Page 123 - RusRPTNov19

the first decline in revenues in Lenta’s reported history, driven by combination of a marginal uplift in retail revenues (up 3% y/y) and a wholesale turnover that more than halved (down 55% y/y to RUB2.6bn). In the absence of notable organic growth, Lenta suffered from a reduction of visit frequency and basket items, driven by colder weather, lower non-food demand and seasonal goods. The company reiterated its 2019 guidance for eight new hypers and three new supers, with capex of RUB17bn.
Sportmaster, one of Russia’s largest and most successful retailers, will acquire Polish business of French Go Sport Group , Vedomosti daily reported on October 1. This confirms previous reports that Sportmaster is ready to expand into the European market . A total of 34 stores with total area of 37,000 square meters will be acquired by Singapore-registered Sportmaster Operations managing the group's operations in Russia, Ukraine, Kazakhstan, Belarus, and China. The value of the deal was not disclosed, but it will not exceed €40mn, analysts surveyed by Vedomosti estimated. The Polish stores acquired will operate under Go Sport brand during the transition period, but will be eventually rebranded as Sportmaster. Analysts believe that Sportmaster's economies of scale, portfolio of own brands, and logistics chains in China and Asia-Pacific will allow it to compete in the price-competitive European market with local retailers like Decathlon. Set up in the early 1990s to cater to the emerging middle class, Sportmaster has been until recently the largest purveyor of clothes and apparel to Russians . 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. Sportmaster’s revenues grew by 20.3% in 2018 to RUB111bn rubles ($1.7bn).
Obuv Rossii announced on October 3 that in 9mo19 it had launched 157 directly operated stores, with 52 of them opened in 3Q19. The majority of the 9mo19 openings were in Siberia (43%), followed by the Urals (17%), the Russian Far East (19%) and the Volga region (18%), with the remainder in the North-West. The total selling space of directly owned stores increased 14.5% y/y to 61,600 sqm. The 157 net openings YTD accounts for 80% of our annual forecast and has come before the high season in footwear retail. For 2019, we factor selling space growth of 35% y/y, which we see fuelling revenues in 2020-21. For now, the new stores are downbeat, bringing low maturity but increased working capital. This is a key headwind for Obuv Rossii and NWC currently matches revenues. The clearly defined seasons enlarge the assortment, while the rapid roll-out means that 20% of inventories are in stores which are ramping up, while a further 10% is sourced for outlets that have yet to be opened. Since the IPO in 2017, the stock has declined two-thirds and now trades on 2020F EV/EBITDA of 4.2x, representing a 17% discount to Russian retail, with a 60% discount to CCC and EM peers. Until the company streamlines growth and working capital bankers keep a cautious view; Hold reiterated.
O’Key has announced an interim dividend of $15.1mn, with the record day to be announced. The announced amount implies a 36% payout ratio from 2019F net income and a 3.6% yield. The company has recently slowed its organic openings, with management guiding for no new hypermarkets and only 20 discounters in 2019, putting less pressure on cash flows and providing
123 RUSSIA Country Report November 2019 www.intellinews.o