Cześć. Dzień dobry. Hi, welcome. Magdalena Kopaczewska, Investor Relations, LPP and Przemysław Lutkiewicz, Vice President of the Board. We'd like to welcome you to our results conference, where we will discuss our financial results for the fourth quarter and for the whole year, increasingly. We will also talk about corporate events that happened since our last meeting, and we will tell you also about our plans for the future. It will be finalized by the Q&A session as usual. Let's start with Przemek's account of further events.
Thank you. Ladies and gentlemen, the key corporate event in the last quarter were the debut of our Sinsay stores in the markets of the Southern Europe. In Italy, we opened our first store in December last year. It was close to Venice. Quite a large store.
We wanted the first stores to be a bit bigger than the standard ones, about 1,000 square meters, for the very purpose of the great debut, ability to present full collection and the shopping experience of the highest value of the clients. I can also boast that we opened the second store in Milan for Sinsay, our presence of online and offline is already available for the customers in Italy. In the next quarter, new openings are planned for this brand, but also for Reserved in Italy. Another element of our strategy, Southern Europe.
We opened in January this year, our first store of Sinsay in Greece, in Crete. Very good sales results. Very good reception for this collection. We saw that the Greek markets receives our products very well.
In the second quarter last year, we saw that the sales results were promising. We can observe that the online and offline channels are prospering very well in this country, and we are waiting, of course, for the opening of further stores in this country. Online, of course, is all about novelties, and this is the requirement of the time, so new algorithms, artificial intelligence. I would like to tell you about one tool that we implemented in 2022 already.
At the end of 2022, we had some figures, and we knew how to use this tool better. This is the Dynamic Yield tool. It basically prompts and recommends products to the customer. Thanks to this tool, we can recommend products which we know for certain historic shopping data that the customer might like.
We can propose similar styles to the ones that the customer was interested in but are sold out currently. Simply, we can give tips to the customers about the products that would match the previously purchased products or the products currently in the cart. We can observe first good results of this, and this allows us to increase the amount of cart products by customer. Online channel is very important to us. On the left-hand side on the slide, you can see that 1/3 of the whole MOHITO sales is via online channel.
Also, for Sinsay, it's over 30%, and Reserved almost 30% in the fourth quarter of the wholesale was done via the e-commerce channel. E-commerce also entails logistics solutions.
We can boast that in January 2023, we launched a new fulfillment center warehouse solely for e-commerce purposes in Jasionka near Rzeszów. It's our own warehouse. We transferred the operations to this warehouse from the one that was rented before. It was in Stryków. The rented one in Stryków finished its operations, and the activities continued near Rzeszów. Thanks to that, we have 69,000 square meter floor space in this warehouse, 17% of the whole warehouse space we own in total.
I will discuss this further in next slide, how logistics is important. Now let's discuss the fashion collections. Magda, please present.
After 2020, 2021, which changed our fashion preferences to home and casual, 2022, because of the return to the offices and meetings, gave us increase in popularity of more formal collections. Here, the two brands, MOHITO and Reserved, are perfectly fitting this trend, because they focused on a very toned color scheme and the return of classic forms. We are very pleased with the sales results of the men's Reserved collection. Very good sales results. They are the fact rooted in this higher quality, the models, the changes in the structure of the collection.
Thanks to that, the part of this men collection for Reserved in this season of autumn/winter generated 20% of the results, so it was 2% better than the previous year.
Thanks to matching the collections to the current trends, the good sales results were also recorded in MOHITO, especially in the online channel and especially abroad. Along with the financial report, as usual, every year, we are publishing our sustainability report. This is the non-financial report, it is the same this year. We included such information as beginning the cooperation with a startup for full recycling of polyester fabrics or cooperation with an institute that would allow us to have recycling of the blends.
That is now a big problem in the fashion industry. We also described there the project that we launched concerning the wind energy that is powering our facilities. We also devoted one chapter to our carbon footprint in all three scopes, which was in fact limited by 8% this year.
Also the report focuses on our activities in the social sphere, also for Ukraine. We recommend highly to read it. You can access this via our website. Now, Przemek, over to you. Thank you so much. As regards Ukraine, as you remember at the beginning of last year, the war started. We closed all our stores in Ukraine and we suspended all operations. Of course, the organizational structures and personnel were kept.
We of course paid our employees because we wished that the war to be over. Unfortunately, the war was not not over quickly. It's still ongoing. In the third quarter, we had a lot of signals from the employees from Ukraine that they would like to have the stores reopened. They want to have normal life.
