Cześć, dzień dobry. Hello, welcome. Magdalena Kopaczewska, Investor Relations, LPP, and Przemysław Lutkiewicz, Vice President of the Management Board. Welcome. We would like to welcome you to our results conference for the second quarter, where we will tell you about key, interesting events since our last meeting. We will also discuss our financial results for the second quarter and tell you more about our plans for the future. At the end, as usual, there will be a Q&A session for you. Let's start with the key corporate events. In July, we opened another Reserved store in Israel. It's fourth store of our flagship brand in that country. It is dedicated to the ladies collection, and it's placed in a shopping mall in a very great location in Tel Aviv, often frequented by tourists and residents alike.
What's worth emphasizing is that Israel is a country where we have the biggest number of stores of Reserved brands from among the Middle East countries. Simultaneously to the development of our flagship Reserved brand, recently, we have been opening more and more stores of our another brand, Sinsay, the youngest of our brands. This is the value for money segment brand. The development was twofold, online on the new markets and on the other hand, we got the signal from our customers as the need of traditional stores where the stationary stores were not present so far. This gives us confirmation that our omni-channel strategy is well working.
As far as traditional stores, in the second quarter, we opened 56 stores for the Sinsay brand, mainly in the countries where we have already been present, and this shows the potential to further saturate these markets. When it comes to the online channel for this brand, it's worth noting that Sinsay has been doing really great in the online channel. 40% of the revenues of this brand comes from the online channel. The most popular collections online are the kids collection and home collection. These have been developing rapidly in terms of offer for the ladies collection and the home collection. During the last conference, we mentioned very good results for the Sinsay brand in the new online markets, meaning Greece, Spain, and Italy.
In the second quarter, we can confirm the very good results for the online channel of the brand. PLN 23 million for sales from these countries, and what's interesting, the biggest sale is from Greece. It's worth noting that Sinsay has a dedicated app and over 2 million downloads so far. This, of course, gives us further motivation to develop applications on other markets. Looking at Sinsay's developments, we see the potential, especially in the times like these. We would like to emphasize that the brand has still competitive advantage in terms of price. September is, as usual, back-to-school time, and August for our customers means the preparation for this back-to-school moment. For our brands, in turn, this is the season for the back-to-school effect.
This year we noticed that our customers, because of the nice weather in August, shifted the shopping time for September. Now we can say that September, for us, was very good in terms of sales results. Interestingly, back-to-school used to be stronger in offline than in online segment. They prefer to take their kids to the stores and actually do shopping there in this period. This year, we decided to strengthen the online channel by promotional actions, and this brought very good results. Back-to-school sales results were very strong, both online and offline. When it comes to this year's back-to-school collection, the strongest point was diversification.
It was possible to buy a white shirt for the beginning of school, but on the other hand, it was possible to buy sports sets, some accessories for school. Another strong point was the very successful collection with licensed items, especially popular with the youngest customers like Pikachu. Every kindergarten pupil wanted to have this. What's also worth mentioning, talking about the back-to-school period, this is the time where our customers not only come to the traditional stores to get the basics for school, but it's also an opportunity to exchange the wardrobe from the summertime to the autumn one. It's important to offer the customers a broad range of products for the autumn and winter collection. Next event will be discussed by Przemek.
Thank you so much. You're well aware that when an area of operation of our company grows enough or becomes strategically important, we separate this to the daughter company. This happened in 2017 with our operations in stores. There was LPP Retail established, and last year, a separate company was our IT operations and Silky Coders was established as a result. This year, we separated logistics operations to be now taken care of by LPP Logistics. Key goals, of course, shortening the chain of command when it comes to our business. Now this decision-making process is shorter and can be quicker. In logistics, another element is, of course, management of the growing chain of warehouses, fulfillment centers and distribution centers alike. Of course, better allocation of capital within the group. This company can also provide services externally.
This will not be core of its operations, but 95%-96% is directed to LPP S.A. We are continuing operations in Ukraine. We will tell you a lot of information about foreign markets today. A brief update on Ukraine. At the end of the year of entering the new year, there were 159 stores operating in Ukraine. Due to the war, this setup has changed, both in terms of strategy of our business there and the approach to stocking the stores. War in Ukraine changed, in our case, the whole strategy for the eastern markets. In Ukraine, there are currently 96 stores operational in the safer regions in the shorter working regime, so only people who consent to working do that. 38 stores are completely lost to us.
They are either destroyed in war or not possible to reopening. 38 of the stores, they are under discussion here. It depends on the safety of the location. Since June this year, we resumed deliveries of new collections to Ukraine. In August, full collection was delivered and in addition, I think in May, we opened the e-store in Ukraine. The market is operating to the extent possible given the war. We see that the sales with us are good. Of course, there is less competition, but people really do seek a return to normality. They want to go to work and live their normal lives. Another element of our strategy in the eastern parts, there used to be the Russian market. This chapter has been finalized. We sold the Russian company.
In May, we signed the agreement and it was finalized, officially signed off in June. As of the end of June, we lost control over the Russian market. I would like to give you some details about the transaction itself. It is not so easy, as you can see. What we should tell you is that selling price. Sorry, let me take one step back. There are two elements of the transaction. There is the sale of the stores and the sale of the goods. These are two separate elements of one big transaction of selling of Russian business. We sold the stores for $600 million. It's expressed in dollars, but translating this on the day of transaction, it's equal to PLN 601 million.
