Lenta Ltd. (LNTA;LNTR)
Lenta Ltd.: 3Q 2019 sales and operating results
28-Oct-2019 / 07:56 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 THIRD QUARTER ENDED 30
SEPTEMBER 2019
St-Petersburg, Russia; 28 October, 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 third quarter ended 30 September 2019.
3Q 2019 Operating Highlights:
- Total sales declined by 0.4% in 3Q 2019 to Rub 100.4bn (3Q 2018: Rub
100.8bn), including retail sales growth of 2.9% to Rub 97.8bn (3Q 2018:
Rub 95.1bn) and wholesales decline of 55.0%;
- Like-for-like ("LFL")[1] retail sales declined by 0.5% excluding VAT vs.
3Q 2018. This is equivalent to LFL retail sales growth of 0.4% including
VAT, due to increase in VAT from 1 January 2019;
- LFL retail traffic decline of 2.0% combined with LFL retail ticket
growth of 1.5%;
- One hypermarket was opened during the third quarter of 2019;
- Total stores numbered 375 stores as at 30 September 2019, comprising of
246 hypermarkets and 129 supermarkets;
- Total selling space increased to 1,471,647 sq.m as at 30 September 2019
(+4.3% vs. 30 September 2018); and
- Number of active loyalty cardholders[2] increased to 15.5m (+12.5% YoY)
with around 97% of transactions in the third quarter carried out using the
loyalty programme.
9M 2019 Operating Highlights:
- Total sales grew 1.9% in 9M 2019 to Rub 299.6bn (9M 2018: Rub 294.0bn),
including retail sales growth of 5.7% to Rub 293bn (9m 2018: Rub 277bn)
and wholesale sales decline of 59.9%;
- LFL retail sales growth of 1.7% excluding VAT vs. 9M 2018. This is the
equivalent of LFL retails sales growth of 2.6% including VAT, due to the
increase in VAT from 1 January 2019;
- LFL traffic growth of 0.7% combined with a 1.0% growth in LFL ticket;
and
- Four new hypermarkets and one supermarket were opened during 9M 2019,
while two hypermarkets and seven supermarkets were closed during the same
period.
Events in 3Q 2019 and after the reported period:
- The Company established a representative office of Lenta Ltd. (a holding
company registered in the British Virgin Islands) in St. Petersburg and
the Company's CFO, Rud Pedersen, was appointed as the head of the office;
- The Extraordinary General Meeting, held on 22 October 2019, resolved
that the Company will continue its incorporation in the Republic of Cyprus
and will be registered as a public limited liability company ("Lenta
PLC"), followed by amendments and replacement of the current Memorandum
and Articles of Association. The full text of resolutions and the results
of voting at the EGM can be viewed on the Company's website at
www.lentainvestor.com [1].
Lenta's Chief Executive Officer, Herman Tinga commented:
"The third quarter of 2019 was another challenging period for the food
retail industry. The market remained very price-competitive due to the weak
macroeconomic environment combined with the rapid expansion of retail
chains. Consumers continued to be price-sensitive with more options around
for making daily grocery purchases, while the retail chains have been
focused on driving customer traffic by enhancing promotional activity.
As a result of these market trends, Lenta saw a declining frequency of
visits together with reduction in the average number of items in the basket.
This affected our results in the third quarter as Lenta delivered retail
sales growth of 2.9%, while LFL sales declined by 0.5%. At the same time we
also faced seasonal factors such as cold weather, low demand for non-food
and seasonal food items, which especially affected our sales in July and
September alongside with the one less Sunday in September this year compared
to the previous one. However, the launch of "Lenta Anniversary" and our
traditional "Back to School" campaigns, alongside other promotions, helped
us achieve better results in August.
Nevertheless, we have been working to enhance our shopping experience and
client communication for both formats. We also continued working on the
optimization of our logistics. In October we closed one leased distribution
center in Moscow and replaced it with a new facility with total space of
around 70,990 sq.m, which became the largest distribution center in Lenta's
portfolio. Simultaneously, we are still in progress of shaping a new
strategy, which should help us to open the door into a new era of Lenta's
development.
