Lenta Ltd. (LNTA;LNTR)
Lenta Ltd.: 2Q 2019 sales and operating results
25-Jul-2019 / 08:59 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
LENTA SALES AND OPERATING HIGHLIGHTS FOR THE SECOND QUARTER ENDED 30 JUNE
2019
St-Petersburg, Russia; 25 July, 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
second quarter ended 30 June 2019.
2Q 2019 Operating Highlights:
- Total sales grew 0.4% in 2Q 2019 to Rub 100.2bn (2Q 2018: Rub 99.8bn),
including retail sales growth of 4.7% to Rub 97.8bn (2Q 2018: Rub 93.4bn)
and wholesales decline of 62.4%;
- Like-for-like ("LFL")[1] retail sales growth of 0.8% excluding VAT vs.
2Q 2018. This is equivalent to LFL retail sales growth of 1.6% including
VAT, due to increase in VAT from 1 January 2019;
- LFL retail traffic growth of 0.6% combined with LFL retail ticket growth
of 0.2%;
- Two hypermarkets and one supermarket were opened during the second
quarter of 2019;
- Total store count reached 377 stores at 30 June 2019, comprising 246
hypermarkets and 131 supermarkets;
- Total selling space increased to 1,472,937 sq.m as at 30 June 2019
(+5.0% vs. 30 June 2018); and
- Number of active loyalty cardholders[2] increased to 15.2m (+13.5%
y-o-y) with around 97% of transactions in the second quarter made using
the loyalty card.
1H 2019 Operating Highlights:
- Total sales grew 3.1% in 1H 2019 to Rub 199.2bn (1H 2018: Rub 193.2bn),
including retail sales growth of 7.2% and wholesale decline of 62.2%
- LFL retail sales growth of 2.9% excluding VAT vs. 1H 2018. This is the
equivalent of LFL retails sales growth of 3.7% including VAT, due to
increase in VAT from 1 January 2019;
- LFL traffic growth of 2.1% combined with a 0.7% growth in LFL ticket;
and
- Three new hypermarkets and one supermarket were opened during 1H 2019
while one hypermarket and four supermarkets were closed.
Events in 2Q 2019 and after the reported period:
- Severgroup LLC acquired 34.45% and 7.47% of Lenta's issued and
outstanding voting shares from TPG and EBRD respectively. As a result,
Severgroup launched a cash offer on 30 April 2019 to acquire all of the
issued shares and GDR's of Lenta;
- Once Severgroup acquired in aggregate more than 50% of the Lenta voting
shares, the Board used its authority to fill the four vacated seats on the
Board with the nominees of Severgroup, namely Messrs. Alexey Mordashov,
Roman Vasilkov, Maxim Bakhtin and Alexey Kulichenko;
- Upon completion of the mandatory tender offer on 4 June 2019,
Severgroup's holding was a combined total of approximately 78.73% of
Lenta's voting rights (c. 77.99% of Lenta's share capital).
Lenta's Chief Executive Officer, Herman Tinga commented:
"Lenta delivered healthy retail sales growth of 4.7% and like-for-like sales
growth of 0.8% in the second quarter. The results mainly reflect a
deteriorated economic situation for our consumers, negative impact of
calendar effects in the second quarter and overall tough competition in the
retail industry.
Stagnating household disposable income and a shift in Easter holidays
especially affected our performance in hypermarkets with a decline of
like-for-like retail sales by 0.2%. The pressure mainly came from negative
like-for-like traffic of 1.4% due to lower frequency of customer visits, and
slower growth of the average ticket.
Despite these challenges we have being encouraged by ongoing inflow of new
customers to our stores throughout the second quarter thanks to further
improvements in offering and balanced promotional activity. This trend also
supported our supermarket format, which continued to demonstrate solid
like-for-like sales growth driven by strong increase in traffic.
Amid pressure from the market environment, we remain focused on improving
operational efficiency of our existing business, while we keep working on
initiatives that should drive sales and deliver continued growth this year.