This price will be paid within the next four years. It will be paid in installments. As of the balance sheet day, there was a need to calculate this selling price and discount the selling price because of time value and the risk of the country. The discounted was PLN 300 million. As of the transaction date, the value of discounted price that was put in the books was PLN 296 million. Between the day of transaction and the day of the balance sheet, the FX of dollar increased, so there were 26 exchange differences as of that date. The value of receivables from sale of the stores in our books is PLN 324 million.
On the other hand, what it looked like in terms of P&L, how much we lost on this transaction, in short. The discounted selling price, you can see in the middle of the slide, this is PLN 296 million. In our books, in the separate financial statements of LPP S.A., the value of shares in the Russian company that we invested in the company by increasing capital in the years, we invested PLN 913 million. We sold for 296 something that was worth PLN 913 million. On a separate financial statement of the mother company, we have a loss reported amounting to PLN 660 million. This is the loss that we recorded for LPP S.A. company.
When it comes to consolidated results, this is quite complex, but there was a calculation of foreign exchange differences and margins resulting from intergroup settlements. Not getting too much into detail, this loss on losing control over the Russian business in the consolidated statements was PLN 347 million. The whole transaction cost that on the consolidated financial statement, the loss was a bit less, and the consolidated one showed PLN 347 million. During the actual transaction, and we were like settling everything, the company was still within the group. The results generated from the beginning of the year by the 30th of June, the date of sale, they counted into our group results. In that period, we lost on the business.
Because of the store closures, it was PLN 107 million loss on the business. At the same time, you remember that by the end of the year, we had a write-off for the loss of value of Russian stores. This amount of this write-off was expressed in rubles. Converting it to the złoty as of the balance sheet date, we have the write-off reversal for PLN 403 million. The loss of control plus the write-off reversal minus the losses we incurred for the period where we had control over the business, the loss is PLN 51 million for our financial statement. We recognize this in P&L in discontinued operations, results on discontinued operations. On top of that, there is another part of transaction, so a selling of goods in stores in Russia.
So far as everything was okay, the war was not on. There was the spring/summer collection in the stores, sent to Russia. These goods and the receivables was over PLN 1 billion. As a result of the whole transaction, according to the agreement, this money for the goods sent will be returned to us. Now, let me note. I don't know if you remember, but we settle with local currencies. When we send the goods to Czech Republic, we invoice in the Czech koruna, in Croatia, in kunas, and forints in Hungary. We have centralized treasury department, which manages the currency operations within the company. As not to put the foreign exchange risk to the subsidiaries, we invoice them in their local currencies. That also happens with the Russian company. We invoice in ruble.
All the receivables were expressed in the invoices in ruble. When the war broke out, fluctuations of the Russian currency started as well. Before the war, we paid PLN 0.05 for one ruble. During the war, the Russian currency was losing its value, PLN 0.03 per ruble. In the first quarter, we recognized quite huge negative differences. It was artificially increased, the value of the ruble recently. In recent days, I can observe that ruble is quite strong in the Russian central bank, PLN 0.08 per ruble. As a result, the receivables converted into złoty were over PLN 1 billion. We also recorded a considerable foreign exchange differences, over PLN 360 million from the conversion of the new foreign exchange alone.
Ruble has strengthened their huge receivables from the sale of the goods from before the war. Right now, we decided that we want to fix these settlements not in ruble, not in Polish złoty, but in U.S. dollars. For today, they have been converted and fixed by way of a contract into U.S. dollars. They will fluctuate depending on the exchange rate of dollar in relation to Polish złoty. There was also write-off resulting from the credit risk for PLN 46 million, and this also was put into one of costs for the second quarter. We count that according to the agreement, we will receive the receivables by the end of May 2023. The business has been sold. We lost control over the business.
Therefore, this is the business belonging to a new investor. We closed this chapter of cooperating with Russia, and we're now focusing on Southern and Western European markets. I will discuss this in more detail right now. Looking at the map, that has considerably changed. There is no Russian operation, so we focus on the Central and Western Europe. Take a look, please, that in Poland, it's nearly 1,000 stores. Considerable countries, of course, Romania, 118, Czech Republic, over 100 stores, and still the Ukrainian market, nearly 100 stores. I'm often asked in which markets we will develop. I will tell you more about the new markets, but take a look at the map where now we are present. We still have the possibility of further saturation of Central Europe with our stores.
When we compare Poland to, let's say, Romania has like half of the number of inhabitants. So it should have like half amount of stores, comparing to Poland. In Poland, if we have 1,000, why not having 500 in Romania? In Czech Republic as well, there is a possibility to open more stores. In Serbia, Bulgaria, looking at this simple calculation, number of inhabitants per number of stores, it's still visible that we have a potential to saturate the markets. This is one of the elements of our strategy and an important part of our growth for the years to come. Looking at the left-hand side, we see the drop by 265 due to this loss of Eastern markets.
At the end of the second quarter, there were 1,756 operational stores in our group. Going to financial results now. Let me make a reservation here that there is a dual situation. On the one hand, the reported results before one year ago with the Russian business included. There is a second column shows after restatement or like with exclusion of Russian subsidiary from our results to compare apples to apples, let's say. This year, this is the operation without the Russian company, so continued operation. Compared to without Russia operations and the historical figures were from before the war and where the results of the Russian companies were included in the results of the whole group.
For those of you who wish to take a look at what the results were like, calculated for the last year in the first in the quarters, you can find this information in our data book published on our website as well. Moving on. At the end of the half year, we were present in 38 countries. The group revenues increased by 23%, calculated with the Russian company when it's counted to the results. Good like-for-like results. Traditional stores recognized good sales and online also developing nicely, especially in the second quarter that you will see in further slides. 24% increase in online, and 30% like-for-like increase. The floor space, unfortunately, dropped because of the Eastern markets by almost 10%. Let's have a look at the revenue growth.
