reach 300 PLN [share price?], then there's a bonus for two gentlemen – rights to dispose of shares. I don't have to take it; I can give it to an orphanage. But I want to make a bet with you: I know 1000 PLN is absurd, that's why we talk now; if it's higher, it's harder to talk. So I propose that 500 PLN is 2 from my profit – that's the difference between 200 and 500. I have the right to buy shares at 200 PLN. You see how much money that is; you know my motivation. I had greater motivation when funds came to me when it was tough, and I didn't do it. That will be the next topic. Summary of key strategic directions: further development of licensed brands – that's our very balanced business. I confirm again: no one has such licenses in the world. Usually licenses are dedicated to distributors who produce and distribute. No one has direct licenses for their own channels in such quantity and importance. We will continue to develop all businesses. Today, the beneficiary of licenses is not other channels; I want all channels to benefit. A license product is weak only in shoes – I have that problem with Sprandi; many sell it but no one knows it because there are no clothes or accessories, only shoes. Same with Lasocki, only shoes and bags; dżin Rosji has no clothes – it's too late. But I come with licenses that can do very well in clothing. We want to accelerate the development of retail space. I already have 200,000 square meters of openings contracted for next year on very good terms; there's no possibility of not realizing it. The only problem is if we tell you we're halfway in half a year, we can always slow down. At this profitability and with what we intend to do, I know the prices and margins for next year – with the dollar hedged at 3.9, we have very high margins. We will develop using our own capital – my model relies on partly financing through galleries, partly from our financial results, and inventory on 180-day credit. We have a lot to do for what we produce and sell, but I hope it gets better and financial results allow banks to do more. And WarBox and Riders – this may surprise you: I believe in WarBox more than in Half Price because it carries higher first margins. WarBox will have over 60% final first margin; Half Price we estimate at 50% margin. Of course, I haven't mentioned Neobay – we're doing a franchise process there; we'll see. The company is in restructuring but sells well and must solve its problems. Abroad we're opening our own stores; we're already renting space; this year there will probably be 30 more stores. We have product and inventory; everything is prepared. The business model change for the Modivo group and quickly building high profitability – I need Modivo for quarters, I need 1.6 billion in inventory. I don't need that much to sell online. I always wondered how others have similar inventory but sell from five boxes across Europe, while I have to put it in all stores. So we must significantly reduce Modivo inventory, and it's very feasible: just reduce purchases for fall – we'll cut half the brands, limit others. We don't need to take such risks on third-party brands; risk will be on our own licenses where we have high margin because product credit costs 4% for half a year – with high margin it's imperceptible. I think I've said everything. Again: very good start and development of Half Price, new concept WarBox good start, licenses and acquiring more licenses, plus a strategy change for Modivo. I'm not convinced everything will succeed, but I see first effects. That's all from me, thank you. Maybe questions?

I knew that would come up – I knew we'd talk about Modivo. We have to achieve profitability. We focus in the coming months on profitability. Adam escaped? Adam is here, representing our partner Rafał. Tomek Szeląg was here earlier; we're in big agreement. Everything is happening with the shareholders' consent; I also spoke with SoftBank. If we want a profitable e-commerce and company, we have to do it my way, because I have the tools. Look at our biggest seller – he has no stores, no production, no licenses, no off-price. It's impossible that our e-commerce with group synergies doesn't make money; unacceptable. I will show you in the next two quarters that it's feasible. And management who say it will be better – how many apps, how much technology? We had 360 IT specialists in Modivo; a few remain. There were 60 projects; four remain. Everything needs to be streamlined. Maybe a buyout, maybe we'll talk – for now they are patient, and I thank them. The next two quarters must confirm our plans. With such integration within the group, the chance is higher.

Because of incorrect reports – every listed firm explains that someone wrote something: 'consumer minus 12', but everyone has positive like-for-like. I have very good like-for-like in November; I see the consumer. Maybe this consumer comes to me because I have brands and sales channels that are an answer to these tough times. That's why my focus is on WarBox and CCC. I want to dress a person in a branded T-shirt for 59 PLN in their town where they have no option – they'd have to go to a big city or search online. I do it. Look at how Polish retail is structured – there are no bazaars anymore; people must go to small parks. For me it's an anomaly: I earn more in small towns than in big ones – very low costs, high rotation, no competition. Everything clicks nicely in small towns, and I'm glad these parks are emerging.