Of course, it's still dangerous. We still have bomb alerts. However, Ukraine is trying to function as normal as possible in these difficult war conditions. Gradually from the third quarter on, we started to open new stores, first in the safer areas and then going to the east of the country. Of course, because of the warfare, we lost 34 stores. Before the war, we had 159 stores. Now we have 125 operating stores. Of course, they operate in a limited capacity. If there are alarms, bomb alarms, we have the employees going to the safe places.
In general, we are still looking after our employees and security and safety is a priority. In the e-commerce and opening stores, we can say that the performance is very, very well.
We have high sales results. The competition is lower in this country. Logistics is going on as usual. We have normal supplies coming from Poland to Ukraine. We are hoping for the warfare to end, but we are looking at this market thinking that we want to start development in the safest locations, opening new stores. We are talking about a few locations. We will see how this progresses. Generally, we want to do a lot in this country because this helps the local economy as well.
Let's have a look at the map with our presence. It's greener and greener, as you can see. We marked with this color the countries where we have both online and offline offer. At the end of last year, we opened an online store in Serbia.
Therefore, this country was marked green. As I announced, we opened the stores, the stationary stores in Italy and Greece, also these two countries were marked green this time. Poland is still our biggest market, over 1,000 stores, but we are focusing strongly on Romania, Bulgaria, or Serbia. I will discuss this further in a moment. On the left-hand side, you can see the chart where we present the number of stores. It decreased by 282 stores. We sold the Russian business over 500 stores.
In Poland and abroad, it's dynamically developing, over 60 stores more in Poland and abroad over 200 stores. Now we are focusing on other countries apart from Poland to saturate the markets where we have those opportunities.
The development plans will be discussed in a few moments about our outlook for 2023. Let's move on to financial results for the fourth quarter. Let me just remind you that the selling of Russian business changed the financial statements. Means that we started displaying the continued operations in 2021 to compare like-for-like and apples to apples. At the end of our report, we have the discontinued operations, and there we present only the results for the Russian company until it was consolidated.
By the end of the second quarter of last year. Looking at the continued operations. We operate in 39 countries offline and online. PLN 16 billion of revenues for the group for last year. This means 40% more in continuous operations.
We had 1,962 stores and less floor space by over 11%. This gap after selling the Russian business hasn't been filled yet, but we are hoping that our development plans will allow for supplementing it, and we will have even more floor space at the end of 2023. We can see also that the customers are more willing to go from online to offline, a good 16% increase like-for-like. Online, of course, it is increasing quarter to quarter.
A bit less, but generally, for the year, we recorded over 90% of increase in revenue. Let's move on to revenue. Over PLN 4 billion for revenues in the fourth quarter itself. On the left-hand side, you can see that all brands had two double-digit growth.
23% increase overall. Of course, MOHITO is worth focusing. 33.9% increase. It was dynamically developing, especially in online and in Southern Europe. The second brand that I would like to highlight here is, of course, Sinsay brand. This is the brand that has the most stores openings, and the floor space is increasing the most dynamically. Here, 28% increase. Sinsay sells more than Reserved at the moment, over PLN 1.5 billion in Sinsay and a few billion more than Reserved. We are happy with the performance of all our brands in the fourth quarter. Good double-digit growth.
As Magda said, good collections for MOHITO and Reserved indicate that we are able to grow in both distribution channels. The stores, the stationary stores have recorded better results.
The online sale, over PLN 1 billion e-commerce revenues last year. Looking at this right-hand side chart where we divide it into Poland and abroad, you can see that in Poland, there's an increase for online, but slight decrease abroad. Why? Because we started to spend less money on performance marketing, so buying clicks with the biggest operators, biggest companies abroad like Facebook, Google. That caused that we have new customers. It appeared that the new countries are not necessarily coming back, so the brand recognition needs to be needs to be strongly worked on.
We decreased the outlays on this, and we are pushing more our applications, our mobile applications that we have for Reserved and for Sinsay right now. With these two applications, we are going abroad.
It's not only Poland, Germany, Romania, also Czech Republic, Hungary, and Slovakia in the first quarter of this year. We decided to focus more on developing and convincing our customers to move to our applications to generate conversions. This is successful. We will save considerably on performance marketing, but we want this profitability of this online channel to increase this year, which is already observed. Applications are all the more important that 45% of the whole revenue in Poland for the two brands has been generated via mobile application.
We can say in general, and we have been saying that the mobile devices constitute 70% of the whole of the whole visits and purchases is done via mobile devices.
