TIDMLNTR TIDMLNTA
RNS Number : 0622X
Lenta Ltd
25 April 2019
LENTA SALES AND OPERATING HIGHLIGHTS FOR THE FIRST QUARTERED 31
MARCH 2019
St-Petersburg, Russia; 25 April, 2019 - Lenta Ltd, (LSE, MOEX:
LNTA / "Lenta" or the "Company") one of the largest retail chains
in Russia, is pleased to announce the Company's consolidated sales
and operating results for the first quarter ended 31 March
2019.
1Q 2019 Operating Highlights:
-- Total sales grew 6.0% in 1Q 2019 to Rub 99.0bn (1Q 2018: Rub
93.4bn), including retail sales growth of 9.9% to Rub 97.1bn (1Q
2018: Rub 88.3bn) and wholesales decline of 61.5%;
-- Like-for-like ("LFL")(1) retail sales growth of 5.0%
excluding VAT vs. 1Q 2018. This is equivalent to LFL retail sales
growth of 5.9% including VAT, due to the recent increase in
VAT;
-- LFL retail traffic growth of 3.8% combined with LFL retail ticket growth of 1.2%;
-- One hypermarket was opened during the first quarter of 2019,
while one hypermarket and four supermarkets were closed;
-- Total store count reached 375 stores at 31 March 2019,
comprising 244 hypermarkets and 131 supermarkets;
-- Total selling space increased to 1,464,461 sq.m as at 31
March 2019 (+5.1% vs. 31 March 2018); and
-- Number of active loyalty cardholders(2) increased to 14.8m
(+14.2% y-o-y) with around 96% of transactions in the first quarter
made using the loyalty card.
Events in 1Q 2019 and after the reported period:
-- Rud Pedersen joined the Company as Chief Financial Officer
and became a Director of Lenta Ltd. by virtue of his CFO role;
-- Ruslan Ismailov, who previously served as a Divisional
Director was appointed as Supermarket Format Director;
-- Severgroup LLC announced that it has agreed to acquire the
equity interests in Lenta owned by TPG and EBRD. These represent
approx. 34.44% and 7.47% of the voting rights respectively. The
agreed price of US$ 3.60 per GDR is subject to the terms and
conditions of separate conditional share purchase agreements,
and;
-- Lenta announced the termination of its share buyback
programme. Since the initiation of the program, an aggregate of
approx. Rub 980.8m has been returned to GDR-holders, through the
purchase of 4,552,610 GDRs representing 0.93% of the share
capital.
(1) Lenta's stores are included in the LFL store base starting
12 months after the end of the month in which they are opened. The
Company has not made any changes to the methodology of LFL
calculation; both total sales growth and LFL sales growth are
reported excluding VAT as the best measure to evaluate y-o-y
performance
(2) Cardholders who made at least 2 purchases at Lenta during
the 12 months to 31 March 2019 are considered active
Lenta's Chief Executive Officer, Herman Tinga commented:
"Lenta delivered a strong retail sales performance in the first
quarter of 2019 with total retail sales up by 10%, which was double
selling space growth. Lenta's Like-for-like retail sales growth of
5% was the fastest we have seen in the last three years. Although
the economic environment remains weak, we are encouraged by
impressive inflows of new customers which enabled this acceleration
in like-for-like sales. I am particularly pleased with the rapid
progress in our supermarkets where like-for-like retail sales
growth accelerated to 22% driven by 19% traffic growth. As
expected, wholesales declined in the first quarter and we expect
this trend to continue for the rest of 2019, weighing on total
sales growth.
Although market conditions are still challenging, we see more
and more signs that promotional activity in the market is
stabilizing. Lenta's promotion share was flat in the first quarter
- this led to modest on-shelf inflation in March after two years of
shelf-price deflation.
Our expansion plans remain unchanged and are focused on selected
projects with the most attractive returns. We also closed a small
number of underperforming leased stores and expect this to have a
positive effect on future profitability.