American investors asked that. I don't know, ma'am. I know that we are growing. But generally, the problem is that customers prefer to see a Reebok logo rather than a monobrand. I can sell a Reebok T‑shirt for 59 PLN, and I'll make money. In retail, a 45% margin doesn't interest me; I need 65% in apparel. That's all thanks to licenses. I try to explain to everyone that licenses carry value. Let me give an example – my mug and bag: there are examples of shoes. A rubber boot costs $9 and sells for 279 PLN. Everyone around the world complains I sell too cheap. I took them off German, French, Spanish sites because they accused me of selling too cheap. But I say: this is a customer – a McDonald's costs different in Russia than in France. Give me the price. Dolce & Gabbana? Not 89 PLN in the first channel, 69 in off‑price. It really works. Today, the margin on a mug is huge. I want to convey that these are astronomical margins – I've never seen such margins producing shoes and having a retail network. That's why I set such arrogant targets. As for paid subscription – no other network has asked me for money for having them. I will ask. I'll give you a 10% discount; on your first boot purchase it pays back, and you get an additional 10% for other family members. There will be a family card – you pay 20 PLN and can give three cards to family members. How popular is this model in the world? In the US almost everyone has it; in Europe – Karol, how many such paid subscriptions are there in Europe? There are many such models, even in our country in retail – Allegro, many smaller clubs. But there isn't such a unified model. I'm not forcing anyone; in the club you'll get privileges: a 10% discount. I figure that when people sign up, I'll give them 10% off, but I'll sell more at first prices faster. And I will encourage but not force. I can imagine that at 100 million transactions at the checkout, customers will learn about Modivo's paid subscription and be enrolled in the club. Moreover, 20 million people will immediately move to the Modivo club. I go further – no one in Europe has done this before: combining five channels into one club. This will not be a club about fashion; we won't compete with the biggest e‑commerce player. Modivo is about fashion benefits and service. Where do we have these results? Our logistics costs are 5.9% – I don't have them here on the results page; 5.9% vs. competitors 17%. Do you know how much our marketing costs are? [We spend] on paid traffic and attracting a customer just to lose money on them. I sold goods on a marketplace at a 14% commission, and they used it for paid traffic costing 17%. Where is my benefit? The answer was: the boss has the customer on his site. Nonsense. Good – I haven't gotten lost. But somewhere there are results; these are impressive data. Wojtek, where is it? We'll set it up in a second. One more question, if I may?

No, you are mistaken: from 600 down to 200 – that's 400 savings, but we'll spend 50 on other channels, so 350. And subscription gives us 200 if 3 million people sign up at 60 PLN each. I'll tire you out with radio, cinema, TV for that money. To burn 600 million, you'd have to be the world champion. With subscription we get 200 – if we sign up 3 million at 60 PLN each, that's 200. We'll try to do that. But it will start sometime maybe in the fall. We're going hard: radio, cinema, TV – 'Modivo subscription, sign up for the paid club, you get benefits.' We'll bombard the customer with information that such a thing exists. Instead of spending 600 million on paid traffic, we spend once on the club and then the customer is ours. We won't spend 600 – it's impossible. So I understand correctly that the dollar at 3.90 is hedged? Yes, we are hedged, though not covering the entire exposure – a bit below percentage. But containers – yesterday we agreed half cheaper for the whole year than last year; there are many other savings – tens of millions. Good, where do we have the 5.8? Logistics: look at Q4, Q3 we have 5.8% logistics. See how much other market participants have – all those warehouses, all those stupid ideas that if you have 10 warehouses you'll serve the customer faster – false. It all costs. We're closing the warehouse in Romania – it cost us 20 million annually unnecessarily; it's not faster. You need double stocks everywhere. Centralize everything – all warehouses, all decision centers, one CRM, one customer knowledge. I had three information centers in Modivo, three different ones that didn't talk to each other; and CCC did the same. You don't see the synergy effects yet this quarter, but many good things came into effect on November 1st. You'll see in Q4 significant synergy differences in costs at the Modivo level. Thank you very much.

