Page 116 - RusRPTJun20

indication that the service is expanding, with the plan to reach 500 outlets by YE20 in five more cities. In April, Delivery.Pyaterochka reported 259,000 orders across 4,000 SKUs with an average check of RUB2,006 and delivery time of 1.5-2 hours. Its core competitors, Samokat (the pioneer in this service) and Yandex.Lavka, had over 1mn and 780,000 orders, respectively. Express delivery is the most promising niche, in our view, as its covers the service of the convenience format (38% of food retail in 2019) in medium-sized cities and creates a new layer of social infrastructure, with the possibility to expand into other goods. For more details, see our E-Grocery sector - Quarantine canteen, of 8 April.
Dochki-synochki has filed for intergroup bankruptcy and a similar claim is to be made by its supplier​, according to Kommersant. Dochki-synochki was the second largest traditional retailer in the children goods category in Russia, with 2019 turnover of RUB20bn, 189 stores, and a market share of 5%. The update signals a deterioration in Dochki-synochki’s operational and liquidity position, particularly given that stores are shut because of the lockdown restrictions.
Detsky Mir is the leader, with RUB128bn, 720 stores (DM branded stores only in Russia), and 26% respectively​. Detsky Mir has seen limited competition in the offline segment, with its nearest competitor only about 15% the size. In online sales, the largest players are Wildberries (RUB42bn turnover in 2019), Detsky Mir (RUB14.4bn) and Ozon (RUB12.4bn). In April, Detsky Mir lost 33% y/y in revenues while its online store surged 3.5x, accounting for 41% of the total (vs. 11.2% last year). We think that the growing preference for e-commerce in the children goods segment is to remain after the restrictions are lifted, driven by the increased promotion of the service and lower client acquisition costs, while the channel is to become a prime growth pillar and competition niche.
Detsky Mir​ has released 1Q20 financial results that were decent, but take a back seat to current adverse operational conditions​. The EBITDA margin was almost flat y/y, at 6.2%, while a minor improvement in gross profitability was offset by higher SG&As. EBITDA and net income matched (adjusted for FX losses) consensus estimates. Net working capital was hit by an additional RUB5bn purchase to mitigate FX risks and pushed net debt/EBITDA to 1.6x as of March, and doubled q/q NWC. In April, the company’s revenues declined 33% y/y (down 19% y/y in the last week) while online surged 3.5x y/y to represent 41% of total. Analysts factor in a 30% y/y correction for 2Q20, and 10% y/y decline in 2H20, seeing pressured household spending and sanitary concerns to visit shopping malls. The company is sticking to its longer-term targets of at least 300 new openings but is postponing its dividend distribution and is to revisit short-term targets (LFL growth, optimised SG&A, double-digit adjusted EBITDA margin) when the restrictions are lifted.
Obuv Rossii has reported weak 1Q20 numbers, showing 4% y/y growth​, which was a slowdown from almost 19% y/y in 2019. We believe that the 2Q20 trends do not have much connection to 1Q20, as a significant part of the company’s stores were closed during April and we think that the first half of May could see more negative consumer trends due to the public holidays over the period. Apart from that, the apparel and footwear industry in Russia is suffering from currency depreciation, which is likely to lead to higher prices, which in turn can only be compensated by cheaper collections. We see material downside risk to our annual sales growth forecast of 12%. We note
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