Unaudited financial results of Baltika, fourth quarter and
Baltika Group ended the fourth quarter with a net loss of 890 thousand euros. The loss for the same period last year was 1,352 thousand euros. Despite the current COVID-19 pandemic, results for the quarter improved by €462,000 year-on-year thanks to Baltika Group’s focus on reducing fixed costs, resulting in a reduction in operating expenses of 694,000 euros. The year-end result includes a provision for store closure charges in 2022 in the amount of €90 thousand, a deferred tax asset reduction reserve in the amount of €60 thousand , an inventory provision of 100 thousand euros.
Group sales for the fourth quarter amounted to 2,614 thousand euros, down 34% compared to the same period last year with a 30% drop in retail sales in due to the closure of 27 stores and a 65% drop in online store sales. For the sake of transparency, another main reason for the drop in sales was related to the fact that our Group decided as a future strategy to trade with only one brand of women’s clothing (the new Ivo Nikkolo) and to completely stop men’s clothing. In addition, in the fourth quarter, new restrictions due to COVID-19 were imposed in Latvia with the complete closure of stores from mid-October to mid-November, then with weekend closures from mid-November to December 21.
Gross margin for the quarter amounted to 1,671 thousand euros, down 25% or 551 thousand euros compared to the same period of the previous year (Q4 2020: 2,222 thousand euros). The company’s gross profit margin was 63.9% in the fourth quarter, 8 percentage points higher than the margin in the same quarter a year earlier (Q4 2020: 55.9%). The positive increase in gross profit margin is due to Baltika Group selling more inventory at full price to end customers with lower volumes of discounted items.
The Group’s administrative and selling expenses in the fourth quarter amounted to 2,289 thousand euros, down 23% or 694 thousand euros compared to the same period last year. Most of this relevant cost savings came from a reduction in retail operational costs. Non-recurring costs related to store closures and other non-recurring expenses related to commercial activity during the 12 months amounted to 877 thousand euros. Consistent and significant reductions in distribution and administration expenses are part of Baltika Group’s ongoing restructuring plan, a priority area, which has resulted in lower head office expenses of €240 thousand.
Total 12-month gross margin was €6,120k, compared to €9,676k a year earlier (down 36.8%) and the biggest drop was in January to May, when most stores were closed for part of the period due to the COVID -19 pandemic. The fourth quarter result was most affected by store closures in the Latvian market. Operating expenses during the 12 months amounted to 9,551 thousand euros, down 34.5% or 5,036 thousand euros due to the strategic decision to close 27 unprofitable stores in the countries Baltics. Other operating income totaled 59 thousand euros in the fourth quarter, which mainly corresponds to the Latvian government’s business support for closed stores of 56 thousand euros.
Financial expenses for the year amounted to 330 thousand euros and the corporate tax expense to 65 thousand euros due to the change in the deferred tax reserve for 80 thousand euros. The net loss for the year amounted to 2,900 thousand euros (the amount for the same period last year was 376 thousand euros). In addition, the Group’s operating costs related to containment were around 30% higher than what the Group received through various support programs, with a negative impact on our annual result estimated at around 500,000 euros. Last year’s profit included a one-time positive reorganization impact of EUR 5,905 thousand.
The Baltika Group closed the year with cash and cash equivalents of 614 thousand euros, using the bank overdraft facility in the amount of 1,985 thousand euros (excluding the limit of 3,000 thousand euros ) at the end of the year. Baltika will continue to implement the strategy – develops modern high-quality products in its women’s fashion brand Ivo Nikkolo, which is available in Estonia, Latvia, Lithuania and in our online store. The focus is on accessories, where a wide range of quality products are available in all stores.
Chairman of the Management Board, CEO