We want, of course, to develop our applications, in enter and roll out these applications in further markets. This is easier and easier. In the further quarters, we will announce a further development or entering a new market for our applications. Now, revenues divided by Poland and abroad, increasingly higher abroad. It means that we have more revenues abroad. Over 60% was generated abroad in the fourth quarter of this year. On the right-hand side, you can see the table where we have the floor space. It decreased by 11% year-on-year because we have no Russian stores anymore.
In Poland, we have 11% increase, double-digit increase. Still, we have room for development in Poland, especially for Sinsay stores, so smaller cities, retail parks or locations by the streets.
We are focusing and saturating the markets more in this regard. On the other hand, it is abroad that is the driving force. We have been developing faster. It was nearly 30% in floor space. The square meters that we have abroad are considerably higher than in Poland. The foreign markets, Southern Europe, these are the places where we are entering the fastest right now because they give us the biggest rate of return. They become profitable very quickly.
The location of capital is the most makes the most sense. Margin, it was lower year-on-year. As you can see in the chart, you can observe how great it was in the fourth quarter of last year, over 60%.
We had like a shopping craze in that moment after two years of lockdown and buying online, the customers wanted to return to physical stores. It was possible to sell a lot in full prices. That's why the margins were so good last year. This year, as you can see, we have 50%-52% in this kind of range, which is the result of a few elements. First of all, it's a lot of inventory that we bought at the beginning of last year, quite ahead for the Eastern market, and then we had to liquidate and put into other markets.
On the other hand, there was unfavorable foreign exchange for the U.S. dollar and freight costs and expansion of Sinsay.
That it has a lower margin than the remaining brands, and we have the dilution of the margin by the fact that we have a lot more Sinsay stores. Let's not worry about this. It's also lower costs for Sinsay. We will focus on this in the further quarters. I will talk about a bit more in the next quarters. This is increasing. On the right-hand side, you can see our inventory. Last year, they were too high for the reasons I outlined just a second ago. They are decreasing quarter to quarter. In the fourth quarter, we can observe a further decrease comparing to the third one. It's still over PLN 3 billion. It's still too high.
In the coming just-in-time regime and with better management, we will focus on rotation of goods and limiting this inventory level. As you can see, the line per square meters, it's decreasing as well, PLN 2,000 per square meter for the last quarter. We wish to move towards this 1,500 in the coming quarters, we will work on decreasing this and to manage the stock as good as possible to release the capital that we have still in this working capital.
What is good is that most of the collection, three of four, as you can see for the fourth collection, this is the spring-summer collection, so it is prepared or it was purchased for the new season. Let's move on to costs.
The costs, despite inflation, we managed to stabilize the costs. As you know, our company can save money and have very much control over the costs when the macroeconomic situation is less favorable. It happened exactly like this. Results for December, we wanted to control the costs more. From the fourth quarter, we can observe quite low costs when it comes to stores. SG&A in total, even lower. A decrease in comparison to the fourth quarter of last year. What happened here? When we look at what constitutes the cost.
The rental costs here, we have more Sinsay stores, better conditions for the previous contracts. Of course, right now, there is an element, quite special one.
From the fourth quarter on, what started is the revaluation of rentals, especially those in euros. We have inflation, indexation. We can expect in the further quarters that the rental costs will increase. Because the costs increase, we decided to have more control and better control of personnel costs. We have new technologies like RFID clips that save the workforce, so we don't need so much working hours of the personnel. We are more flexible in terms of management of working schemes, so to decrease the working hours used to service the customer at the store.
The third element, the other costs, I think the biggest element of this is, of course, energy use. This energy use, as we know, this the cost has been increasing a lot.
We have most of our stores with meters installed to decrease the use of energy and water consumption. These increases in energy costs are not so troublesome, the costs are stable year-on-year overall. The cost per square meters in stores is only 2% increase year-on-year despite this higher inflation. On the right-hand side, you can see overall SG&A costs per square meter. They are lower year-on-year. As a company, we are focusing strongly on costs to revenues, this percentage, Percentage of sales.
Our aim is for them not to not to get higher than 40%, we have 40% for the fourth quarter of this. Last year, it was 48% as you can see.
We are saving, especially when it comes to e-commerce, the marketing expenditure is lower. This year we will also continue that. The changes in logistics that have been happening, they always allow us to save considerably when it comes to cost. Let's move on to profit and loss account. The fourth quarter, we are comparing, of course, 2022 with the continued operations from the previous year. Like-for-likes. As you can see, we have 23 increase in revenues year-on-year, the margin was considerably lower.
That's why we focused so much on the cost elements. As you can see, SG&A costs, they have 2% increase only. Thanks to that, we have EBIT over PLN 400 million. Considerably better than the previous year.
