Page 116 - RusRPTMay19

company said on March 31, adding that bought out shares will be used to pay a bonus for the company's president Yan Dunning. Previously Magnit bought out shares in 2018 to provide RUB16.5bn worth of stock options to its reshuffled management, which was welcomed by the analysts. "Max price for buyback is set at a 10% premium to close on 29 March," BCS Global Markets commented on April 1, arguing that the "buyback will provide short term support for local shares."
Severgroup of Russian steel tycoon Alexei Mordashov has acquired a 41.53% stake in Russia’s second tier retailer, hypermarket chain Lenta to enter the retail business. Mordashov bought the shares from Lenta's largest shareholder TPG Group, which sold its 34.13% stake, and the European Bank for Reconstruction and Development, which sold its 7.4% stake, the company announced on London Stock Exchange, confirming previous reports. Lenta operates 244 hypermarkets and 135 supermarkets with a total area of 1.5mn square meters. In 2018 the revenues of the company were up by 13.2% to RUB414mn, but net profit declined by 11% to RUB11.8bn. The chain is the third largest in Russia in terms of food sales after X5 Retail Group and Magnit. Mordashev paid $3.6 per one GDR of Lenta, or $728.9mn for the whole stake or $1.75bn, which makes about 8% premium to the market. The explosive growth of Russia’s supermarket chains has come to an end as organised retail starts to run up against structural constraints. The leading chains have switched from expansion to grab more market share to improving profitability and have even begun to close some of their more unprofitable stores. Lenta has been struggling to find a strategy to more effectively compete with the two market leaders Magnit and X5 Retail Group. Lenta's acquisition is conditioned by a mandatory buyout offer to all shareholders of the retailer's GDRs and shares, which will be held at $3.6 per GDR or $18 per share. After an IPO in 2014 Lenta has a freefloat of 57.22% on London Stock Exchange.
● Detsky Mir
Russia’s leading children's store Detsky Mir has published robust 1Q19 trading update with sales accelerating 16.1% y/y, driven by robust like-for- like (LFL) growth in both Russia and Kazakhstan, the company said on April 15. Real incomes in Russia maybe stagnating but people are still spending on their kids and most of gains came from increasing customer numbers, VTB Capital (VTBC) said in a note, up by 7.25 in the quarter. “The company’s core, Russian market demonstrated 6.6% LFL growth, boosted by the national holidays in Russia (23 February and 8 March) and the maturity of stores opened in 2017-18, Maria Kolbina, a retail analyst with VBTC said. “These results provide upside risks to our more conservative forecast for 2019F of 11% y/y growth and could potentially serve as a foothold for better growth prospects.” The company continues to expand on the back of its iconic brand, well known to everyone in the former Soviet Union. The company opened five outlets in the first quarter, bringing its total store base to 748 locations, and 769,000sqm of selling space. Detsky Mir also entered the Belarusian market this year as an emerging middle class makes it more appealing to retailers, as bne IntelliNews has reported with “The long march of Belarusian retail” in September 2018. Detsky Mir opened its first three stores in the first quarter and confirmed plans to open at least 80 more Detsky Mir stores in 2019, including 10 more in Belarus. As bne IntelliNews has already reported, Detsky Mir plans to open 30-50 new stores in Belarus in the next 3-4 years. The real disposable money income of Belarusians rose by 8.1% y/y in January-October 2018, the National Statistics Committee of Belarus reported on December 18 and is expected to continue rising. The domestic supermarket chain Eurotorg
116 RUSSIA Country Report May 2019 www.intellinews.com