CCC Group in Q4 2022: strong revenue growth, robust CCC omnichannel and further profitability improvement at HalfPrice
In the fourth quarter of FY 2022 (November 2022–January 2023), the CCC Group recorded strong revenue growth (+19% yoy, to PLN 2.4bn) despite last-year’s challenging base (+45%). Contribution of e-commerce to the Group’s total sales remained high, at 56%. Diverse and attractively priced product ranges, recognisable brands and convenient shopping experience were the key drivers behind Customers’ choices in the past months. At CCC, omnichannel revenue/m2 were up 26% yoy, the metric having improved yoy for the eighth consecutive quarter. Measures to optimise working capital were successfully continued according to plan. Inventory turnover in the CCC segment improved by 80 days yoy, with inventory level down PLN 481m yoy. HalfPrice recorded a 148% yoy increase in sales for Q4 (to PLN 285m) with strong, double-digit EBITDA margin (of 12.6%) on consistent efforts to expand its offering and enhance brand recognition. The Modivo Group began to monetise its investment in the Marketplace service, launched three months before, with Q4 2022 GMV of PLN 8.2m.
The CCC Group keeps developing its business lines, bringing a broad range of products to its Customers and steadily improving their shopping experience through innovative technology solutions. In the fourth quarter of 2022, the Group recorded strong revenue growth of 19% (to PLN 2.4bn) from last year’s challenging base (+45%). Contribution of e-commerce to the Group’s total sales remained very high, at 56%.
In view of the turbulent business environment, in Q3 2022 the Group announced a year-long capital accumulation plan, envisaging a series of measures to build a ‘financial cushion’ for the Group, including cost reductions, work to improve cash conversion (including inventory turnover) cycle and CAPEX rightsizing. On the back of these measures, the Group’s cost-to-revenue ratio improved by 4.5pp yoy in Q4 2022, with costs growing at a rate considerably slower (more than a half) relative to revenue, despite inflationary pressures.
The CCC Group’s adjusted EBITDA came in on a par yoy.
‘We focus on the expectations of our Customers and on enhancing our omnichannel model, while monetising solutions deployed earlier on. A very challenging year is behind us and the beginning of 2023 does not promise to be any easier,’ said Marcin Czyczerski, President of the CCC Group Management Board. ‘For all that, a number of economic parameters relevant to our business, including costs along our supply chain, foreign exchange rates and energy prices, seem to be normalising at quite a rapid pace. The recent downturn in consumer confidence has halted, with the past three months suggesting a possible reversal of the trend. The slowing inflation and pause on the rate hiking cycle offer hope that the macro environment may soon stabilise’.
In the fourth quarter of 2022, revenue in the CCC segment rose 21%, or PLN 1.0bn, yoy, with retail space broadly unchanged and inventory levels down as much as 32% (their lowest since 2016).
The strengths of the business line include a broad product range, attractive pricing. and the innovative omnichannel model. One of its key elements is the mobile app, which – with more than 10m downloads to date – has just emerged as CCC’s main online sales channel. In the reporting period, omnichannel revenue/m2 rose 26% yoy, the metric having improved yoy for the eighth consecutive quarter.
ccc.eu is contributing a growing share of the segment’s revenue (up 10pp yoy, to 30%). Sales in this channel grew by as much as 81% yoy.
‘With significant sales growth (up 21%) and an inflationary business environment, the CCC business line reduced selling and administrative expenses by 3% year on year in the fourth quarter of 2022. This is another effect of the cost reduction programme undertaken in 2022,’ said Łukasz Stelmach, Managing Director of Finance at the CCC Group. ‘In the past quarter, we also managed to significantly reduce inventory levels, by PLN 481m (or 32% year on year), which, given the fast revenue growth, had a positive impact on turnover (improvement of 80 days year on year). This allowed us to significantly reduce our investment in working capital. Working capital optimisation is currently the key factor in deleveraging and bolstering the business line’s balance sheet’.
CCC maintained its operating profitability at the last year’s level. EBITDA adjusted for one-off items came in at PLN 46m, compared with PLN 12m in 2021. With another consecutive quarter of positive EBITDA and significant progress in working capital optimisation, the CCC segment is generating cash flows that fully cover HalfPrice’s growth needs.
In Q3 2022, HalfPrice delivered a positive operating profit margin and in Q4 2022 it again confirmed the strength and maturity of its business model, having further improved its performance. In the reporting period, revenue generated by the Group's youngest concept rose by a whopping 148% yoy, to PLN 285m, with a 94% yoy increase in retail space.
A big contributor to HalfPrice’s performance were rising sales at like-for-like stores, up as much as 30% yoy. The rise was driven chiefly by an approximately 40% yoy growth in traffic. Another major factor was the steady growth of brand recognition, at 50% after less than two years since launch.
At 44%, the business line’s gross margin rose almost 4pp yoy, driven by expanding supplier relationships, product range optimisation and order volumes.
‘We have built a strong foundation to consistently strengthen our market position and deliver strong results. Today we have a presence in eight countries, where we operate 91 offline stores. A year ago, we launched online sales in Poland, which now account for close to 5% of our revenue,’ said Adam Holewa, President of the HalfPrice Management Board. ‘As we continue our growth, we are adjusting it to the current situation on the retail market. We can see our off-price concept is working, and we aim to gradually roll out the network in 2023’.
In Q4 2022, HalfPrice maintained a strong double-digit EBITDA margin (of 12.6%). In qoq terms, EBITDA margin rose 0.3pp.
In the fourth quarter of 2022, the Modivo Group posted revenue of PLN 1.1bn, up almost 7% yoy. The revenue growth was driven mainly by the Modivo business line (up 42%) and the eobuwie.pl hybrid store chain (up 40%).
Modivo’s contribution to the Modivo Group’s revenue is expanding fast with the rollout of Marketplace and marketing services for partners. In Q4 2022, Modivo contributed 29% to total revenue, 7pp more than the year before. The business line is successfully monetising its investment in Marketplace, with GMV at PLN 8.2m since the service was launched three months before.
The multibrand e-commerce industry continues to feel the pinch of adverse macroeconomic conditions, including surging inflation, which has significantly dampened demand. In the face of major overstocking and rising consumer price sensitivity, the competitive environment is also contributing to deteriorating gross margins.
Costs posted by the Modivo Group for Q4 2022 were driven chiefly by revenue growth (variable costs) and a market increase in unit costs of services and materials (including forwarding, packaging and performance marketing). The Group is reducing its fixed cost base mainly in the areas of brand image marketing (ATL) and energy consumption.
‘An intense year is behind us, a year that was challenging for the entire e-commerce sector. Given the current global trends, operational efficiency is a top priority. We continue to optimise key areas such as logistics, returns and investment in performance marketing. At the same time, we are implementing projects we consider to be the future of our business. We are investing in the rollout of our retail network, launching new offline stores in Poland and abroad (we opened our first outlet in Romania and a second store in Prague) and testing the concept of in-store eobuwie.pl zones within the CCC chain. We capture opportunities offered by our Marketplace, having added new product categories, beauty and home & decor, to our range. We expect these efforts, combined with our investments in technology, including mobile apps, the new Magento2 platform and the already operational fulfilment centre for Modivo in Wola Bykowska, will help us deliver on our goals,’ said Damian Zapłata, President of the Modivo Group Management Board.
In 2023, the Modivo Group will put in motion its business efficiency improvement plan to further scale up its business, improve margins and reduce costs. The Group’s liquidity position and balance sheet will be strengthened through working capital optimisation efforts.