For the second quarter, record result PLN 4.3 billion of revenues for the second quarter, despite the lack of Eastern markets. On the left-hand side, you can see the historical data with the Russian company included. On the right-hand side, you can see which brands performed best. It's worth noting that Sinsay has become our biggest brand in the group in terms of revenues. For the second quarter, it's PLN 1.6 billion. Reserved comparing PLN 1.5 billion. Sinsay is number one, and the increases in Sinsay has been quickest online and offline alike. We add new stores, and the online channel has been developing quickly in this segment. Also, Reserved recognized a positive second quarter. The collections, especially the ladies collections, have been selling very well.
Kids are very well sold online. We are pleased with the results. For the second quarter, we are pleased with how the collections have been received by our customers. You can see in the figures that the popular markets in the east, like Cropp, House, they suffer now because they recognize the decreases. We add, however, new stores, and we believe that in the quarters to come, these brands will also report increases. Let's move on to e-commerce now. In the fourth quarter of the last year, we noted a record result over PLN 1 billion, and it was similar to the second quarter of this year. Online has been growing dynamically. Still, on the left-hand side, you can see the reference with the second quarter year-to-year.
The historical data is with Russia. We call this other region in the green, sorry, part. Over 50% increase in Poland, nearly 100% increase in European markets, and a drop in the Eastern markets because we don't have the Russian sales anymore. We resumed the online stores in Ukraine market. Nearly 1/3 of the whole revenue is online there. When you look at particular media or how the sale is done, 70% of sale is done via mobile devices. 87% of the visits online are via smartphones. These are the signs of modernity. Therefore, we need to develop our apps. We have been developing our apps. This is a good point. We have apps for Reserved and Sinsay brands now. Two billion visits in the app of Sinsay.
We're working on to internationalize the apps, to add further languages and introduce in further markets. Let's move on to the revenues per regions. Of course, the still developing markets, I'm thinking of online and adding new stores. The European markets, apart from Poland, it's over 60% increase year-on-year. Poland has been growing also fast, over 25% year-on-year. Of course, the other regions suffered losses. Floor space in total dropped by 10%. We see nice double-digit increases in Poland and European Union countries. Now that Poland still is less than 50%, and we do wish the foreign markets to develop quicker, but Poland accounts for 43% of group's revenues. Other important markets where we recognize the best results are Romania, the Czech Republic and Germany. Of course, this proportion has changed.
The revenues from Poland decreased when we lost Russia, unfortunately so. Let's move on to the margin. On the right-hand side, you can see the first and second quarter of this year where the margin for Russia was not included, and this, of course, affects margin year-on-year. It used to be 50%. The second quarter also over 50% now without the Eastern markets. With less exposure to Eastern markets, without Russian market, it's 52% for the second quarter of this year. It's visible that the Eastern markets used to add more margin. Taking out these markets result in a drop in the margin. There are also other reasons why the margin dropped. First of all, very strong foreign exchange rate of dollar. It was over PLN 5 for some moment. This does not help.
On the other hand, we have inflation, producers inflation, raising the prices by factories as well. This also is not helping us, but fortunately, we are in the business that we can also raise our prices. First time for, like, many years, and I'm saying this because for many years our industry was deflationary and the prices dropped. This is the time now that we had to, and our competitors as well, had to raise the prices. This allows in turn for transferring some of the burden resulting from inflation to the sale prices. We are fighting for our trade margin. On the right-hand side, you can see inventory chart. They are nominally highest in history, over PLN 4.4 billion of value of inventory.
Per square meter, over PLN 3,000. This is quite a high amount. First effect is the increase in the foreign exchange rate of dollar, which causes year-on-year that inventory increased by 100%. If we translated this into dollar, it's 59% only. On the other hand, we have the effect that we have been fighting for over the recent months and quarters, the disrupted supply chains. In order to prevent the problems with supply chains, we decided in the second quarter to get the stock earlier. We got the goods to the warehouses quite earlier, and we have 100% security of the goods for the autumn/winter collection. The fourth quarter should be without any problems in terms of logistics and supply chains.
Of course, looking at the structure of the inventory, what is visible is even what we included in the slide. These are like fresh inventory. We don't have any old stock. This is winter and autumn collection mostly and some of the next season's spring/summer collection. About 13% is still a summer collection from the previous seasons, which was sold out by the end of September after the balance sheet date. Looking at the structure by the brands, over 50% of the inventory is for Sinsay, which has been recording very good sales results. Now, moving to costs. Of course, inflationary, they have been growing. On the left-hand side, you can see the cost of own stores, 15% increase year-on-year. Of course, in every category there's increase recorded.
In rentals, euro to złoty. These are mostly euro-based rentals. Some of them are in the turnover-based formula. Of course, turnover has increased, so we pay higher rents. This part has been increasing. We preferred this, especially in Sinsay brand. We have been signing more and more contracts for turnover-based rentals. Personnel costs have been increasing. More stores means more personnel to service the traffic in the stores and the goods. Salaries also increase over the quarters to come. This will not be any easier because the government is announcing the increases in minimum salary, which will translate into the personnel cost increases over the coming quarters. We will have to think of increasing the prices of products to cover this inflation. What else we can say about the cost?
