Page 108 - RusRPTDec19

our model and a selling space CAGR of some 10% over the period. Online sales are set to reach 30% of the total, with the EBITDA margin being similar to that of the offline channel. Revenue growth was comparable QoQ in 4Q19. The company is increasing the share of its private label, with 70-80% in the fashion category, and also aims to reach a 50% share in toys. Management sees the company becoming the number one player in Belarus in a couple of years, while its pets goods business, Zoozavr stores, is guided to reach breakeven on the EBITDA level by YE19.
Indian Surya Group (operates the stores of British brand Superdry and Jeans Symphony store chain in Russia together with Indian multi-industry holding Reliance Industries could potentially acquire Russian children’s goods retailer ​Detsky Mir​, ​Kommersant d​ aily reported on November 15 citing unnamed sources close to the deal. Detsky Mir is controlled by the AFK Sistema multi-industry investment conglomerate, which has been seeking to SPO or sell the asset. The latest reports suggested that the ​retailer could be sold​ to the Safmar Group of Mikhail Gutseriev or to Sovcombank. Reportedly, the negotiations with Indian investors are still in the preliminary stage, but the buyers are reportedly interested in turning Detsky Mir into a global player and to spin it off on the Indian market.
X5 Retail Group​ is launching online FMCG products with delivery to corporate clients via Perekrestok.ru​. The online assortment covers 24,500 SKU, while the average check is estimated at RUB7,000 (twice as high as for individual shoppers). Our View: Perekrestok.ru was established in 2017 and its target is to become the largest e-grocer in Russia next year, with a turnover of RUB12bn. The online food market is the most rapidly evolving segment in commerce and we see it surging 5-8x by 2025F to RUB186-300bn. InfoLine sees the FMCG market for corporate clients at RUB120bn annually, or 0.8% of total food retail, and incremental white space for the company. We consider the service as appealing for those working in offices and hotels, as well as small entrepreneurs, while restaurants might require a deeper assortment. There is little clarity on returns, as the core competition would be with wholesale operators and specialised retailers. The new digital growth pillars could, in our view, return X5 Retail Group to rapid expansion in the medium term. For 2020F, we forecast revenues advancing 10% y/y to RUB1.9tn. In its ten-year strategy, X5 assumes turnover tripling to RUB6tn and a 20% market share by 2029. New businesses are set to account for 20% of the total by then. In e-grocery, we see two key areas for multichannel retail diversification: express delivery from Pyaterochka and Perekrestok.ru stores. We see the new initiatives as potentially accelerating growth in the medium term but currently consider X5 as fairly valued so are reiterating our 12-month Target Price of $35 and Hold recommendation.
Russia's largest retailer ​X5 Retail Group​ will start testing wholesale deliveries to restaurants, coffee shops, offices, SMEs ​and other B2B clients, the representatives of the company told Vedomosti daily on November 25. Competition in the traditional retail tightens and all the players are seeking to expand across all niches. As reported by ​bne IntelliNews,​ previously X5's largest rival ​Magnit also started experimenting with wholesale formats​.
Fortune 500 major TJX Companies bought 25% in Russian apparel discounter ​Familia​ for $225mn, valuing the company at $900mn​, RBC business portal reported on November 19. TJX operates apparel discounters TK Maxx in Europe and Marshalls, Homegoods, TJ Maxx in the US, operating
108​ RUSSIA Country Report​ December 2019 ​ ​www.intellinews.com