In the previous year, of course, we had write-offs especially for the stores in Ukraine. They were quite considerable. This data has to be looked at from this perspective, that last year we had the special write-offs. On the financial side, we had quite high negative FX losses because of the stronger złoty. This resulted from our Russian subsidiary receivables. This is expressed in US dollars. In the fourth quarter we had negative FX differences. Therefore, net financial activity lower than expected, PLN 200 million in the fourth quarter of last year.
Now let's move on to the profit. Almost PLN 16 billion of sales. More year-on-year de-decrease in margin for the reasons I outlined.
The cost that increased over 30%. We are happy that the increase is slower than the increase in sales. Almost PLN 1.5 billion of EBIT. Last year we had these write-offs related to Ukraine. If we look at, and if you want to compare this without the write-offs, it would be comparable operating profit. When we have foreign exchange differences taken out of this, we have continued operations net profit, almost PLN 1 billion per last year. It was a difficult year for us because of the warfare and the loss of 30% of business, but nevertheless, we managed to get out of this situation with stability.
Looking at what is still to be improved, let me discuss working capital. We need to work on this element a little bit. Working capital. What you have seen in many quarters, before the war, we had the situation that working capital was negative. It means that it was higher than the inventory. Our liabilities were high, higher. We paid for the goods, but we haven't sold the goods yet. As you can see here on the right-hand side, our trade liabilities were lower than inventories. This has been changing. We are working on changing the situation.
We want the inventories to be lower to improve rotation by splitting the deliveries, just-in-time deliveries when they are needed and not ahead of time. In the next quarters it should normalize.
On the other hand, there is a lot of stock that we already paid for, therefore lower use, and of reverse factoring. It's now PLN 1.5 billion and the limits are PLN 3.3 billion. In the next quarters, we will be coming back to the norm using this reverse factoring financing more so that working capital can come back to normal. Our trade liabilities are higher than inventories. There is this element of receivables, the short-term receivables. When we had this transaction of selling the Russian stores.
There we have about PLN 800 million inventory for the balance sheet date, and they have been repaid gradually. PLN 0.2 billion of repayment during the quarter. This will improve our cash flow.
On the right-hand side, you can see that the cash conversion cycle is a bit worse. Therefore, we had a negative cash conversion cycle. Now it's positive 8 days, in the next quarter we are able to improve the situation to go back to the norm. The norm, as I said, is the negative working capital. When it comes to indebtedness level, it is safe. We are publishing for you, and we are displaying here net indebtedness with IFRS 16, PLN 4.8 billion. It's quite high, almost PLN 4 billion is due to use of debts for the finance leases under IFRS 16. According to the old methodology, it's quite lower.
We have cash that is not included, and this cash has been invested in the money market funds denominated in USD. This part is making money for us, and we are using part of this amount for this as securing the reverse factoring. We use a lot less of the limits in the fourth quarter, there were a lot of deposits, and they were returned, so they were pure cash that we can use to invest directly and to manage directly.
On the right-hand side, you can see our CapEx, over PLN 300 million of CapEx in the fourth quarter. Over PLN 200 million were about opening new stores, and almost PLN 90 million was concerning IT and other investments.
Summing up the targets over the last year and looking at what we have achieved from the targets, we can say that we are pleased with the effects of our work, and we are pleased with the fact that we can show you our achievements of the targets in terms of figures. PLN 16 billion revenues, this is what we announced that we wanted to work out. We also discussed about rebuilding floor space, but trying to fill the gap after selling the Russian stores. We have 1,960 stores. We were planning even 2 stores less. This has been achieved.
At the beginning of the year, we announced that we want to have PLN 5 billion revenues in online sales. This, of course, was reduced gradually.
PLN 4.5 billion e-commerce sales was announced recently. Because, of course, of the cut in marketing, we had PLN 4.4 billion of online sales, but we consider this to be achieved. When it comes to EBIT margin, we wanted to achieve 8%, 9% of EBIT margin, and we have even better, 9.2% EBIT margin. This target has also been achieved. CapEx, we were planning PLN 1.1 billion. We had a bit more, PLN 1.2 billion of capital expenditures, but these are good investments that will give better results in the future.
Summing up the targets, we are pleased with the results of these difficult years. Let's move on to the outlook and our plans. Starting off with the latest results for the first quarter.
