Page 128 - RusRPTDec20

generated by hypermarkets decreased 1.6% y/y amid a 1.8% reduction in selling space and -0.3% LFL sales growth (as a 16% increase in the average ticket was mitigated by 14% traffic outflow). The group's LFL sales growth was driven by ramping up discounters, which demonstrated 27% LFL sales growth in 3Q20. The share of discounters stood at 16% in the group's total sales in 3Q20 (up from 11% in 3Q19). Online sales through the company's own delivery service rose 30% y/y in 9m20, and reached 3.6% of its retail revenue in Moscow and 1.9% in St Petersburg in 3Q20. Meanwhile, outside these cities, the company plans to develop the service in cooperation with delivery operators. In particular, it made an agreement with SberMarket in October to deliver online orders in Omsk, Ufa, Rostov-on-Don and Nizhni Novgorod. The company opened five discounters last quarter ending up the quarter with 182 stores (including 77 hypermarkets and 105 discounters) and total selling space of 591k m2. In a trend similar to what we saw with Lenta, sales growth notably decelerated throughout the quarter from 7.4% in July to 1.8% both in August and September. The company may benefit from the growing ticket trend in 4Q20, as hypermarkets have proven popular for one-stop shopping. Still, we do not expect them to benefit as much from the second wave of the pandemic, as restaurants are still open and we do not expect panic-buying. Still we see no visible improvements in the format, while the discounter format has just broken even (we assume). We retain our cautious view on the company.
Detsky Mir held a conference call yesterday, 2 November, following the publication of its 3Q20 IFRS results.​. During the call, management reiterated the retailer’s mid-term expansion and capex guidance outlined in August. Zoozavr pilot stores have shown encouraging results YtD, and they are performing well ahead of expectations. Overall, we view the company’s statements as expected and in line with the strategy presented in August.
● Store rollout. Detsky Mir plans to open at least 40 supermarkets, 10 Zoozavr stores and 10 Detmir Pickups in 4Q20. The retailer reiterated its mid-term store rollout guidance (at least 300 supermarkets, 500 Zoozavr stores and 800 Detmir Pickups).
● Capex guidance. Detsky Mir plans to spend c. RUB 2bn in 2020 and c. RUB 3-4bn in 2021. Average annual capex should amount to RUB 5-5.5bn in the mid-term (due to the opening of federal DCs).
● Logistics. Since launching its first regional DC in Rostov-on-Don in July at a cost of RUB 100mn, the company has continued to develop its logistics infrastructure, signing an agreement to open a regional DC in Kazan in 2Q21. The retailer confirmed its plans to open two of its own federal DCs (RUB 2.5bn each) and three leased regional warehouses (RUB 100mn each) during the next couple of years.
● Zoozavr pilots exceed expectations. Sales YtD in the 13 pilot stores have been 80% ahead of expectations.
● Marketplace project moves ahead. Detsky Mir had expanded its 1P assortment to 150,000 SKUs from 100,000 SKUs as of 4Q19. The 3P
128 ​RUSSIA Country Report​ December 2020 www.intellinews.com