On the right-hand side, you can see the cost per square meter as general cost. The stores with e-commerce and the headquarters, these were particularly high for digital marketing, the internet advertising in the second quarter. It was over PLN 400 per square meter. We wanted to enter the new markets fast in Spain, Italy, and Greece. We spent a lot on marketing. In the quarters to come, these probably will decrease. We will look at the indicator that we mentioned before, cost per COGS sales cost. We are focused on this to be below 42%. Right. Let's move on to the profit and loss account. On the right-hand side, you can see the three columns with the values, and the fourth column with percentage values.
First, we have the historic results of the second quarter with Russia, as we reported last year. In the middle, you have the column called after restatement. The results after restatements with Russia, and then without Russia for the third column. PLN 4.3 billion revenues increase year-on-year. 45% increase. We compare like-for-like here. This is where we focus, profit margin lower than last year, where we had the business in Russia. Now it's 52% for our second quarter. The costs, because of the digital marketing, were increasing more than sales cost, and almost it was 15% higher year-on-year.
When it comes to net financial operations, it's worth remembering that there were positive FX differences with the ruble to złoty, over PLN 200 million profits from foreign exchange differences. Net minus tax, we have the net profit on the continued operations without Russia, nearly PLN 550 million. Twice than before the year before. Net profits or loss from discontinued operations, as you can see with the Russian business in the second quarter, it was nearly PLN 300 million. The net profit for the whole group of the second quarter was almost PLN 250 million. It was lower year-on-year. Below, you can also see with working capital and cash cycle days, and operating cash flows.
Operating cash flows were lower this year because we had some previous stocking of new winter and autumn collection to avoid disruptions in supply chains. That's why we had more outlays here. There is also this receivable from the sold Russian company, and this caused that the working capital is now a bit worse than a year before. Let's move on to the whole first half of year results. PLN 7 billion revenues. Gross profit margin, similar year-on-year, of course, not counting the Russian margin. Let's maybe focus on costs. The costs have been growing slower. This is the positive aspect. PLN 500 million EBIT, twice as high as previous years.
Adding the positive foreign exchange differences, we have net profits from continued operations over PLN 560 million. Considerably higher than last year. Taking out the Russian discontinued operations, there are PLN 514 million net profits. 7% higher than the previous year. The situation, the financial standing of the company is good. Profit and loss accounts, you can see we are, the profits, we are pleased with the first half of this year, despite all the turbulences and turmoils resulting from the war in the east. Just a few words now about the balance sheet. Indebtedness level, it has increased a bit, PLN 4.3 billion, according to IFRS 16. The Russian company does not affect this anymore, and our data with inventory do not include the Russian company.
This indicator of indebtedness is on a safe level below two as net debt-to-EBITDA . In this indicator of net debt, we do not include deposits or collaterals as reverse. It was PLN 1.4 billion in cash. We keep on investing. This CapEx is lower than in the previous year because of the lack of Russian operations. In the second quarter, we spent PLN 230 million on investment. As you can see, most of this refers to the new store openings. Summarizing this first half, which we are quite pleased, despite the situation and hard times and the war in Ukraine, we managed the business well. We have good revenues in traditional stores. E-commerce constantly growing.
We are very pleased with the results. Margins, well, good still. We're controlling the costs and the indebtedness is at quite a low level. Despite the selling of the business in Russia, our business is still on the safe side and we have good perspectives for the future. When it comes to our targets, perspectives, thinking of the targets of this year, and I will discuss them, the long-term ones in a moment. We see that the business has been growing well, what Magda mentioned. We entered the autumn/winter season. Back to school period was quite strong for us. We have recorded good sales results, and this is a good forecast for the months to come. Because usually when you start the season well, it also ends well. We believe that the trend observed historically will be maintained also this year.
We keep the plan for revenues over PLN 16 billion, so 13% year-on-year increase. Online, we would like to have PLN 5 billion in online sales. Due to the lower floor space, we forecast the fall by about 10% here. When it comes to profit margin, it will be lower year on year, and this will translate into operating margin and EBITDA. We keep our investment outlays plan PLN 1 billion CapEx, of which PLN 600 million for stores and PLN 300 million on logistics infrastructure. We can see the risks, of course. We have to take the risks into consideration. What you can observe and what all industries observe, this is the negative impact of the war and inflation. This affects inflation, the prices, the energy prices.
As a result, the customers will have basically a lower disposable income or other priorities for their spending, and food and energy are usually on higher priority. There are turmoils in terms of foreign currency markets. Weak złoty, very strong U.S. dollar, weaker euro, but still comparing to the złoty, it's quite strong. The foreign exchange results affect our results as well. We can see the positive side. Our brands. Like, none of our brands is an expensive one. It's like middle segment or value for money segment. If the customers seek cheaper clothing, we do offer that, and our prices are adapted to that. We have good fashion and diversified offer.
On the other side, we can see that in Reserved brands, if the fashion is adapted well to the taste of the customer, even a slight increase in prices does not cause resignation from the purchase by the customer. This is one of the elements of opportunity that we see for our company. We can raise the prices and for the time being, the customers approve this. Looking further into the future, 2023, we see a lot of talk about crisis and possible slowdown in the economy, considerable problems related to inflation. It seems that we are well prepared for the coming possible economic slowdown. We have been working on this topic. As a company, we are cost-cautious. We look at our budgets very carefully, and we start the budgeting period now. Next year will be very cost-oriented.
Looking at the whole company, we can see that we have a unique and diversified business model. Our fashion brands, Reserved, Cropp, and MOHITO, they follow Inditex footsteps. We have lower prices, I mean, high prices, but we can include very modern solutions like RFID. Especially in Reserved brands, we use the latest technological trends as well. In e-commerce, we invest a lot in applications. From this model, let's call it the middle segment brands model, these learnings can be captured and transferred into Sinsay brand. We have the more expensive brands and the lower-priced ones. Not a lot of companies in our industry have this kind of model. We use also a common infrastructure for all these brands to benefit from the synergies.