The first quarter, I would say, we are moderate optimists. On the one hand, we see that the customer is a demanding one. The customer expects to have a good product in at attractive prices. What we have observed, after raising the prices, the customers in Reserved or MOHITO brands, they accepted the higher prices. However, when it comes to Sinsay, so the value-for-money segment brand, the situation was a bit different. The new prices introduced in February and March, they were not met with a positive reception from the customers.
We decided to make a change. We did an experiment, and it was worth doing to check the markets. The value for market, this is very price sensitive, so we returned to lower prices for Sinsay like last year.
We have high demand, and Sinsay has been performing very well. Now, taking into account that Sinsay is the biggest brand and the most contributor to our EBIT result. With lower price in Sinsay, the margins will be a bit lower than expected. In turn, we have lower costs in this brand. This is a different business model, and the cost of rentals, floor space, all the operations are different. We will be focusing more on the operating margin that will be improving in the coming quarters.
From this perspective, rest assured, the experiments on prices, this is a good thing because we should be doing that. We are able to quickly react if something is not going as planned.
Now we have very good result in all our brands and a strict control of costs, which will be maintained in the coming quarters as well. Floor space is increasing 20% year-on-year. According to plan, we opened 90 stores in the first quarter. For this year, we have a plan of opening 380 stores, so similar number of stores opening every quarter, so we are in line with our plans. Offline sales has been increasing 25% increase year-on-year, so the continuation of the trend that customers want to buy offline more willingly than online.
We want to open new stores. We want to have more storesTo meet the demands expressed by the customers. Online sales. It will be stable year-on-year.
We have been working on profitability of this part of business and on the fact that we want to use the customer base that we already have in several brands that we own. We want to focus on this part to improve the profitability, to keep on working on reducing inventory so that this comes back to normal. Let me repeat again, strict control of costs, which aims at increasing EBIT in terms of value and percentage. On this map, I wanted to show you the regions of Europe that we are focusing most.
The Southern Europe, the new, the Italian and Greek markets, but also the markets that we have been present for some time that have been performing well, which means Romania, Bulgaria, Serbia, but also Croatia, Bosnia and Slovenia.
We focus there on Sinsay store openings. You can see in this upper part that we are planning to open new stores, over 100 of Sinsay brands among these 150 new stores. We will be opening new stores in Greece and Italy. We are hoping for the dynamic rollout in these countries. We are not forgetting the online, of course. In Bosnia and Herzegovina, we will open the online store in the 4th quarter of this year. We opened such a store in Serbia, and we are very pleased with the results of that store.
Our e-commerce expansion is planned outside the EU. You can see here our targets for increasing in the future.
On the left-hand side, we display that we want to have 2 million square meters at the end of this year. The first 20 years of operations, we opened 1 million. Now in the 5 years to come, we want to accelerate this. Higher volumes than before. The 2 million meters that we marked as a target for the January of 2024, these are the contracts we have already signed. Our lease department, they are working on the 2024 leases. As you can see, this January 2024 target, the vast majority of that has those contracts have already been signed.
This is a dream, but verified one, and with concrete figures included in the signed contract.
From today's perspective, we can see that the coming years, 10%-15% increase we are able to achieve. Now moving on to this chart on the left-hand side, Poland, 12% increase. We have been recording double-digit growth in our countries, but the majority of investments and the majority of the stores will be opened abroad. 25% year-on-year of increase in floor space. These are the stores that give that we have very good business cases.
The rate of return is no longer than 24 months, so 2 years. We are trying to allocate our capital in the places where we have the most benefit. For now, this is outside Poland, especially in the Southern Europe.
For that, we need logistics, of course, and the access and the ability to deliver the goods in proper times to the customers who buy online, but also to the stores. On the left-hand side, you can see three most important countries when it comes to logistics. Poland, Romania, but also Slovakia. There have been a lot of changes in logistics. We focus strongly on Romania. For some time now, we have had a fulfillment center operating there that is servicing the online sales.
It has been performing very well, we decided to open a logistics center in that country for stationary stores as well to deliver the stores not only from that center, not only to Romania, but also other countries in Southern Europe. Moving forward, we want supply to change as well.
So far, all the containers with our goods, they went through the Baltic Sea, from Asia to the Baltic Sea, and then the Gdańsk port, and from there, they are distributed throughout Europe. Now, part of these goods will go to the Black Sea, to Romanian ports, and from there they will be delivered to Romanian warehouse and distributed to Southern Europe. Benefits, shortened times of delivery by about a week, and a lower transportation cost because we have a shorter route of the container, giving lower costs.
This is one of the initiatives that we have been already implementing to reduce the logistics cost. Second initiative is moving logistics center that used to be outsourced to our own location. That's what happened in Stryków. We closed this outsourced warehouse and the external operator was servicing it.
