Page 148 - RusRPTNov21

unmatched for Russian retail at 18.7% (1H21 EBITDA margin
under IFRS 16).
● The development plan assumes the chain tripling in 10-15 years.
● Variety value retailing is still underpenetrated (1% in Russia vs.
2.5-4% in the USA and the UK). The segment is scheduled for a 19% CAGR in the medium term, i.e. 5x faster than overall retail. The ultimate potential for 15.5k stores was also restated.
● There are no plans to roll out an own marketplace or online store. The click and collect option, and cooperation with Sbermarket, provide new clients for the company while the share of online is around 1% of total.
● DC capex was guided at RUB 15-16bn in the next four-five years to double the capacity. In the near-term, two logistics centres are being considered for the Volga Region and Moscow.
● The suppliers split is unchanged for now, at 75% local and 25% foreign. Freight costs are up 5x YTD and sea logistics are still experiencing a container shortage.
● The client profile is intact: 70% women/30% men, with an average age of 40 years. In 2021, the company saw higher demand for food and it reorganised its marketing and offer accordingly.
● Inflation is to be addressed in due course, in contrast with peers on the developed markets, while Fix Price is considering new price points but without going into to more pricy segments.
● The ESG strategy and report are to be presented in 2022
Detsky Mir published its trading update for 3Q21 on October 14. Revenues rose 14% y/y to R43.9bn in the quarter, which marked a deceleration from the 29.6% growth in 2Q21.
Despite the high base of 3Q20 (from the spike in demand for online shopping last year), the company managed to post double-digit top-line growth, thanks mainly to a normalization in traffic, back-to-school shopping and the ongoing surge in its online sales. Notably, the share of apparel and footwear (a high-margin category) in total sales reached a record 36% in the quarter.
LFL sales growth came in at 6.3% y/y in 3Q21, with 4.1% traffic and 2.2% ticket growth. Detsky Mir's online sales in Russia increased by 43.7% y/y to R11.8bn, or 27.0% of total revenues. As for the monthly performances, July was weaker due to the unusually high temperatures and Covid-related restrictions, while August was strong due to back-to-school shopping, which got a boost from social payments.
The company added 85 stores on a net basis during the quarter (including 34 in the smaller Detmir.ru format and 27 Zoozavr stores), which took the total store count to 1,014.
The top-line numbers were above the company's conservative guidance and our forecasts, so we take them positively. Regarding the upcoming financial results, the company's full-year EBITDA
148 RUSSIA Country Report November 2021 www.intellinews.com