And last but not least, I am pleased to announce that the Company is
continuing to optimize the Group's holding structure. Along with our new
representative office in St. Petersburg, shareholders approved the
re-domiciliation of the Company's jurisdiction from British Virgin Island to
the Republic of Cyprus at the EGM. This should pave the way for more optimal
capital allocation going forward, while allowing us to realize efficiencies
in the cost of compliance and improved corporate governance."
Lenta's Operating Performance
The Company's retail sales grew by 2.9% in the third quarter of 2019 driven
by selling space additions. Total sales reached Rub 100.4bn implying a
decline of 0.4% compared to the third quarter of the previous year. A
significant decline of 55.0% in sales to wholesale customers accounts for
the difference between retail sales growth and total sales growth in the
third quarter. Lenta expects wholesales to decline YoY throughout 2019.
In response to a challenging environment, the Company has been working on
implementation of a series of initiatives to increase the distinctive
attractiveness of Lenta's offering to customers. The Company continued to
improve its assortment, including the launch of various private label
product ranges in the third quarter. The Company also carried out a number
of distinctive initiatives in the areas of customer marketing, Lenta's
loyalty program and customer communication. This included the launch of
programs that offer cash-back options for new and existing customers, as
well as the launch of a special card program for Lenta's professional
customers (Lenta PRO).
The Company also maintained focus on its digital marketing activities,
reaching new and existing customers with offers tailored to each individual,
to increase both traffic and basket size. The number of active loyalty
cardholders increased to 15.5m as at 30 September 2019 (+12.5% YoY) while
the share of transactions made with the loyalty card was 97%. Lenta's Mobile
App, which launch in the fourth quarter of 2018, has already attracted more
than 3.5 million users. Lenta took further steps to enhance the Mobile App's
functionality, delivering an even better customer experience. In the third
quarter we have personalized our promo offerings, and facilitated access to
our specialized Lenta clubs ("Super-childhood" and "Lenta bar") through the
app. We expect these and other initiatives to result in increased loyalty,
higher sales and lower marketing costs.
Hypermarket retail sales grew 1.5% in the third quarter, primarily driven by
selling space growth of 4.1%, while LFL retail sales in this format
decreased by 1.2%. The supermarket format's total retail sales rose by 21.3%
in 3Q 2019 driven by a 6.5% increase in selling space and LFL retail sales
growth of 9.3%. The supermarket format's share of Lenta's retail sales was
8.3% in the reported quarter, compared to 8.7% in the second quarter of 2019
and 7.8% in the fourth quarter of 2018.
Quarterly Year to Date
3Q 3Q Net Change 9M 9M Net Change
2019 2018 change (%) 2019 2018 chang (%)
e
Total 100,3 100, (418) (0.4%) 299,5 294,01 5,548 1.9%
sales 84 801 65 7
(Rub,
million)
Retail 97,80 95,0 2,733 2.9% 292,6 276,79 15,86 5.7%
sales 2 69 58 0 8
(Rub,
million)
Hypermarke 89,66 88,3 1,303 1.5% 267,4 258,40 9,041 3.5%
ts 1 58 47 6
Supermarke 8,141 6,71 1,430 21.3% 25,21 18,384 6,827 37.1%
ts 1 1
Wholesales 2,582 5,73 (3,150 (55.0%) 6,907 17,227 (10,3 (59.9%)
(Rub, 2 ) 20)
million)
Retail 966 967 (1) (0.1%) 975 989 (14) (1.4%)
average
ticket
(Rub)
Hypermarke 1,074 1,06 14 1.3% 1,081 1 071 10 0.9%
ts 0
Supermarke 459 449 10 2.2% 477 476 2 0.3%
ts
Retail 101.2 98.3 2.9 3.0% 300.3 279.9 20.4 7.3%
customer
traffic
(million)
Hypermarke 83.5 83.4 0.1 0.2% 247.4 241.2 6.2 2.6%
ts
Supermarke 17.7 14.9 2.8 18.7% 52.9 38.7 14.2 36.7%
ts
Total retail customer traffic increased by 3.0% in the third quarter of 2019
compared with the same period in 2018, comprising 0.2% growth in hypermarket
traffic and 18.7% increase in retail traffic at Lenta's supermarket format.
During the reported period, one hypermarket and 11 supermarkets entered the
LFL panel. LFL retail sales declined by 0.5% (excluding VAT) in the third
quarter, representing 2.0% decline in LFL retail traffic and 1.5% growth in
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