Polish retailers seek eastern promise closer to home as coronavirus bites

Poland's big clothing and footwear retailers LPP LPPP.WA and CCC CCCP.WA are switching focus back to eastern Europe, sizing opportunities to add brick-and-mortar stores as international rivals concentrate on online sales during the pandemic.

LPP eastern Europe's answer to H&M HMb.ST and Inditex's ITX.MC Zara - has expressed ambitions to emulate its two rivals as a top five global fashion brand. Those plans have stalled as the pandemic has hit consumer spending, but with eastern Europe weathering the crisis better than Western economies, the retailer sees better prospects in its home region. "Our approach to expansion has changed due to the epidemic," LPP's Deputy Chief Executive Przemyslaw Lutkiewicz told. "We hope that from the next year we will return to the expansion of new stores, but mainly in the eastern markets."

LPP's push comes as some big Western brands - which flocked to the region in around 2000 to take advantage of rising incomes and fast economic growth - shut stores in eastern and central Europe. French fashion retailer Camaieu, which is looking for a buyer as it struggles to survive the coronavirus crisis, is preparing to close 27 stores in the Czech Republic and has shut 25 in Poland, among other overseas locations, as it focuses on its domestic market.

Meanwhile Inditex said in June it would close up to 1,200 smaller stores within two years, including a chunk in Europe of its Zara and Pull&Bear outlets, in a move to focus on online sales and big stores in prime shopping districts. Analysts say that in tough times it makes sense for West EU retailers to concentrate on their core markets.

"The fact that the top level players are wanting to limit their presence (in emerging markets) opens up opportunities for Polish brands," PwC Warsaw-based partner Grzegorz Laptas said. Shoe and bag retailer CCC - whose products include Sprandi sports shoes and Lasocki and Jenny Fairy shoes and bags - has scaled back expansion plans this year but aims to make new investments in eastern Europe next year.

"We will definitely be opening stores in Romania or Russia, because these are good markets," Marcin Czyczerski, chief executive of CCC - which is one of Europe's largest shoe manufacturers - told Reuters. Eastern and central Europe flourished in recent years thanks to a flow of EU funds and investment by global companies taking advantage of lower wages and a skilled workforce, and the region has seen fewer cases of COVID-19 than bigger European countries.

Retail sales returned to growth in July in Poland, the Czech Republic and Hungary, and Poland is set to be the EU's most resilient economy this year with GDP set to fall by 4.6%, according to European Commission forecasts, compared to 8.7% for the euro zone. Gdanskbased LPP, which sells its biggest brand 'Reserved' in 25 countries, has been particularly hard hit by high costs and low sales in Germany where it has 19 stores.