I would also like to welcome Severgroup as our new major shareholder and
long-term strategic partner. The management team will be looking forward to
working together on the strategy that would help to further strengthen
Lenta's business and deliver strong returns to all of our shareholders. "
Lenta Store Developments
In the second quarter of 2019 Lenta opened 3 new stores on a net basis. This
included the opening of two compact hypermarkets: one owned hypermarket in
Ekaterinburg with selling space of 4,340 sq.m, and one leased hypermarket in
St. Petersburg with selling space of 5,263 sq.m. The Company also opened one
leased supermarket in the Moscow region.
In the reported quarter Lenta added 10,568 sq.m of net selling space. As at
30 June 2019 the total number of stores reached 377, including 246
hypermarkets and 131 supermarkets with total selling space of 1,472,937
sq.m. (+5.0% y-o-y). Lenta retained its presence in 88 cities across the
country.
After the end of the reported period the Company made a decision to close
one compact leased hypermarket in Novokuznetsk and one leased supermarket in
St. Petersburg with selling spaces of 4,503 sq.m and 644 sq.m respectively.
Quarterly Year to Date
As at As at Net Change As at As at Net Change
30 30 chang (%) change (%)
June June e
2Q
2018 30 30
June June
2Q 1H
2019 2018
1H
2019
Total 377 345 32 9.3% 377 345 32 9.3%
number
of
stores
Hyperm 246 233 13 5.6% 246 233 13 5.6%
arkets
Superm 131 112 19 17.0% 131 112 19 17.0%
arkets
Number 3 8 -5 -62.5% -1 17 -18 -105.9%
of net
store
openin
gs
Hyperm 2 1 1 100.0% 2 2 0 0.0%
arkets
Superm 1 7 -6 -85.7% -3 15 -18 -120.0%
arkets
Total 1,472 1,403, 69 5.0% 1,472, 1,403 69 860 5.0%
sellin ,937 077 860 937 ,077
g
space
(sq.m)
Hyperm 1,363 1,308, 55 4.2% 1,363, 1,308 55 088 4.2%
arkets ,256 168 088 256 ,168
Superm 109,6 94,909 14 15.6% 109,68 94,90 14 772 15.6%
arkets 81 772 1 9
Total 11 10,172 1 635 16.1% 8 786 19 -10 411 -54.2%
net 807 197
sellin
g
space
added
(sq.m)
Hyperm 9 603 4,793 4 810 100.4% 9 791 9 951 -160 -1.6%
arkets
Superm 2 204 5,379 -3 -59.0% -1 005 9 246 -10 251 -110.9%
arkets 175
Lenta's Operating Performance
The Company's retail sales grew by 4.7% in the second quarter of 2019,
driven by selling space additions as well as growth of LFL retail sales.
Total sales reached Rub 100.2bn implying a 0.4% growth compared to the
second quarter of the previous year. A significant decline of 62.4% in sales
to wholesale customers accounts for the difference between retail sales
growth and total sales growth in the second 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 15.2m as at 30 June 2019 (+13.5% y-o-y) and the share of transactions
made with the loyalty card was 97%. Lenta's Mobile App launched in the
fourth quarter of 2018 has already attracted more than 3 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 2.4% in the second quarter primarily
driven by selling space growth of 4.2%, while LFL retail sales in the format
decreased by 0.2%. The supermarket format's total retail sales rose by 38.3%
in 2Q 2019 driven by a 17.8% increase in selling space and significant
improvement in LFL retail sales, which rose by 15.8% in the reported
quarter. The supermarket format's share of Lenta's retail sales was 8.7% in
the reported quarter vs. 8.8% in the first quarter of 2019. Its share
increased from 7.8% in the fourth quarter of 2018.
Quarterly Year to Date
2Q 2Q Net Change 1H 1H Net Change
2019 2018 chan (%) 2019 2018 chang (%)
ge e
Total 100,1 99,7 381 0.4% 199,1 193,2 5,966 3.1%
sales 56 75 82 16
(Rub,
million)
Retail 97,80 93,3 4,40 4.7% 194,8 181,7 13,12 7.2%
sales 0 56 4 42 21 1
(Rub,
million)
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