Page 78 - RUSRptAug18

9.2.5 Retail corporate news
Recently merged consumer electronic retailers, The M.Video group published the second quarter of 2018 operating results for M. Video and Eldorado in July. Both businesses demonstrated double-digit growth, while consolidated sales increased by 17.2% y/y to R84.5bn (with VAT), with LFL sales growth of 15.4%. That resulted from successful promotions, including ones related to the World Cup. Combined online-based sales went up by 38.7% y/y to R15.5bn including VAT (or 18% of revenues). The percentage of online orders with in-store pickup was 73% for the group. The acceleration in top-line growth was expected, though its magnitude exceeded our expectations. The company's strong nationwide physical footprint is nicely complemented by its fast-growing online business, which has helped it continue to gain market share. We are positive on M.Video's fundamentals, although the stock is illiquid and the increase in the company's debt by circa R50bn due to recent acquisitions will lift the EV/EBITDA ratio to pricey territory.
X5 Retail Group has reported a strong 2Q18 trading update, showing 19.4% y/y sales growth on a 23.3% y/y selling space expansion and a 1% y/y jump in LFL sales. Sales growth for 1H18 reached 19.8% y/y, making us comfortable with our FY18F forecast of 19% y/y. 2Q18 LFL sales trends were opposite to those in 1Q18, i.e. the ticket turned negative, whereas traffic was in positive territory. We expect the ticket to improve on the back of higher inflationary trends in 2H18; however, keeping traffic in positive territory will be subject to company’s ability to run successful promos and loyalty programmes, in our view. Store openings for 1H18 reached more than a 1,000 on a net basis, and we believe that the company will easily make it to 2,500 gross openings for the year and do not exclude the chance of a further increase. The next trigger for the stock is the 2Q18 IFRS results on 14 August: our preview pointed to a 7.3% EBITDA margin: we expect the stock to gain traction between now and the release of those results. We reiterate our Buy recommendation for the stock; 12-mo TP $43 and 50% ETR.
Russia’s leading shoe retailer and Moscow-listed Obuv Rossii (Shoes of Russia), is ahead of schedule having opened 71 new stores in the first half of this year , the company said on its website. Obuv Rossii the 71 stores were opened in in 61 Russian cities as part of a strategy to expand the network in Russia’s regions. The company specializes in supplying middle-of-the-market quality shoes to Russia’s middle classes. Obuv Rossii raised $150mn with a rare IPO in October 2017 that was organized by BCS Global Markets and is using the money to grow its market share, especially in Russia’s regions. The company has been a big winner from the nascent economic recovery, aggressively pushing its strategy of opening new stores. “The directly-operated store (DOS) network increased by 8% q/q with the largest openings under the Westfalika brand (51 stores). In terms of geographical expansion, 48% of the new stores were opened in Siberia, 22% in the central region of Russia, and 7% in the Far East region. Thus, the total number of stores increased by 6.5% q/q to 606 stores, including 113 franchise stores,” BCS GM said in a note.
Russian children’s goods retailer Detsky Mir posted 14.6% year-on-year sales growth in the second quarter of 2018, flat as compared to the
78 RUSSIA Country Report August 2018 www.intellinews.com