2 result

2 resultBaltika Group's performance in the second quarter of 2011
corresponded to the company's expectations. The focus of the period was on
improving efficiency by restructuring the Group's retail network and
streamlining the internal processes. Throughout the first half-year, the
company continued to enhance its collections creation process, upgrade
inventory and discount management, aim its marketing efforts more directly at
the brands' target customers and improve customer service at the stores. Thanks
to determined streamlining, in the second quarter sales per square metre grew
by 10%, and even more in local currencies. At the same time, store operating
expenses were almost 10% smaller and costs per square metre dropped by 1.4%.

Second quarter gross margin rose to 58% (Q2 2010: 56%) and discount rates
improved significantly; the average discount rate for the second quarter was 5
percentage points smaller than a year ago. Inventory turnover increased and
although the world market saw an upsurge in raw materials prices (particularly
cotton) and cost inflation in China was substantial, the Group succeeded in
maintaining its cost to sales price ratio stable.

Sales level with the second quarter of 2010 were achieved on an 9% smaller
sales area while gross profit grew by 4% and operating expenses (distribution
and administrative expenses) declined by 6%. In the second quarter, the Group's
profit centres considerably improved their performance, all brands and
continuing retail markets generated a profit and total profit of the retail
system grew by 57% year-over-year.

2 result