We moved it to Jasionka near Rzeszów. We have our own warehouse there, and our company LPP Logistics have been operating there, which gives us savings for the logistics costs. Another element, the warehouse that we have near Bratislava, we decided to keep it. This is a leased one, but the external operator that has been managing it on our behalf, it was replaced with our own structures. We have our own structure, introduced our own employees and we can save on operating costs there. It's comparable, but it's the effect of scale for the coming months.
We will be able to use the floor space. We have more efficient operations. Our own logistics company will bring us considerable cost savings.
The target overall for the 2023/2024, of course, first and foremost, growth in profitability in the difficult times where we have been reading about slowdown in the economy, we have been observing the cautious behaviors of the customer. As a company, we should also present a cautious approach. We need to invest where the investment brings benefits, but we should focus on our costs and profitability very strongly. Of course, revenues are important.
We will be growing faster offline than online. We want to have this 25% increase year-on-year offline. Thanks to the positive like-for-like. These will be stable year-on-year. These in the online section.
We will focus on cost effectiveness online, that the profitability is increased. The group revenues should reach PLN 18 billion this year. Gross profit margin should be a bit higher than last year, 51.3%. What I want to focus on and to focus your attention on is our EBIT. EBIT should be over 10% because we have two business concepts.
On the one hand, we have more expensive brands like Reserved, MOHITO, which have higher margins, but we have been developing Sinsay with lower margins and with lower costs. The mixture of the two business models. Looking at this, we should focus most on EBIT margin.
When it comes to the savings, that are considerable, logistics and performance marketing, especially performance marketing, this is quite easy to stop these expenditure. We will spend half less money on that. There is also considerable savings in terms of logistics, thanks to all the activities that I have outlined already. CapEx over PLN 1 billion, similarly to last year, out of which PLN 800 million are investments for stores. We want, by increasing profitability and managing the working capital and cash well, we want to have lower debt year-on-year and to have our targets met.
We observe that there are some risks and opportunities related.
The risks is the economic slowdown on the and the inflation on the purchasing behaviors of our clients and their shopping behaviors. The better management of online sales, new store openings in many countries. This will, on the other hand, allow us to address the customers' needs. We can see that our brands are well-positioned. What I mean here is that the pricing levels, even in our most expensive brands, this is the moderate price.
The value for money segment that has been increasing quickly, it allows us to offer the lower budget customers also good value for money and attractive styles at good prices. The last slide for this presentation, ladies and gentlemen, dividend payment. Yesterday, the board proposed dividend payment in the amount of PLN 430 per share.
We want to pay out in two tranches, in July and October, PLN 215 per share each tranche. This is all we prepared for today. Thank you, ladies and gentlemen, let's start the Q&A session. We do have a lot of questions, very interesting questions. Let's start with several ones concerning the distribution center in Romania. Where exactly in Romania are you planning to open a new distribution center? PAP is writing about second half of the year as the opening.
Can you give us a more precise date? The stores from which countries will be serviced by this distribution center? What is the estimate impact for the transportation costs and delivery times change because of this opening in Romania?
Will this opening also mean more intense opening of stores in the country serviced by the center? That's a long question. Let me maybe repeat. Okay. I think I remember all. I don't want to give you a precise date. You know how it is with such big projects, this can be accelerated or delayed. Second half of the year, I think is the good estimation. It will be near Bucharest.
This is the first thing. I wouldn't like to discuss specifically the savings and the benefits from this project, but in general, the cost savings resulting from all the logistics changes for this year are estimates of the level of PLN 150 million-PLN 100 million. Quite considerable. What stores and countries?
Of course, apart from Romania, Bulgaria, but also Greece, Italy, and Yugoslavian country, the southern Europe. This is the region we want to focus on most this year. These are the countries dedicated. A question about the plan to develop physical stores. Where are you going to have the most openings and where are you planning to open the least number of stores? First of all, we are opening Sinsay brand. This means retail partners in smaller cities.
We will not be opening in big shopping malls, only several dozen stores for this year for Reserved and MOHITO. Most of the stores opening, it will be smaller cities.
As we discussed before, Southern Europe, Greece, Italy, but also Romania, Bulgaria, ex-Yugoslavian countries. We are not forgetting about the northern countries. Finland is the market that we want to dynamically develop this year. Looking at the Western Europe, this year, we are planning to open 3 stores in London, 1 store in Germany, and 2 Reserved store in Milan on the main street. Despite the fact that we are focusing on this value for money segment, we are not forgetting about the flagship brand, Reserved.