Modern IT solutions, technology that counts in all industries, also in our industry. We have over 600 IT specialists in-house dedicated to working on the highest technologies. We have data science, machine learning, business intelligence. We also have a new trend, I think it's quite cool, user experience. It means that our website or our app for smartphones are user-friendly, as user-friendly as possible. Whether this accept button is small or big, whether it's on the right, where it is placed, how you move from page to page, this is, especially for the young customers, a key solution because impatient youth have to do their shopping quickly. Let me give you some examples how we use this technology to individualize the stocking of stores, we don't send the same models, the same items to all the stores.
We look at historical models, weather models. We know that different countries need different goods, different cities need different goods. Looking at historical behavior in different cities, we provide individualized tailor-made goods selection for each store. On the other hand, what's important is that we are able to send from the traditional stores, we send the goods to the online customers. Our algorithms are able to adapt the goods. We have hits for sales, like e-commerce warehouse sold all the must-haves to the customers, but there are some items still in some stores, and the online customer desires those items. The stores can actually pack the items and send to the customers. Previously, it was not possible because from the central warehouse, it was sent out. The leftovers of the good stuff were simply trapped in smaller cities.
We have higher rotation of goods, much higher rotation. This, the rotation, as you say, is the key indicator to for improvements in the future. Of course, there are some unpopular slow movers, so they're failures, let's call them. When we send such goods which do not sell well, why to keep them on the shelves? We want good performers in our stores, so we do not send these items to the online customers from the warehouse, but from the actual stores. That's how the online customers receive this, and we improve rotation in stores. What else? Standardization, logistics of boxes, containers. When the container costs are so skyrocketing, we don't want to simply drive around with air inside.
Our IT group plans the cardboard sizes, the filling, and the container filling from Asia to Europe, so as to make it as efficient as possible to eliminate the empty air in containers and the whole shipment. Of course, sizes. Looking historically at what is the size range desired by the customers, we noticed that we were missing extreme sizes. We increased the amount of the smaller sizes and on the other, bigger extreme. This curve for the size range has changed. Thanks to our observations or our IT team observing the trends, looking at what sells well, and we adapt the stocking for our stores accordingly. You like the smaller ones, right? Ladies and gentlemen, just a brief comment now about energy.
We've been asked a lot, what about the energy and what is the impact of energy on our P&L? What are the risks associated? What's good is that looking at our cost structure, the energy costs are not a lot, 3% of the whole. Of course, because the costs are increasing and it's noticeable, it can be raised to 6% of the whole cost, but it's still not much. We are not using a lot of energy. Looking at the risks, we do not forget about them. If we have relatively low energy costs. The increase in electricity cost is different in many different markets. In the domestic market, it has been the highest, unfortunately. We can observe the European Union limitations. In our German stores, we have to like shut down the lighting on the displays faster.
On the one hand, these regulations that are mandatory in some countries, we translate them into other countries. We have metering in our stores in terms of water and energy consumption, so we can manage that better. Most importantly, taking care of the environment. In new warehouses, we install the latest technology, so solar panels, of course, but also the accumulators that we provide lighting and even electric vehicles that drive to our logistics centers. Two years ago, I think, yes, in 2021, we signed a contract with FIGENE Energia company to supply green electricity. This contract is to be effective from January 2023, and we believe that on the one hand, we will have green energy, but it will be considerably cheaper than, well, comparing to the prices on the domestic market now.
Looking in the broader perspective, 2023, 2024, what is still visible as opportunity for growth is online. I'm thinking of Reserved and Sinsay mostly. We keep expanding the number of styles offered online. In other words, we have the highest range of products online and the categories of products. In Sinsay, we have home decor available as well, school accessories, beauty section as well. The offer is broader, especially in the online sector. We are not forgetting about traditional stores. We believe, looking at the map and looking at the possibilities for market saturation in Central Europe and possibilities in new markets, we see that we can grow by 10%-15%. Where? Mostly in Central Europe, saturating the markets where we currently operate, but also entering new markets. This is what I would like to discuss.
Now take a look at the slide, please. Our strategy has been changing considerably. We used to look at eastern markets as opportunities for development with low competition. Now we have to change the perspective. Losing the eastern markets, losing Russia, we have to change the focus. Southern and Western Europe. What are our plans? Entering Italy this year. According to the agreement signed, we have the possibility of opening the first Sinsay store there. Also we would like to open in the first quarter of next year, the flagship store in Milan for the Reserved brand. Reserved has been entering new countries as well. We are thinking about entering U.K. We are finishing the works on the contracts for three Reserved stores in shopping malls for Reserved brand in London.
What's important is they will be profitable. You remember the opening of our store on Oxford Street in 2017, right before the online boom. We signed quite an expensive contract for the rental of the store. Now the reality has changed completely and the rentals are much lower. Our business cases that we are considering with the opening of each new store show that these stores will be profitable and we have the opportunity to develop positively in those areas. What we will be doing is looking at, you know. We are eager to test, and we are hoping for the success in the Italian, Greek markets for Sinsay and in the coming years also further markets, the Spanish markets or Portuguese markets for Sinsay.
