Page 101 - RUSRptOct18

9.2.5 Retail corporate news
Russia's leading retailer X5 Group may be forced to close some stores as its market share in some regions approaches monopolist limits defined by the authorities, Vedomosti daily reported on September 2. Reportedly, in the 11 of 18 districts of in the Lenoblast (St Petersburg region) the retailers share ranges from 25.33% to 32.83%, exceeding the 25% set as a threshold by the Federal Antimonopoly Service (FAS) watchdog. As reported by bne IntelliNews, after a decade of growth, Russian supermarket chains are running up against the limits to growth – both in terms of saturation in local markets and market share limits imposed by the FAS – and are switching their focus to improving profits instead of opening more stores. The cap to expansion ends a two decade long race amongst the leading companies to open as many stores as fast as possible to cement their hold on their market share. X5 federal market share was at about 9.5% in 2017, but the FAS calculates market share compliance based on regional and district numbers. The food retail space of the top-200 is up 2.6% YTD to 23.5mn sqm, according to consultants InfoLine, with additions down by 13% in the second quarter of 2018 y/y to 660,800sqm as organic growth starts to give way to improving efficiency. The two industry leaders – X5 Retail Group and Magnit — accounted for 58% of the total additions YTD.
Russian sports equipment retailer Sportmaster will launch a new chain with own-branded lined Demix , Vedomosti d aily reported on September 24. The first mono-brand shop to be opened in Moscow mall Gagarinsky. The sales of inexpensive Demix brand already beat Nike and Adidas combined in Sportmaster shops, according to company's representatives, hence the decision to set up stand-alone outlets for the brand. Sportmaster operated 403 shops in Russia, 25 in Ukraine, 23 in Kazakhstan, 9 in China, and seven in Belarus as of the beginning of 2018. Apart from Demix its in-house brands include Delamare, Joss, Nordway, Outventure. For 2018-2019 up to 15 mono-brand shops for Demix are planned to be opened. In the long-term perspective the expansion of mono-brand shops across all territories is planned. Analysts surveyed by Vedomosti n ote that demand on sports gear in Russia is actively growing, in line with global leisure trend for using sports apparel and clothing in everyday activities. At the same time the mono-brand shops are mostly reserved to premium price segments, such as Adidas, Puma, Reebok, Nike, and Under Armour. Demix could fill the lower price segment niche.
Russian medium-cap retailer O'key announced the appointment of Armin Burger as new CEO , who took the job in addition to his current position as CEO of the O'key discounter format. Prior to the appointment of the new CEO O'Key posted discouraging results in the first half of 2018 on a pressured market that runs into structural capacity limitations . It also revised downwards its guidance for its hypermarket segment’s revenue growth. "[Armin] Burger has spent some 30 years in the industry, having held various positions at Aldi, and has been the CEO of company’s discounter business since 2013," VTB Capital reminded on September 14. VTB notes a declining trend in hypermarket revenues and highlights the challenging operating conditions for O’Key’s flagship business. The analysts await the details of allocation of responsibilities between the discounter and hypermarket businesses for the new CEO, as well as "their strategic development in the medium-term." "On our numbers, O’Key trades in line with X5 Retail Group and Lenta, demanding 6.0x Enterprise Value / Ebitda, which we consider to be stretched," VTB
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