Demand From Ukrainian Refugees Boosts Polish Retailers’ Sales

(Bloomberg) -- Poland’s leading fashion retailers posted strong first-quarter sales as consumer spending remained buoyant despite surging inflation, with demand for shoes and clothes driven higher by refugees arriving from Ukraine.

The country’s largest apparel company LPP SA boosted operating profit by 136% in the first quarter as sales rose 45% compared with the year-ago figures that were affected by the Covid pandemic. Sales of shoe retailer CCC SA rose 32%, while its operating loss halved from last year. 

The companies’ cheaper brands, such as LPP’s Sinsay and CCC’s Sprandi, are particularly well positioned for sales to the more than 3 million Ukrainians who crossed the Polish border since late February. A boost in revenue was also noticeable at Poland’s biggest food retailer Biedronka, owned by Jeronimo Martins SGPS SA. 

“Demand from refugees, who often arrive with only small suitcases and no spare clothes, is an important factor that helps Polish retailers withstand a broader weakening in consumer sentiment,” said Tomasz Sokolowski, an analyst at Santander Bank Polska SA.

While Poland’s economic growth is set to slow to 3.8% this year, the weakest pace since 2016, retail spending has remained robust, rising by 22% year-on-year in March. Inflation, on the other hand, has spiked to a 24-year-high of 12.3% in April, which has triggered repeated interest-rate hikes and bets that consumer demand may wane.

The performance of Polish retailers contrasts with trends in Western Europe, where the likes of Germany’s Zalando SE face abating demand as inflation crimps the budgets of households.

LPP shares rose 3.1% in Warsaw, the biggest gainer in the WIG20 index, while CCC fell 0.2%. Both stocks have lost roughly half of their value this year.

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