Ambitious plans of expansion in new markets in different realities in terms of costs. How are we going to finance these operations in terms of this expansion? At the extraordinary general meeting that recently was held approved the issuance of our bonds and euro bonds. What we want to finance? We want to finance the new stores and operations and the working capital because we will need more goods on the new market and increase online and offline sales. We would like to change a little bit of financing having more long-term financing, and it has to be green or sustainable bonds. Our strategy, our ESG strategy, should be financed with the green bonds.
Looking at the timing now for the issuance, we can see today that the situation on the macro market is not good. It's high interest. It would be very difficult to find buyers of the bonds. It's not that we have to do it now. We have opened certain options for issuance of bonds, and it seems that from our perspective now, the earliest date of issuance would be second quarter of the coming year. That's all from now. Thank you, ladies and gentlemen. Maybe Q&A session now.
There are a lot of interesting questions. Let's start. By how much and in which period the company forecasts price increases and in which markets will the prices be increased?
So there are a lot of questions about price increases. This is quite a popular topic today. Ladies and gentlemen, we raise prices in every market. We don't skip markets in this respect. In each European country, inflation is double-digit. Even in Germany, the most stable economy in Europe, it's about 10% now. The price increases includes all markets and all brands, of course, to a different degree. The scope is between 7% to several percent. We want to defend our margins so that the company remains profitable. Maybe let's add that Sinsay, we do look at the price increases because the customer of Sinsay is very sensitive to the price. We look carefully there, and we look at our competitors. What's worth noting is that all competitors have been increasing prices. Inflation doesn't spare anyone, so costs are higher and the prices accordingly higher.
When exactly are you planning to open, stores and enter, Mil an and London?
In London, we'll see first half of the next year. With Milan, as you saw in the presentation, Sinsay should be available in Milan in December this year and Reserved first quarter of next year.
D oes the company have long-term contracts signed, for the energy, purchase for 2023? What's the share of the energy in total? What is the forecast increase in energy prices?
Energy is another heated topic. I see that we don't have long-term contracts apart from the one with FIGENE, for many years to come. This contract with FIGENE should give us, on the one hand, green energy, and on the other hand, good prices and also secure energy for our needs for Poland.
We're talking about the demand for the stores. These are the most important. Not all stores can be included here because in some cases, these are meters from the lessors, but we have to buy the energy from the owner of the malls. Where we have our own meters for the warehouses and headquarters and stores, this FIGENE contract should cover the whole demand for energy. In foreign companies, we do not also have long-term contracts. They finish by the end of this year, so the increases will be quite considerable within the group. It's very difficult to say for me right now because when I talk to foreign companies, this may be 56%, 100%. Because we have the FIGENE contract in Poland, this increase will not be so considerable.
Another question refers to e-commerce: Do you plan expanding the, portfolio mix and portfolio of your brands?
Not with portfolio of the brands. We keep our brands. Especially in Sinsay and Reserved brands, we are expanding the portfolio of products. This is the strategy that many companies follow, that you have, more availability and, more range of products online as we have been doing the same.
Are you opening online stores, everywhere apart from, Balkan countries?
We keep getting questions about Serbia. What about the Serbian market? In October, we will finally open the Serbian market and get this know-how and learnings outside the European Union. We will be opening, the markets in other non-European Union countries. We want to have online, stores operational, with time in the whole of Europe.
The Balkans also shown that we are moving outside of the European Union here. What's the plan for exceeding the Sinsay plan? And when are you going to start to have orders for Sinsay? What orders do you mean?
I'm not quite sure. I'm not sure how to understand this question. Okay, maybe Sinsay has been developing the fastest from our brands, and this you could see in the slides, they sell more than Reserved, so the demand for goods is considerable there. We have the whole stock available for the stores and e-commerce for the winter and autumn collection. We started the orders for the spring/summer collections and the deliveries will start in January.
Another question pertains to the competitors. Which companies are now your strongest competition? Is it visible in terms of stock increase and more aggressive sales, sell-off policies?
Number one is Inditex, of course, but also because of Sinsay in our portfolio, we look at other companies. We look at Pepco, we look at KiK. The companies that are placed in this value for money segment. For the time being, we don't see or we don't have the knowledge of any the excess goods there. The goods can be sold at attractive prices. I'm thinking of our goods and also competitors. We don't observe a price fight on the market. This is a good thing. The trend has started that consists in not only like fighting for the share in the market, but we observe a trend for securing the margins and securing profitability. This possibility is key and what we do observe on the market, this is more about factories of clothes. It's like limiting the orders.
Companies seem to have enough inventory and there is uncertainty for the future, so the orders for the further production are decreasing. All producers try to adapt to the realities of the market and what they anticipate as market realities. Let me repeat. For now, we don't see any slowdown in terms of shopping. We don't see the transition from more expensive to cheaper brands.
Let me add a little bit about competitors. Apart from brands you mentioned, for Sinsay, the competitor is, of course, Primark and SHEIN. Our competitive advantage in relation to those competitors I mentioned and what Przemek mentioned, is that we are present with Sinsay both online and offline. Those competitors from the value for money segment, they're either only offline or as SHEIN, only online.
We have the signals from the market that the customer needs to have the omni-channel experience of purchasing both in traditional stores and online. That's true. Online players are strong, omni-channel players as well. We don't see any weaknesses of any competitors. They are all strong. We do have a lot of work because we compete with the best in the market.
The next question is about the structure of costs in the purchase price. The cost of cotton, work and transport costs. How much the drop compensates the dollar? What's the pressure in China?
It's difficult to answer precisely. What we see today is a decrease in demand for production. We see the prices at the producers are lower. We see the lower prices of cotton and producer margins. We do not observe considerable pressure on salaries in Asia.
