Page 103 - RusRPTAug19

Russian retailer Lenta reported 0.4% year-on-year growth in revenues to RUB100bn ($1.6bn) in the second quarter of 2019, making a notable deceleration from 6% y/y growth in top line seen in the previous quarter. "The key reason for the top-line slowdown was a drop in low-margin wholesale revenues (slower expansion was also a factor), though this was guided by the company," Sberbank CIB commented on July 25. Wholesale revenues dropped from RUB6.4bn ($100.7mn) in 2Q18 to RUB2.4bn ($37.8mn) in 2Q19. Pure retail revenues of Lenta were also slightly below the expectations, with 4.7% y/y growth to RUB98bn, with like-for-like sales growth decelerating from 5% in 1Q19 to just 0.8% in 2Q19 on lower frequency of hypermarket visits. In the second quarter Lenta added hypermarkets and one supermarket in net terms, taking the store count to 377, and increasing the trading space by 5% y/y to 1.47mn square meters. In June Severgroup of Russian steel tycoon Alexei Mordashov completed the acquisition of a 36.8% stake in Lenta to increase Severgroup’s stake to 78.73%, while the free float decreased to 20.3% from 58.0% prior to the deal. "As Lenta was recently acquired by Severgroup, the current operating trends are of limited importance at the moment," Sberbank argues.
Russian hypermarket and discounter format retailer O'Key posted revenue growth of 5.7% year-on-year in 2Q19, recovering from 1.1% y/y decline seen in the previous quarter. The retailer's like-for-like sales gained 3.3% y/y as discounters performed well (18% gain in LFL sales) and slight recovery in hypermarkets and supermarkets business, which gained 1.8% in LFL sales. Previously in January O’Key unveiled a new strategy, but left investors unimpressed. Following the publication of 2Q19 results, the retailer reiterated the guidance for 2019, with hypermarkets' top line growth expected to be around zero and DA! discounter stores showing double digit growth. O'Key could open up to 30 discounters this year, in addition to 164 stores as of end of 2Q19 (up by 11.6% y/y). Previous reports suggested that O’key could be in part acquired by Yandex.Market online marketplace, a joint venture between Russia’s largest bank Sberbank and most valuable digital company Yandex. Previously unconfirmed reports claimed that Sberbank seeks to acquire O’key, which the bank denied. Now reportedly Yandex.Market could acquire a stake in O’key, with Sberbank financing the transaction. Market capitalization of the retailer stood at about $520mn as of the announcement in April. However, no details have yet followed the announcement. Recent reports suggested Sberbank and Yandex drifting away, with Yandex.Market joint venture possibly to be broken up by the state controlled bank.
Shoe seller Obuv Rossii released its 2Q19 operating results. Consolidated revenues increased 26% y/y to R2.8bn, driven by 1.2% LFL retail revenue growth (with 3.8% LFL ticket growth and a 2.6% decline in LFL traffic) and the 34% LFL revenue growth of the cash loans business in particular. The share of shoe-related products (such as clothes, bags and accessories, which have a higher markup) in retail revenues soared from 29.6% in the second quarter of 2018 to 31.9% in 2Q19. During the quarter, the company opened 82 new directly operated stores (DOS) in net terms, taking the total store count to 837 (including 166 franchise stores). The company opened 105 stores in 1H19 and plans to open 150 in total in 2019. Obuv Rossii also provided some details on the progress of its pickup points project. At the end of 2Q19, it had pickup points for online orders in over 600 retail outlets, which generated additional traffic with a conversion rate of 4.5% over the quarter (i.e. 4.5% of customers who came to pick up an order bought other items or paid for services in the store).
103 RUSSIA Country Report August 2019 www.intellinews.com