The key to success is inventory – or rather, the balance. If we have half the products, we'll sell them more at first prices and not end up with a brand to sell out. Only our own products with very high margin should go to clearance. If we discount our licensed products by 40%, we still have a 63% margin. That's how we steer the business. The rest just struggles in that period. Please, Mr. Marusz? X YZ. Mr. President, you mentioned the agreement to purchase 10% of the shares in the KS network. When was that agreement made, on what terms, and is there an option to increase the stake?

They need to sort out their affairs; all have over 100 million in debt. The group's restructuring pleases us; wholesale and franchise sales are very good. Maybe that's a business idea for the future – franchising in many countries with that margin is worth sharing. Not everyone is satisfied. We bought 10% to help with locations, negotiate on their behalf, give our IT programs, see the turnover – it always helps that the territory is secured. Of course, we have various ideas; maybe in the future. For now, let’s focus on the fact that it's a franchise and we realize the wholesale margin. But it's effective because we start trading immediately – we don't just open two stores and see; it's a network with specialists in product who go to Bangladesh, China; they got licenses, accept patterns; margins are cosmic. When will these shoes finally appear in shoe stores visibly, not just there? I have 50 stores that I want to replace; we're working on the first store. The decision is whether shoes should be displayed or brought from the back. Better with shoes displayed, but that's for 50 stores in big cities. If we want to open a store in Kołobrzeg, Świdnica, Suwałki, Przemyśl, I don't see a boutique – I'd scare people. Shoes will be on a shelf higher: 250-600 PLN. I assume 250-300 will sell best; the price barrier is around 300 PLN – above 350 there's a problem selling. But dżin Rosji is not a brand for CCC – sorry, it only has 4% of sales, it struggles. If we put dżin Rosji in shoes, it will be a different sale. We need dżin Rosji shoes for 600 or 1000 PLN – that's the segmentation I'm introducing: I show boots for 1000 PLN but sell for 300 in CCC and 250 in Half Price; I make good money because production cost is 15 dollars. I need many brands; otherwise it becomes the CCC brand. Today Lasocki is a CCC brand – we can't move it up or down because everyone associates Lasocki with 200 PLN. They're right – I probably don't buy them. But I have to segment; that's why this is all shown. I need segmentation; the licensors will tear my head off if I don't segment. That is a fact – it is in the channels. You have a horse, don't you? Please, you came with a horse – not by accident. Okay, thank you. So they have to appear physically because people don't understand the concept; it's nice and they treat it like a parcel locker for trying on. Those islands we introduced – 50 islands in half a year – we canceled; we lost about 60 million annually on empty shipments. That will not continue; the customer will pay after receiving the package; in-store pickup will be free; home delivery – paid. I'm introducing hard rules and they work. It's not like before – everyone said Half Price should mark down to zero; I stopped marking down and made a 12% higher margin. You just have to cut certain things in the organization and say 'Not everything has to be profitable.' We turned off Buy Now Pay Later at CCC, and we have higher sales and much fewer returns because people used to buy in advance and return. There are psychological aspects: closing a collection, closing a store – customers treat it as an opportunity. It's all about knowing these dependencies in business.

Probably not expecting miracles; it will be spread. For me, expansion is a long‑term step. I often take a location years ahead if I know I need it. There is so much expansion and so many offers that we can choose the best locations now.