This is good for our industry, looking at trade margin. It seems that raising prices, what we are doing right now and what our competitors are doing, should allow for maintaining the trade margins at similar levels comparing to last year. Well, let me not say last year, because last year was great, after post-COVID rebound. Before COVID, before 2019, everybody will return to those margins. The situation has been stabilizing in terms of transportation. Container transportation is cheaper. No considerable inflation there. We are counting on a more stable situation in the months to come, and the margins might be similar to those from before 2019. There is a whole set of questions, so I will read them out one by one.
To what extent the considerable increase in inventory was a result of the acceleration of the autumn, winter collection?
Considerable. I would like to say that this increase in the stocking was for the autumn, winter collection, because in June, July, we had goods for the autumn and winter collection. This is the increase of our inventory, so now we have lower transportation for the collections because everything is already stored in our warehouses. As I mentioned during presentation, 84% of our whole inventory are autumn, winter collections. Fresh goods, but simply supplied before the usual time. We are on the safe side.
Black Friday holiday season, and we had the purchase done with a lower dollar. In the third quarter, will we see the lower inventory in floor space?
Yes, we will see the low of inventory in the third quarter.
To what extent the increase in the scale of purchases of the collections and the relatively low inflation in the market, of sourcing markets, supports negotiating the dollar prices for the purchase of collections?
Considerably. The time has come for rapid changes. When the container cost is rising, it's short time and very rapid. We see the other way around. The increase in production prices at the producers was quite rapid and it rapidly slows, like drops. The turbulences are considerable and today it's easier and cheaper to buy in the goods in dollar terms.
Because of the appreciation of dollar also to the sourcing currencies, are you considering settlements in local currencies? Will we settle with Asian countries in their local currencies, in yuan?
No, because let me tell you, despite certain attempts by central banks to activate the local currencies, none of the producers want the local currencies for some reason. This might result from the fact that when the factories in China, they buy materials in other countries. Let's say cotton in India or finished materials in other countries, so they need to have this dollar exchange still. From that, for the time being, dollar is the main currency for any settlements, and we haven't changed any contracts so far, and we don't foresee any other currencies than dollar.
Do you feel the loss of the freight prices? Would you like to add anything?
Yes, we do notice that.
In the second quarter, what were the marketing costs in relation to the revenues and how this changed in the whole year?
The costs were considerable. I would say about even. Let me put it the other way. I'm thinking of the turnover, like the whole turnover and the online one. We usually talk about when we spend on digital marketing, we compare this to online sales, and I would like to comment on this. We had the indicator. We used to have the indicator of 8%. We increased the share in the marketing to 14%. Recently, even more. Now we are returning to lower indicators. This will be several percent of the whole. It used to be considerable. Several percent of outlays on digital marketing in the second quarter.
What's the increase of the cost for the functioning of stores budgeted for the year to come, taking into consideration the inflation and increase in the minimum salary?
I don't have exact data because we have just started the budgeting process, but minimum 15%. Inflationary what we see now, this will be directly translating into our costs.
You have quite considerable receivables in relation to your counterparty that bought the Russian business. What's the risk of payment for the debt?
This is serviced on a regular basis. We have every week's payment from this counterparty. The history of installments paid and the short period of time till the closure of the whole receivables, it gives us the possibility to say that the risk is limited.
Let me add. Can these receivables be obtained quicker by factoring, for example?
Not through factoring, because this is risky for the companies that don't want to enter that. We didn't have any conversations with anyone about that. We just have to wait for the amounts to come from that counterparty. Maybe it will be quicker, but we don't know.
Please comment on the current differences in the gross margin between Sinsay and other brands. What's the difference when you have excluding marketing costs and other costs?
I don't want to answer this question. It's very detailed. Let's just keep this information to ourselves. Let's move on.
H&M is testing payments when you return goods through online channel. Can LPP go this way or the whole industry can go this way?
You have very fresh questions. This is like the topic from yesterday. Not only H&M, but also Inditex and Zalando, they are going the same direction. Yes, we do observe the trends in the market. If it's a general trend that everybody will follow, we will probably follow as well. For now, we have free of charge returns. Because this topic is so fresh and H&M has done it, we haven't talked about it, but we do observe the trend. We know that we have to respect all the trends. With time, we might also introduce that.
What is the cost for the lower floor space? Because we had more ambitious plans for Sinsay expansion, they have been verified by the market. Could we expand faster?
Well, yes. Looking at CapEx, and the uncertainty, we decided to open only the stores where the profit will be possible. Lower risk, lower number of stores, but still dynamic development. Initially, in our plans, we had 400 Sinsay stores. Now we're talking about 300 Sinsay stores. We have been opening one store per day, and it's still quite fast.
Now, another question about energy. Could you please give more precise information on the mentioned 3% of the energy costs. Should we understand this as total with the energy costs in rental fees?
No. The energy is not included in the rentals. It's another cost item. If we take all the energy costs, headquarters, warehouses, stores, regardless where do we pay to the energy supplier or landlord or owner of the mall, we all have it on separate invoices. When we take all the energy costs and compare it to our overall costs, I'm thinking of SG&A costs. For now, in the first half, it was 3% of the overall cost. If this increases by 100%, this could be 6% of the whole cost.
Another very important question: How is accounting done for the work of IT specialists working on their own solutions? Is it a contract or B2B or employment contract? How do you account for this in payroll for the time spent on your IT system? How is it capitalized by CapEx or balance sheet? What was the amount last year?