We want to build recognition of Reserved in the Western market, but want to do it via online more. On the one hand, the stores with better commercial terms and conditions should be profitable, but we are more cautious in this regard. In Germany, we have recorded profit after several years.
This is encouraging, but still, when it comes to Western Europe, we have been very cautious. This is not the time to increase on these markets a lot. The next question is about this reverse factoring. What is the reason for decreasing engagement in reverse factoring? Which was negative. This was free cash flow with lower result in 2022. Has in-instrument become too expensive after the percentage increase? What are the plans for the working capital? Let me start by saying that it's not too expensive for us as an instrument.
The suppliers pay for it, so the cost on the company end is not significant. It's more organizational. On the other hand, lower use is not the result of the fact that we don't like reverse factoring.
We do, but it's due to the fact that last year we had a lot of goods purchased before, ahead of time, for the Eastern market. We had paid for this, so the use of factoring diminished. We have been still selling the goods. We have to normalize and sell out the inventory, the surplus goods out of resulting from turbulence on the Eastern market. Now we are ordering new collections and the use of factoring months every month is increasing. By the end of the year, we will be using all the factoring limits. This is what we're counting on.
We will have a lot of demand for financing. This is like temporary. We do like factoring. We will be using factoring.
We will use our limits, we will come to the banks to ask for further limits. For now, because of the turbulence we experienced and because of the war outbreak, we need to deal with all those issues and the new goods that are entering stores, they will allow us to regulate the situation with working capital and normalize the use of factoring. Another question is about why LPP is not counting the deposits to indebtedness, net indebtedness.
We would like to do that, the standards of accounting say that we cannot. Is the decrease in online sale attributable to Sinsay, which means lower marketing, which decreases operating costs and increases profitability for the market? Can you repeat, please?
Is the decrease in online sale attributable to Sinsay brand, which means less outlets on marketing? When it comes to Sinsay revenues, this is good currently and will be very good. The fourth quarter was all the more difficult that because we had the surplus goods, we decided not to order a part of the winter collection. The structure of goods for Sinsay in the fourth quarter wasn't appropriate to what and much to what the customer expected, but it allowed us to go out of turbulence with inventory.
Everything is coming back to normal, everything is good. The decision about marketing was not really caused by Sinsay brand, but it was a general decision that marketing that is currently placed on the Internet, we decided to focus on profitability of our business and not generating new markets. All brands, Reserved, Sinsay, MOHITO, Cropp, and House, all the brands had a lower marketing budget for the fourth quarter, and this will be continued this year. Profitability of our e-commerce business has been increasing.
Of course, we have stable sales, but this is what we are focusing now. Can you please discuss what is the offline dynamic for this brand, Sinsay? I don't remember exactly, but considerable double-digit increase because of the floor space increases. We opened nearly 300 stores of Sinsay last year.
Do you identify other reasons why the budget sales for the brand is different from other brands? The fourth quarter, the changed the inadequate structure of the goods availability. This was due to our internal business decisions to stabilize the working capital and inventory. Everything is coming back to normal. Sinsay has been selling more and more, and we are pleased with their current results. From the first quarters, will we observe the cash conversion cycle increase? Yes.
Is hedging as part of reverse factoring will be slowing down the positive impact of the lower US dollar and foreign exchange rate? It was working until this Russian subsidiary situation with conversion to US dollars.
We had long position in USD. In the fourth quarter, we had negative FX differences because of this USD decrease, and this should get back to normal in the coming quarters. We will be able to match hedging and the level of liabilities to the situation of USD. Another question, very interesting question, is about competitors. Will the shifting of Zara upwards cause that you'll make decision about changing collections due to that communication? Let me explain.
This shift upwards, it's about more expensive collections and more premium collections in the offer of Zara. When it comes to competitors, we are not commenting on that. Inditex and other competitors are very inspiring to us and important to us, and also difficult to compete with.
Generally, when competitors change their price levels, and it's upwards from our brands like Reserved, MOHITO, and Sinsay, of course, this is to our benefit because it's difficult to foresee the effect of that. We will be more competitive in terms of prices against our brands, and we will have more traffic and more sales. Overall, this should be in plus for us.
It's very difficult to discuss scale. What are your plans for organizing the sales again in Ukraine and the store chain organization in Ukraine this year? Will this have effect on margin? This impact will not be considerable. Five, six stores to be opened this year. Of course, it all depends on the situation and on the warfare itself.