Whilst some changes may take place among our shareholders, I
would like to stress that the Lenta team remains focused on our
business and our customers. We have a clear strategy in place and
are confident in delivering further improvements in 2019 and
beyond."
Lenta Store Developments
In the first quarter of 2019, Lenta opened one owned compact
hypermarket in Kazan with selling space of 5,232 sq.m. The company
also decided to close one leased compact hypermarket in Moscow
(5,044 sq.m selling space) and four leased supermarkets(3) . As a
result of these store closures, Lenta's net selling space fell
slightly in the reported quarter. Total selling space increased
5.1% y-o-y to 1,464,461 sq.m as at 31 March 2019.
After the end of the reported period the Company opened one
supermarket in the Moscow region, bringing the total store count to
244 hypermarkets and 132 supermarkets with total selling space of
1,465,426 sq.m (+5.9% growth y-o-y) as at the date of the
Announcement. Lenta retained its presence in 88 cities across the
country.
(3) Two supermarkets in Moscow, one in Noginsk (Moscow region),
and one in Gatchina (Leningradsky region) with total selling space
of 3,209 sq.m. were closed during 1Q2019
Quarterly
As at 31 As at 31 Net change Change (%)
Mar Mar
1Q 2019 1Q 2018
--------------------- ---------- ---------- ----------- ---------------
Total number of
stores 375 337 38 11.3%
--------------------- ---------- ---------- ----------- ---------------
Hypermarkets 244 232 12 5.2%
--------------------- ---------- ---------- ----------- ---------------
Supermarkets 131 105 26 24.8%
---------- ---------- ----------- ---------------
Number of net
store openings -4 9 -13 -144.4%
--------------------- ---------- ---------- ----------- ---------------
Hypermarkets 0 1 -1 -
--------------------- ---------- ---------- ----------- ---------------
Supermarkets -4 8 -12 -150.0%
---------- ---------- ----------- ---------------
Total selling
space (sq.m) 1,464,461 1,393,160 71,301 5.1%
--------------------- ---------- ---------- ----------- ---------------
Hypermarkets 1,353,653 1,303,375 50,278 3.9%
--------------------- ---------- ---------- ----------- ---------------
Supermarkets 110,808 89,530 21,278 24.0%
---------- ---------- ----------- ---------------
Total net selling
space added (sq.m) -3,021 10,862 -13,883 -127.8%
--------------------- ---------- ---------- ----------- ---------------
Hypermarkets 188 5,158 -4,970 -96.4%
--------------------- ---------- ---------- ----------- ---------------
Supermarkets -3,209 5,002 -8,211 -164.0%
---------- ---------- ----------- ---------------
Lenta's Operating Performance
The Company's retail sales grew by 9.9% in the first quarter of
2019, driven by selling space additions and solid growth of LFL
retail sales. Total sales reached Rub 99.0bn implying a 6.0% growth
compared to the first quarter of the previous year. A significant
decline of 61.5% in sales to wholesale customers accounts for the
difference between retail sales growth and total sales growth in
the first quarter. Lenta expects wholesales to decline y-o-y
throughout 2019.
The Company continued implementing a series of initiatives to
increase the distinctive attractiveness of Lenta's offering to
customers. These initiatives included changes in assortment
(including introduction of new private label product ranges),
marketing, Lenta's loyalty program and customer communication.
The Company maintained focus on digital marketing activities to
reach customers, with special offers tailored on an individual
basis to enhance traffic and basket size. The number of active
loyalty cardholders increased to 14.8m as at 31 March 2019 (+14%
y-o-y) and the share of transactions made with the loyalty card was
96%. Lenta's Mobile App launched in the fourth quarter of 2018 has
already attracted more than 1.8 million users. Lenta plans to
continue to enhance the Mobile App's functionality to deliver an
even better customer experience resulting in increased loyalty,
higher sales and lower marketing costs.