Very detailed and sensitive information. I wouldn't like to give a straightforward answer here about the amount. Generally speaking, most of the costs for IT and their salaries, they are included in the current costs. Only a small part is capitalized for the long-term contracts. We can also add that we have two IT companies. In one of them, there are people employed under employment contracts and in the other, very popular B2B system.
Another question. LPP has a quite strong financial position. Do you take into consideration acquisition Artman case, in which product areas?
No, we are not thinking about acquisitions. We are not thinking of buying new brands or other companies. Our strategy is very simple.
We want to develop our brands already in our portfolio, not losing, how to put it nicely, the focus. We focus on the organic development. We did take over Artman in 2008. It was a difficult endeavor. We know how much energy this involves to merge with another company, so we prefer. We have better effects, more effects in terms of organic growth, 10%, 15% year-over-year. This is enough for us. As long as we see the possibilities for organic growth, we are not thinking of any mergers or acquisitions.
What's the behavior of customer in the U.K. And Germany versus other markets?
It's behaving okay. In the U.K., it's more fashion-oriented. German is more classical-oriented. This question has the undertone of the coming crisis. Let me put it this way.
We see the trend that the crisis usually come from the West. Economies in the West suffer more in terms of limiting purchasing behavior from the customers. We haven't experienced that yet, but the trends will eventually come. We see quite positive sales results in the London store. We see increased results in the German store.
What can be read out of that?
In the more difficult times, the customer needs a cheaper product, is looking for, let's call it maybe, replacement or like dupes for the more expensive brands. Looking at our Reserved brands and thinking of Germany and U.K., it's less known, but it offers a good value for money. We are nicely positioned there. We are quite well-recognized, but on the other hand, we are an alternative because this is the middle price range for other brands.
Maybe this is the answer why we don't see the worsening of customer behaviors in the Western markets, even though it's so strongly published in the press, in the press. We have a good product and good price, and we are an alternative in comparison to other more recognizable brands. Another question refers to the request to explain the change in the working capital over the quarter. The changes in the working capital result mostly from the fact that we disposed of the Russian companies, and we have the receivables in the balance sheet. On the other hand, we have more goods, so stock and receivables increase. Some cash has been pushed to inventory, and this will go the other way round in the coming quarters. This will be turned into cash.
We have more inventory than usual and receivables from the Russian companies. Do you have stationary stores that record losses or are they all profitable? There are some that report losses, but over 95% of the stores are profitable, and we are very pleased with that. This is, in our case, business as usual. We keep on reviewing our stores in terms of their profitability. The unprofitable stores, we renegotiate rental, or we close the stores with the end of the contract. It's worth mentioning also that what changed in the real estate markets and what visits us is that the contracts are shorter for the lease. Sometimes even two years, three-year rental contract is a standard now.
If we have miscalculated and there is a store that is not performing, it's very easy to close it soon. Two questions about marketing. Marketing costs online, can they be decreased when you launch stationary stores?
Yes, of course. We observe what you mentioned, Magda, before. The only channel that is important for the customer, on the one hand, over the past years, we noticed that customer moves to the online as well, but it was highly advertised. Now we see the reverse trend, that online encourages customers to visit traditional stores. The two channels have started to cooperate closely, online and offline. What we see?
First of all, the fee for returns, when we send it by courier has been introduced, but if you return in the stores, it's free of charge, free of charge. This is also a way of encouraging the customer to enter the traditional store. We also observed that the stores, the traditional stores, support the online in terms of the willingness of customers to buy online when they see the actual store, when they observe that this company exists in the real world, it's not a company that is that may be unreliable or something. We observe the interrelation of both distribution channels. Looking at Sinsay, when we have 40% of revenues generated by online. In this brand, we see it's considerable, and it's a signal for us that we don't have enough of offline stores.
I think the normal indicator is like 30% online and 70% offline. We can see where we can add traditional stores.
Another question. What about participation in recycling of clothes? Are you planning any incentives for the customers that you already have?
It's a very broad issue. I'm not sure if I can answer. Maybe you can answer this topic better. We started cooperation with one company that is dealing with recycling of clothing. It's a very difficult topic because clothing has been composed of various materials. If you have 100% cotton, it's much easier to recycle this. If you have 100% of polyester, not if you have mixed composition of clothing. Usually it's a blend. That's why we started cooperation with a Polish start-up, which t he cooperation is supposed to help us with the recycling issue. Despite the difficulty of this topic, we are not escaping this. We follow novelties and trends.
We talk to many organizations and, like the one you mentioned, Magda, so as to be able to do this recycling. For now, the returns in the stores, this is usually transferred to charity organizations. All floor space is after the second quarter. It's 1,459, and after the first, 1,458.
What's the slight difference in the second quarter despite the fast growth?
We took out the Ukrainian stores at the end of the first quarter. At the end of the first quarter, we had them included, but we corrected that in the second quarter, leaving only the stores that were actually operational. That's why the number of stores in the Ukrainian markets was recorded.
W hat are the ESG targets for the bond issuance? Do you have the plans? If not, when?
Yes, we have the plans. We need to make them more precise. Of course, building green warehouses, getting green energy, moving to zero-emission vehicles. There are several elements of this kind. We will come back to that topic on the next conference.
Is the German market generally profitable? If yes, when this profitability happened?
We achieved profitability the last year, 2021, when there was an increase, a considerable increase, of online in the revenues. During COVID, we reorganized the company and we lowered the rental prices.
That was the last question for today. Thank you so much, ladies and gentlemen, for joining us today and for numerous and very interesting questions. We would like to invite you to, our next conference in December before Christmas. Thank you so much. See you. Goodbye.