If the war ended, of course, we would have more ambitious plans, but for now, only the few stores discussed. Is there a chance for reversing this policy on performance marketing if you notice that the price per click on the market is rationalized? That's a good question. It means that if the price for the click drops, other companies also will start using it, so the price will increase again. We approach the topic with flexibility. We will have a flexible approach. We have a budget, marketing budget. We can increase the budget if the margins and sales results allow.
On the other hand, we want to allocate this budget in the markets where the return is highest, so where the click can be bought at the cheapest price.
On the other hand, when the customer is attracted by the click, will have conversion, like will stay with us for longer. It's difficult to answer that. You know that we will be reacting in a way that brings the best effect for the organization. It will be markets outside of Poland where we will allocate this budget, and we mean more Southern Europe markets. Due to this dilution of cost per square meter for the stores and opening of Sinsay, the dynamic of the cost may not exceed 5%.
This is what we're hoping for, that the increases year-over-year will be considerable, the increases in pay of the minimum wage. We want the cost per square meter not to exceed 10%.
The surplus, how much did it take out of the margin in the third and fourth quarter of 2022? In which quarter the problem of surplus will be solved? It's difficult to say between 2-3 points. On the other hand, it seems that in the first quarter of this year, 2023, this problem should disappear. What should be the growth margin in particular quarters? What would be the model growth margin in particular quarters after you sell, after you sold this Russian subsidiary and without the surplus inventory? It's difficult to answer this question at this moment.
I don't have the figures right now. What is the demand in German market and in the UK? What is your plan for developing in these markets?
We can observe an increase in sales, positive like-for-likes, and considerable increase in sales volume online in both Germany and the U.K. We decided to open new stores in those markets. It seems that the price levels that Reserved is offering and because of the longer presence in these markets, this attracts customers. We want to focus more on online. The new store openings that we are having, we will be opening a store in Germany as well. We can see that in those locations, online is also increasing. Those channels, they support one another.
We have moderate optimism when it comes to those markets, thanks to the increase in Germany. In online, this gives us profitability in this market.
Every year, every quarter, we will be looking at those markets more intensely, and we will be investing, but rather online than offline. What is the planned quarterly dynamics for the openings for this year? More or less 90, 100 stores per quarter. Every quarter, 20% increase in floor space, looking year-over-year for the quarter of the previous year. In general, 20% increase. Looking at how our construction departments work and a lot of openings at one point, the plan is to basically spread this evenly. Last year, apart from the first quarter, the results were quite comparable.
What can we expect this year? What is the planned quarterly distribution of results?
I can say for sure that the second and third quarters that were very good last year, this will be repeated probably this year as well. They should be the best ones. The first and fourth ones will probably be a bit worse, especially in the fourth quarter. We have the January sales almost the whole month. We want to aim to increase profitability every month in the value and percentage.
Can you sum up the sales of the Russian business? How much have you received so far? What is the scheme of repayments? Is it going according to schedule? When we sold the Russian business, there are two elements. One element is the sale of stores and then the sale of goods.
The sale of goods, here we have this, the payments received every week. Every quarter, this is decreasing, of course. We have been monitoring that. We observed that this is incoming. The second aspect is the sale of stores. We lost PLN 300 million, so the receivable is PLN 600 million. This is discounted to PLN 300 because of the risk of the payer and of the country where the money comes from. We haven't received any installments from that. This amount is to be paid for the stores sold in Russia. This is for the fourth year, 4-year installment.
The first 2023 December installment will show us what the situation is. For now, we can see, we are pleased that the goods receivables are being received.
When it comes to EBIT margin, what is the trend that you're expecting in the coming years, taking into account the change in the structure of sales? We will be working hard for the coming quarters to have EBIT margin over 10%. We are looking at the best in our industry where these values are much higher. It seems that we can do more, and we want to have over 10% from EBIT in the coming years, along with the development, with the effect of scale and perfecting logistics solutions and good cost discipline, and also good sales and increase in the margins.
It seems that the gross margin should half a point, 1 point, percentage point increase every year.
As a result of lack of acceptance of increased prices by the consumers, the prices returns to the level, also for, only for Sinsay or also for other brands? Will you keep increasing prices in other brands than Sinsay? The change in prices and return to the previous pricing policy in Sinsay, this is not about other brands. They have higher prices. We are not planning any further increases. We want the prices to be attractive for the customer.
We have high demand in Sinsay brand, but with also sensitivity towards price increases. We want to offer attractive goods at attractive prices and in the end to have EBIT margins over 10% overall. That was the last question. Thank you very much for all of those questions.
We want to say goodbye now and invite you to the next results conference in June and wish you a good May weekend. Thank you so much. See you next time. Thank you.