LPP Raises the Margin Bar — and Quietly Retires the Store-Count Story
Record H1 profit, a brand-new Sinsay marketplace, and a 2027 warning about polyester and a weaker złoty.
LPP.WA · Earnings Call · 2026-09-17
The plus-side revision
LPP's Q2 FY26 report (2026-09-17) arrived as an operations update but behaved like a profitability beat. The Polish apparel group posted a record first half — over PLN 3B EBITDA, more than PLN 1.8B EBIT and PLN 1.2B net — with the second quarter alone delivering roughly PLN 1.7B EBITDA and nearly PLN 800M net profit, the fifth consecutive quarter of improving margin. The single most consequential line in the whole call was a guidance tweak in the right direction:
The only change in plus is the gross margin. We can see after the results of the second quarter and what we are observing now by mid-September enables us to increase gross margin estimation from 56% to 56.5%-57%. It cascades down into higher EBITDA margin and net profit margin.
The mechanics matter more than the headline. Management was refreshingly candid that a stronger Polish złoty did most of the heavy lifting — roughly three points of the 3.7pp gross-margin gain — with only about half a point attributable to LPP's own pricing and cost efficiency. But that honesty cuts both ways: it means the beat is partly rented from the currency, and the company knows exactly how much it must earn on its own to hold the level once FX turns. Language about the long run and a repeatable "50-plus" gross margin recurs throughout, and it is the framing the company leaned on in prior quarters too.
Sinsay's second act
The more company-unique news is what LPP is doing with its youngest, largest-format-to-count brand. In early September it soft-launched a marketplace inside Sinsay, and management is targeting PLN 40–50M of incremental EBITDA from it next year while insisting the rollout stays "quality" rather than promotional. Around the same time came an unheralded tailwind: the EU's July levy on subsidised Asian platforms, at EUR 3 per product line. LPP frames it as a chance to lean back into advertising, and performance marketing — the online-ad spend it had deliberately kept in reserve — is being re-accelerated. That places LPP on the same side of the tariff fence as the broader market's tariff refund and trade-policy chatter, but from the rare position of a beneficiary rather than a victim.
The operational detail is where the story really shifts. This was a quarter of store-level surgery: more than 500 self-service checkouts installed, mini remodellings to widen apparel and shrink slow-moving home space, and a home collection that has now delivered positive like-for-likes every month of the SS26 season. The school season proved the point, with management flagging a 23% omnichannel lift across the school-facing brands. Notably, "new stores" — a keyword that once spiked as a gainer for LPP — has flipped into the decliner list conceptually. Growth is migrating from opening boxes to squeezing more out of the boxes already open.
What 2027 is telling you
Here is where the narrative turns sober. LPP kept its 2027 plan despite raising 2026 guidance, and the bridge is explicitly about input costs. Management assumes a roughly 1.5pp hit from a weaker złoty and another point from higher purchase prices, with polyester singled out as the pressure point as oil pushes back above $100/bbl — a global high oil dynamic the whole apparel supply chain shares. Earlier in the year the tone on sourcing was more relaxed, with only "1%, 2% of increases" being discussed and polyester framed as a "slightly higher 1-digit" risk; the current call hardens that into a modelled margin headwind. The compensation is straightforward — price increases in the premium brands plus efficiency — and it lets LPP repeat the refrain that its real target is sales-led, repeatable like-for-likes at a "balanced" margin rather than peak margin.
Two inherited problems also reached resolution. The situation in Bangladesh — a painful fallout from the write-off of the Russian business — has normalised after a two-week order pause, with management stating order levels will be higher than last year and diversification continuing into Central Asia. And Red Sea routing, while still mostly around Africa, is producing no delivery delays. This is a company that has spent multiple calls absorbing shocks; this quarter it spent the time compounding instead.
Bottom line
LPP is no longer selling a growth-of-stores story. It is selling a margin-and-efficiency story: a bigger Sinsay, a fresh marketplace, a tariff tailwind, and the discipline to raise guidance on the pieces it controls even as it pre-warns on currency and polyester. The catch is that the 2026 upside is partly FX-borrowed, and 2027 hands a chunk of it back. If the Sinsay initiatives and the EU platform levy deliver the traffic management is promising, the efficiency gain becomes the durable part — and the margin floor stops being a macro accident. That is the bet, and it is a more interesting one than the quarter's numbers alone suggest.