Polish fashion retailer LPP sees no major disruption to deliveries, sourcing from Iran war

GDANSK: Polish fashion retailer LPP has seen no major disruption to deliveries or sourcing so far from the U.S.-Israeli war on Iran, with delivery times largely unaffected, its finance chief said on Thursday.

Delivery times from key Asian markets remain stable, with only minor delays of two to four days from Pakistan and India, Chief Financial Officer Marcin Bojko told reporters.

“This in no way disrupts the availability of our collections,” Bojko said, adding that the company has not seen any “drastic” signals regarding its sourcing so far.

He said that Chinese suppliers have signalled initial price increases of 1% to 2% due to rising oil prices, in what he described as the start of discussions, while polyester products could see mid-single-digit hikes.

Air transport accounts for just 0.8% of LPP’s purchasing mix, meaning a recent rise in air freight costs will have a minimal impact on the group, Bojko added.

He added that oil-linked transport costs were likely to be the main challenge going forward.

CEO Marek Piechocki said the company is well-adapted to global shocks, citing its experience navigating crises such as the pandemic and the loss of its Russian store network.

If oil prices rise further, it will affect the entire sector, which could benefit LPP’s lower-priced Sinsay brand, he added.

In its annual report, the company estimated that in a worst-case scenario, additional sea freight surcharges linked to the escalation of the conflict could reach 30 million zlotys ($8 million) this year.

Higher oil prices could also push distribution costs, which account for roughly 30% of LPP’s logistics expenses, up to 10% higher than February levels, the report showed.

To navigate the volatility, the retailer is actively managing delivery schedules and has hedged about 90% of its U.S. dollar exposure for the spring-summer season.