Page 95 - RusRPTJuly18

Russian children's goods retailer Detsky Mir will develop a new retail format ABC, a multi-brand chain also selling educational toys, the company, that is controlled by multi-industry investment conglomerate AFK Sistema, told Vedomosti daily on June 5. Aton Equity on June 6 commented that the news is "marginally positive" for Detsky Mir, as ABC format will help Detsky Mir to extend its geography of presence beyond the main regions, and to attract more price-sensitive clientele to its stores. The new format will complement its ELCs (Early Learning Centre) chain. The selling space of the stores will be 100-150 sqm with around 1,500 stock keeping unit (SKUs) on shelves (around 300 from the ELC assortment, as well as private label and other brands' toys). Due to the decline in the ruble rate, many products in the ELC line have moved into the above-the-average and even premium segment. According to Vedomosti t he average check in ABC chain is expected to be on par with ELC, and 60-65% higher than at Detsky Mir (estimated RUB2,160-RUB2,300). As of March 2017 Detsky Mir operated 579 main format retail stores and 46 ELC stores that are franchised from UK's Mothercare. Previously in May Kommersant daily reported that Detsky Mir is currently considering opening branches in Belarus in the leading stores and shopping malls as well as looking at entering the market via the acquisition of local retail players. “Detsky Mir is already present in other neighbouring markets, operating 22 stores in 12 cities in the Republic of Kazakhstan. Entering the Belarus market could support the company’s aggressive development pipeline: management guidance points to at least 70 new stores in 2018 and 250 new outlets in 2018-21F,” VTB Capital (VTBC) analysts said in a note.
X5 market share in the grocery market of St. Petersburg may exceed 25% in 2018 , according to the he Federal Antimonopoly Service in St. Petersburg. X5’s market share reached 23.86% in St. Petersburg as of end-2017. However, taking into account the recent acquisition of 32 O’Key supermarkets, X5’s market share may rise to the 25% limit or even exceed it in 2018. If this materializes, X5’s rental agreements for additional selling space in the city will become invalid. X5 will probably need to focus on other regions. X5 CFO Svetlana Demyashkevich previously said that the retailer would need to shift its focus to other regions, such as Moscow, the Moscow region and the St. Petersburg region, when evaluating network expansion plans. The FAS’ restrictions, if introduced, would not affect X5’s top line growth targets.While the potential impact on X5’s P&L would likely be minimal, the news may create negative sentiment around the name, which could put modest pressure on the stock in the near-term.
The Federal Fisheries Agency will sell fish directly to consumers. By cutting out distribution chains, the state-owned stores hope to keep prices 20% lower than other retailers. The new stores should raise domestic and local demand, helping fishing companies. They will also increase the Fisheries Agency's ability to control market conditions and to pick winners among fishing companies. Both measures will consolidate the industry in the hands of those already on top. The Fisheries Agency has just introduced a new quota system for fishing companies. Companies that invest in fishing infrastructure, either by ordering new fishing vessels from Russian shipyards or by building fish processing plants, receive additional fishing quotas. These changes should make it easier for larger firms to plan longer-term investments, a consistent problem in the sector due to changes in fishing quotas and regulations
RUSSIA Country Report July 2018 www.intellinews.com