I said I already have 200,000. But what goes first? All brands will go evenly. Over 70% of the square footage will be in parks; the rest will follow. CCC is saturated; WarBox with caution; Half Price is a rocket – everywhere we open, it makes money immediately, there are queues, and there is no competition. The model develops very well in small towns. It's probably also about product; we don't need a different product there – cheap products like Benetton sell very well in small towns. People buy into the magic of 'half price'. We must continue and spread that idea. Sometimes it's not really half price, but people think it is. Many of our own products – we don't claim first price, second price; we just label one price because there never was a higher price. We won't cheat – we could put a higher price online for a month and then mark down, but that's not the point. People believe all products are cheap, and that's the psychology. I am amazed. On turnover: we operate on a turnover of maybe 5%? I have offers with furniture – I won't refuse. If someone doesn't understand, I say our average turnover is 5 times, if it reaches 10 times, then there's a problem with the owner. Some large apparel operators today don't make money but pay rents based on 6 times turnover and suffer. The tenant is happy because they always make money. During COVID, when stores closed, we pay zero because there is zero turnover. With 6 times turnover, personnel costs can be managed well; if we don't overshoot, the business makes 35% margin from the store. Now, questions, Robert? Maybe you know everything.

Five years – I signed in blood. Then we'll see. But I'm not someone who wants to be in the second row, you know. There's another side of me: I have a family – a son, a woman, all younger than me and very engaged. They're sitting in China working hard on collections. We won't hand over collections to outsiders; product is the most important in a trading company. We forgot that for a few years. So I'm not going anywhere. If health allows, I'll be at my post.

Of course. If I don't take a salary, I have to live from something. I'll survive three years, then we'll talk. I have other income sources – galleries, other things. But I think 2026 is the real moment when we start paying dividends. We try to explain that we want to be a company that grows at the expense of landlords and gets inventory at the expense of suppliers – 180 days is really a good term. Remember that Half Price will rotate faster than 180 days; CCC maybe 200 or 180; Half Price should rotate in 90 days – they buy and sell very quickly locally. Our process will be longer because part of the goods come by ship. Our rotation: we pay invoice at the factory in China, so it takes months before we pick it up. I think if we get much larger factoring lines – that's our next important process this year – and then we'll work on being financed perhaps by Chinese factoring; they have large, even cheaper money now. Our credibility – what I tell you – we are on a different level now with suppliers and Chinese insurers. Limits are completely different. All that translates into working capital. The scale of stores we're developing – every foreigner sees it; they do everything to be with us. I don't have to beg them for goods; our credibility is simply growing. Also, talking with me – owner to owner – is very important. I work with owners of brands, factories, not with hired executives who might be gone in a year. If the factory owner doesn't kneel on the carpet and say 'I'll do these colors with you in the evening' – not with me, but with my son – then it's not cooperation for me. I want to build relationships for 20-30 years. If that factory prospers because we order 80% of its goods, it will be ours for 30 years, knowing our quality requirements. I don't want to jump around. That's crucial: build a supply chain. And the question was about dividends. Dividends are linked to whether we have good payment terms and deferrals on goods. We aim for that. I think it's a matter of time until liabilities finance our inventory – then we are cash neutral. But the company itself must start making money, and we are on that track.

Partially we have some. For example, there are licenses from Gar, not from IBG. But IBG is the absolute leader in good licenses. What they plan to acquire next is impressive. We will be the beneficiary of those new ideas. I think it's not necessary to go into too many details here; when I know something interesting, I'll certainly share. Now I'm explaining what will happen with Modivo so that everyone sees it's simple. What I told you is very simple – you just have to connect the dots and make it happen in the organization. There can't be someone who just spins the cat by the tail; I make sure of that. If we do everything I say, it will be very good. You know what it's like in a large organization: not everyone defends their ideas if they are stupid or unprofitable, but nonetheless they defend them. 'Boss, but this one – it's for image, for branding. How long can you ask the customer to try on shoes not in stores?' No, it's nice and modern, but it doesn't make money. Maybe the only advantage is that the customer buys more – I don't know why – fewer returns, but buys more. Still, that's not worth maintaining entire departments that measure every shoe, pair them. Let me tell you an anecdote: when they said they had to measure all shoes, even a different color, they measured the entire size run, even though it came from the same last. That's how absurd it was. There were many such topics. When four colors came in, they measured all sizes in all four colors. And measuring one pair costs – they are processed to death. That's how it was. Amateurs don't understand it's the same size. Well, okay. Thank you very much. I hope it was understandable enough. I'm available – Wojtek has my number for any questions, if someone didn't feel it or understand it or had doubts. Thank you very much. [Applause]