FURTHER STRENGTHENING OF E-COMMERCE IN Q3 2020, EXCELLENT START OF Q4 2020
The CCC Group, leader of the footwear sector in Central and Eastern Europe, closed Q3 2020 with overall revenue growth of 8% and a surge in e-commerce revenue (up 61%). On the back of strong double-digit sales growth (up 51% year on year), Eobuwie further improved its already solid margins (8% in Q3 2020 EBITDA margin, up 1.2pp year on year). Q4 2020 has also started on a high note for the Group. In October its revenue momentum has accelerated even further relative to the third quarter, with the impact of the pandemic’s second wave on the business virtually invisible for a better part of the month.
Adapting to changes going on in its business environment, the Group is engaged in continued efforts to intensively expand the e-commerce channel, restructure its retail space, maintain a tight cost discipline and a safe liquidity position.
“As during the first onset of the pandemic, we are viewing the current situation as a challenge that will make us stronger and more resilient. Our strategic objectives to digitize the business, strengthen e-commerce, expand the product range and follow the path of sustainable development remain up to date,” says Dariusz Miłek, CCC’s founder and Chairman of its Supervisory Board.
The CCC Group is proceeding with its GO.22 strategy, focusing on the CEE region and expansion of omnichannel sales. At the same time, in response to the fast-changing environment, the Company has revised its plans to expand the chain of CCC brick-and-mortar stores, choosing to significantly downscale its initial targets for retail space expansion (only +9 thousand m2 at the end of Q3 from the year’s beginning vs the initial plans of +60 thousand m2). By the end of this year, the CCC Group will also close down a total of 108 stores. Thanks to the relatively short terms of its lease contracts (two to three years), the Group enjoys considerable flexibility in shaping the future size and structure of its retail chain.
“Given the prevailing market conditions, the year-on-year revenue growth posted by the Group in the third quarter was far from a foregone conclusion. But it has given our business a much-needed boost and added incentive to work for the team. Having in place a clearly defined and consistently executed plan, we have deftly adapted to the new reality. We have gained a wealth of experience and we again have precise operational plans for various scenarios, including a crisis situation where a full lockdown is re-imposed. Despite the challenging environment, in October CCC’s offline channel has shown no appreciable signs of being affected by the second wave of the pandemic. We believe this is mainly attributable to our exceptionally attractive autumn/winter collection and intensive communication with customers. Our omnichannel sales model is proving its worth, with each week of the month bringing robust, two- or even three-digit growth in e-commerce. Today, we are not yet able to fully monetize the effects of the measures we have taken over the past two years because of the pandemic, but our investments in the product offering, e-commerce, and customer communication allow us to look optimistically ahead into the future,” says Marcin Czyczerski, President of the CCC Management Board.
BRICK-AND-MORTAR STORES DRIVING AN INCREASE IN THE NUMBER OF E-COMMERCE CUSTOMERS
It is more and more often the case that CCC’s brick-and-mortar stores generate online sales. The Group is continuing the digitization process at its stores, with approximately 200 locations having already been equipped with tablets for online purchases (purchases with the use of the tablets now account for close to 15% of ccc.eu’s sales in Poland). There are plans to roll out this solution across all stores in Poland, the Czech Republic and Hungary within the coming months, and simultaneously the self-checkout concept is being developed. The Company is also testing e-commerce shipments from stores, with a view to launching this functionality on the full scale at the end of Q1 or beginning of Q2 2021.
“We are primarily investing in strengthening the e-commerce segment. In our GO.22 strategy, we have set a target share of online in the Group’s total sales at 35-40% in 2022. Today, we know we can achieve this target faster, actually as early as by the end of 2020. The supportive factors include a rapid shift in consumer behavior on the one hand and the dynamic development of our digital sales platforms on the other. In view of these changes, we are going to adjust our retail space accordingly, reduce the number and average size of CCC stores, negotiate more flexible lease terms, and change our retail space growth philosophy. At the same time, we will continue the process to further digitize and enhance customer experience at the existing stores. The boundary between offline and online has already disappeared in our business. CCC now stands for CzynneCalyCzas, which means a 24/7 service,” says Karol Półtorak, Vice President of the CCC S.A. Management Board, Development, and Strategy.
Eobuwie remains the driving engine of online sales at the CCC Group, but the contribution from other platforms to total revenue (23%) is on the rise. In the third quarter, the share of CCC.eu in the Group’s e-commerce revenue grew to 11% (from 3% a year earlier).
ACCELERATED GROWTH MOMENTUM AT EOBUWIE
Eobuwie is still delivering robust growth at all levels. In Q3 2020, its sales increased by 51% year on year, with the EBITDA margin maintained at a high level of 8.0% (up 1.2pp year on year). The eobuwie Group is also developing Modivo, a premium fashion online store already available on 11 markets. This year, it is expected to expand into two more countries.
“The potential for e-commerce growth is huge. The pandemic has increased business scalability and our ability to win more market share. As a leader, we are uniquely positioned to leverage this opportunity. At this moment, we are delivering sales above the original forecasts for this year. E-commerce will certainly be the main beneficiary of the current market developments,” says Marcin Grzymkowski, the founder and CEO of eobuwie.
“We are currently working on an appropriate financing base for eobuwie.pl. One of the solutions we are contemplating is to raise capital from a minority investor, who would additionally support us in taking full advantage of market opportunities,” adds Karol Półtorak, Vice President of the CCC S.A. Management Board, Development and Strategy.
Eobuwie has completed the construction of a huge logistics center, a new automated packaging sorter, an order picking robot system, as well as a number of other innovative solutions supporting logistics.
STRENGTHENING LOGISTICS
The Group is investing in e-commerce and enhancing its logistics operations to support this sales channel.
“We are working to increase our capacities by launching a second site for shipping online orders. We are adapting our warehouse in Polkowice to accommodate the growing online sales. In this way, during peak periods, we will be able to handle online orders from two locations – Polkowice and Zielona Góra. In view of the growing number of infections in Poland and Europe, we are now adhering in our work to strict sanitary procedures,” says Mariusz Gnych, Vice President of the CCC S.A. Management Board, Logistics, and Production.
“Currently, we are operating under a scenario with restrictions imposed locally on sales through traditional stores. Whichever way the situation develops, we are now much better prepared for potential further restrictions on retail trade. Sales of our autumn/winter collection in September and October have already attested to this new potential of CCC. A good, comprehensive product range and a new model of customer communication, combined with very strong e-commerce, are the key advantages that position us well relative to the competition, even in a highly demanding environment,” added Marcin Czyczerski, President of the CCC Management Board.
At the end of Q3 2020, the total area of the CCC sales network was 688 thousand m2. At the end of September 2020, the CCC Group was present in 29 countries. In 22 of them, we operated 1,053 offline stores, and we had an online presence in 17 countries. The Group operates a total of 66 online platforms across Europe, including eobuwie.pl, ccc.eu, MODIVO, DeeZee, and Gino Rossi.