Hypermarket retail sales growth was 6.9% in the first quarter,
while selling space growth in the format was 3.9%. LFL retail sales
growth in the hypermarket format improved to 4.0% in the reported
quarter from 1.8% in the fourth quarter of the last year,
offsetting slower selling space growth.
The supermarket format's total sales rose by 55.0% in 1Q 2019
driven by a 24% increase in selling space and significant
improvement in LFL retail sales growth. The supermarket format's
share of Lenta's retail sales increased to 8.8% in the reported
quarter vs. 7.8% in the fourth quarter of 2018.
Quarterly
1Q 1Q
2019 2018 Net change Change (%)
-------------------- --------- --------- -----------
Total sales (Rub,
million) 99,025 93,441 5,584 6.0%
-------------------- --------- --------- ----------- ---------------
Retail sales (Rub,
million) 97,056 88,325 8,731 9.9%
-------------------- --------- --------- ----------- ---------------
Hypermarkets 88,468 82,784 5,684 6.9%
-------------------- --------- --------- ----------- ---------------
Supermarkets 8,588 5,542 3,047 55.0%
-------------------- --------- --------- ----------- ---------------
Wholesales (Rub,
million) 1,970 5,116 (3,146) (61.5%)
--------- --------- ----------- ---------------
Retail average
ticket (Rub) 998 1 018 (20) (2.0%)
-------------------- --------- --------- ----------- ---------------
Hypermarkets 1,101 1,089 13 1.2%
-------------------- --------- --------- ----------- ---------------
Supermarkets 507 516 (9) (1.8%)
--------- --------- ----------- ---------------
Retail customer
traffic (million) 97.3 86.8 10.5 12.1%
-------------------- --------- --------- ----------- ---------------
Hypermarkets 80.3 76.0 4.3 5.6%
-------------------- --------- --------- ----------- ---------------
Supermarkets 17.0 10.7 6.2 57.8%
--------- --------- ----------- ---------------
The average hypermarket retail ticket increased by 1.2% to RUB
1,101, while LFL average hypermarket retail ticket rose 2.2%. The
average retail ticket in the supermarket format in the first
quarter decreased by 1.8% to Rub 507 compared to a 2.3% increase in
the LFL average retail ticket. In both formats, the difference
between total and LFL average ticket growth reflects the impact of
stores in a ramp-up phase which entered the LFL panel in the
reported period.
Total retail customer traffic increased by 12.1% in the first
quarter of 2019 compared with the same period of the previous year,
comprising 5.6% growth in hypermarket traffic and a 57.8% increase
in retail traffic at Lenta's supermarket format.
During the first quarter of 2019, 15 hypermarkets and 21
supermarkets entered the LFL panel.
LFL retail sales demonstrated notable growth of 5.0% (excluding
VAT) in the first quarter. This represents a significant
improvement compared to the previous quarter - largely driven by
3.8% growth in LFL retail traffic, the highest level since 2015.
LFL food retail sales increased by 5.4% and LFL non-food retail
sales by 1.8% y-o-y.
The increase in VAT rates announced by the government in 2018
was implemented during the current quarter. LFL retail sales
including VAT increased by 5.9% - about 0.9% faster than LFL retail
sales excluding VAT as a result of higher VAT rates.
Quarterly
------------------------- ------------------------------------------------
LFL sales growth LFL average LFL traffic
1Q 2019 ticket growth growth
1Q 2019 1Q 2019
------------------------- ----------------- --------------- ------------
Lenta retail (excluding
VAT) 5.0% 1.2% 3.8%
------------------------- ----------------- --------------- ------------
Hypermarkets 4.0% 2.2% 1.7%
------------------------- ----------------- --------------- ------------
Supermarkets 21.8% 2.3% 19.1%
------------------------- ----------------- --------------- ------------
Lenta continued to win new unique customers in both new and LFL
hypermarkets and supermarkets. LFL retail sales growth of 4.0% in
hypermarkets was predominantly driven by an improvement in traffic
growth, while average ticket growth remained almost stable versus
previous quarter. Customer traffic in the LFL hypermarkets
increased by 1.7% y-o-y as a slight reduction in visit frequency
was overcompensated by a significant increase in the number of new
customers. LFL average retail ticket growth in the format remained
almost unchanged at 2.2% as a result of a continuous trading-up
effect which outweighed a decline in the average number of items
per basket and impact of on-shelf deflation in the first quarter.
