Listed Estonian garment manufacturer and seller Baltika saw a net profit of €975,000 in the first nine months 2020 compared to a net loss of €3.3 million in the same period the year before.
Baltika Group ended the third quarter with a net loss of €516,000. The loss for the same period last year was €1.2 million, Baltika told the stock exchange.
The quarterly results have improved €725,000 year-on-year due to Baltika Group's heavy focus on the reduction of fixed costs that saw operating expense decrease by €2.2 million.
The group's sales revenue for the third quarter was €5.7 million, decreasing by 42 percent compared to the same period last year. Retail sales revenue in the third quarter decreased by 41 percent and e-commerce decreased by 23 percent.
The main impactor for the decrease in sales was the decision to end activities with brands Mosaic and Bastion. The retail sales of the biggest brand, Monton, decreased by 7 percent in the same period. Sales to business customers decreased by 84 percent.
Gross profit for the third quarter was €2.9 million, decreasing by 36 percent or €1.6 million compared to the same period in the previous year. The company's gross profit margin was 51 percent in the third quarter, which is 5.1 percentage points higher than the margin of the third quarter of the previous year.
The decrease in gross profit is due to a decrease in sales. The increase in gross profit margin is due to Baltika Group selling more full-price new stock and less discounted items.
The group's distribution and administrative expenses in the third quarter were €3.1 million, decreasing by 42 percent compared to the same period last year. Over 60 percent of the decrease in expense relates to reduction in retail costs.
In line with the restructuring plan, Baltika Group's head-office staff has been reduced during the quarter by 19 people.
The nine-month total gross profit amounted to €7.5 million, decreasing by 49 percent compared to the year before, with the biggest decline coming from the second quarter where majority of stores were closed for a period due to COVID-19.
Operating expenses in the nine months amounted to €11.6 million, decreasing by 31 percent, with 45 percent of the amount coming from the second quarter when stores were closed for a period of time due to COVID-19 and 43 percent coming from the third quarter where it is due to cost savings in line with restructuring plan.
As at September 30, 2020, owing to a loan of €2.6 million received from KJK Fund SICAV-SIF via its holding company and all the costs savings achieved, Baltika Group has achieved the financial stability with €1.1 million cash and cash equivalents and no use of bank overdraft that allows to plan forward with the change in strategy.
Baltika will move forward with only one womenswear brand from the second half of 2021. Baltika has started cooperation with an international agency to build up a brand new retail concept. The first store of the new concept will be tested in the second half of 2021 in Tallinn.
Editor: Helen Wright