March 4, 2020 / 12:21 PM / a month ago

Poland's top clothing retailer invests in automation, logistics as higher wages bite

WARSAW, March 4 (Reuters) - Poland’s largest clothing retailer LPP plans to invest in logistics and automation and may increase prices in a bid to improve margins and combat higher labour costs, the company’s deputy head said.

Poland’s ruling nationalist Law and Justice (PiS) party plans to increase the minimum monthly wage to 4,000 zlotys ($1,038.07) by the end of 2023, almost double its 2019 level, starting with a rise of over 15% to 2,600 zlotys in 2020. Poland’s economic growth of around 3% is adding to wage pressure.

“I do not want to say that the minimum wage increase will result in higher prices, but we are thinking how to introduce new, nicer, better products and adjust prices to them,” Przemyslaw Lutkiewicz told Reuters.

“On the one hand, the minimum wage increase affects salary costs. On the other hand, we hope that customers will have more and more cash to spend, which translates into sales, especially in smaller towns, hence our strategy of entering smaller cities,” he added.

In February LPP, a home-grown Polish rival to international retailers such as H&M and Inditex, said it plans to open more shops in smaller towns, saying that in larger ones consumers were more aware of the effect of the fashion industry on the environment and were buying less.

“We have a chance to reach 10.5 billion zlotys ($2.73 billion) revenues this year, especially taking into account the 16% increase in retail space (rented by LPP) planned for 2020, positive like-for-like changes and further growth of the internet (sales),” Lutkiewicz said.

Lutkiewicz said that margin improvement will be possible thanks to the implementation of radio frequency identification (RFID) chips attached to clothes stored in warehouses which allow the company to track stock better, and a cut in logistics costs thanks to further automation should also help.

Lutkiewicz said that risks that its Chinese-made products won’t be delivered on time due to the coronavirus outbreak have already diminished as shipments from Chinese ports have resumed and factories were expected to restart.

$1 = 3.8533 zlotys Reporting by Anna Koper; Editing by Elaine Hardcastle

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