Nonetheless, deflationary effects were at their lowest level over
the last two years and in March the Company recorded on-shelf
inflation for the first time since February 2017.
LFL retail sales growth in supermarkets in 1Q 2019 surged by
21.8%, compared to 7.6% in the previous quarter. Higher traffic
continued to drive LFL retail sales growth as a result of
significant growth of the number of new unique customers combined
with slightly increased visit frequency. Lenta continued to work on
tactical changes to the offering, such as extension of the
assortment and changes in marketing activities, in order to enhance
attractiveness of stores to customers. LFL retail ticket growth
improved for the second consecutive quarter to 2.3% despite the
effect of on-shelf price deflation.
LFL retail sales growth of 5.0% in 1Q 2019 was therefore due to
a combination of factors: a notable increase in number of customers
with overall lower frequency of visits combined with strong
trading-up effects; partly offset by on-shelf price deflation and a
reduction in the average number of items per basket.
Guidance
Lenta confirms its plans to open about 8 new hypermarkets in
2019 as part of its organic expansion. The Company is also
scheduled to open about 7 new supermarkets. The Company expects
capital expenditures of about Rub 15bn in 2019.
About Lenta
Lenta is the largest hypermarket chain in Russia and the
country's third largest retail chain. The Company was founded in
1993 in St. Petersburg. Lenta operates 244 hypermarkets in 88
cities across Russia and 132 supermarkets in Moscow, St Petersburg,
Central, Siberia and Ural with a total of approximately
1,465,426sq.m of selling space. The average Lenta hypermarket store
has selling space of approximately 5,500 sq.m. The average Lenta
supermarket store has selling space of approximately 800 sq.m. The
Company operates twelve distribution centres.
The Company's price-led hypermarket formats are differentiated
in terms of their promotion and pricing strategies as well as their
local product assortment. The Company employed approximately 45,759
people as of 31 December 2018(4) .
The Company's management team combines a mix of local knowledge
and international expertise coupled with extensive operational
experience in Russia. Lenta's largest shareholders include TPG
Capital and the European Bank for Reconstruction and Development,
both of which are committed to maintaining high standards of
corporate governance. Lenta is listed on the London Stock Exchange
and on the Moscow Exchange and trades under the ticker: 'LNTA'.
A brief video summary on Lenta's business and its Big Data
initiative can be seen here.
(4) FTE (full-time equivalent). Average FTE for 2018 was 43,283
employees
For further information please visit www.lentainvestor.com, or
contact:
Lenta Russian Media:
Mariya Filippova NW Advisors
Head of PR&GR Anton Karpov & Victoria Afonina
Tel: +7 812 380-61-31 ext.: el:+7 495 795 06 23
1892 E-mail: lenta@nwadvisors.com
E-mail: maria.filippova@lenta.com
Forward looking statements:
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the fact that they do not only
relate to historical or current events. Forward-looking statements
often use words such as "anticipate", "target", "expect",
"estimate", "intend", "expected", "plan", "goal", "believe", or
other words of similar meaning.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances,
a number of which are beyond Lenta's control. As a result, actual
future results may differ materially from the plans, goals and
expectations set out in these forward-looking statements.
Any forward-looking statements made by or on behalf of Lenta
speak only as at the date of this announcement. Save as required by
any applicable laws or regulations, Lenta undertakes no obligation
publicly to release the results of any revisions to any
forward-looking statements in this document that may occur due to
any change in its expectations or to reflect events or
circumstances after the date of this document.
This information is provided by RNS, the news service of the
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END
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