St-Petersburg, Russia, 2017-Jan-26 — /EPR Retail News/ — 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 fourth quarter and twelve months ended 31 December 2016.
4Q 2016 Operating Highlights:
• Total sales grew 20.9% in 4Q 2016 to Rub 90.8bn (4Q 2015: Rub 75.1bn);
• Like-for-like (“LFL”) 1 sales growth of 1.7% vs. 4Q 2015;
• LFL traffic growth of (3.9%) combined with a 5.9% increase in LFL ticket;
• 36 hypermarkets and seven supermarkets opened during the fourth quarter of 2016;
• Total store count reached 240 stores as at 31 December 2016, comprising 191 hypermarkets and 49 supermarkets;
• Total selling space increased to 1,146,148 sq.m. as at 31 December 2016 2 (+29.9% vs. 31 December 2015); and
• Number of active loyalty cardholders 3 increased to 10.5m (+25% y-o-y) with approximately 93% of transactions in the fourth quarter made using the loyalty card.
FY 2016 Operating Highlights:
• Total sales grew 21.2% in FY 2016 to Rub 306.4bn (FY 2015: Rub 252.8bn);
• LFL sales growth of 3.9% vs. FY 2015;
• LFL traffic growth of (0.1%) combined with a 4.0% increase in LFL ticket;
• 51 hypermarket and 17 supermarket net openings 4 during FY 2016.
Material events in 4Q 2016 and after the reported period:
• Lenta exceeded its goal to double total selling space in three years, achieving one of the most important strategic targets established at its IPO in March 2014;
• Lenta achieved the milestone of 10 million active loyalty cardholders;
• The company completed acquisition of the Kesko food retail business in Russia, consisting of 11 hypermarkets;
• Lenta opened its seventh own distribution centre in Moscow, dedicated to its supermarket format;
• The Company signed lease contracts with the ADG Group real estate development company to open 36 supermarkets (approx. 47,000 sq.m of total space and 30,300 sq.m of selling space) in Moscow shopping and entertainment centers in 2018-2019;
• Lenta signed an agreement to acquire eight properties in Novosibirsk which are planned for use as Lenta supermarkets; and
• Lenta entered a partnership with Eurotorg, a leading Belarus retailer, to explore the potential for joint procurement opportunities for both food and non-food categories.
Lenta’s Chief Executive Officer, Jan Dunning commented:
“We are very pleased with the results of the fourth quarter – Lenta sales growth increased to 21% while we also opened a record number of new stores, completed the acquisition of Kesko’s food retail business and exceeded our strategic goal of doubling selling space in the 3 years to December 2016.
Lenta opened a record of 36 hypermarkets in the fourth quarter alone – more than we opened in the full year of 2015. The company completed 51 net hypermarket openings and entered eight new cities during the year. A key focus of our strategy is to strengthen our position in Russia’s largest cities and in existing cities of presence – we opened 35 new stores in cities with over 1 million inhabitants and are now present in all 15 of these cities. Almost 80% of new selling space was opened in cities where Lenta is already present – while this leads to pressure on traffic in nearby existing stores, this effect is far outweighed by the long term advantages of being closer to customers with a stronger market position. We will continue to focus most new hypermarket openings on existing cities of presence in 2017.
In December, Lenta successfully completed the largest acquisition in the Company’s history – the purchase of the Kesko food retail business in Russia comprising 11 hypermarkets in Saint-Petersburg. The Kesko stores were integrated then reopened as Lenta stores in only six days, and initial trading results have exceeded our expectations.
Our stores continued rapidly gaining new unique customers from competitors, with customer numbers running ahead of sales growth. The share of loyal customers in both new and LFL stores remained stable, proving the attractiveness of our commercial offer. As expected, cannibalization effects increased due to our rapid expansion in cities with existing Lenta presence – this was especially noticeable in the fourth quarter when we opened two-thirds of the total space added during 2016. For the first time since 2014, customers traded up and bought higher volumes per visit than in the previous year. Like-for-like sales growth of 2% was the net result of growth in the number of customers and a 6% increase in average like-for-like ticket compensating for lower visit frequency, which declined across much of the food retail sector. The consumer environment remains volatile – we already see some trends changing again in January 2017, with same-store traffic returning to positive growth.
We continue rolling-out new supermarkets in Moscow, St.Petersburg and the Central region and in the last year we doubled the number of store openings in these regions. We plan to significantly accelerate expansion of this format in existing and new regions in 2017. The agreement recently signed with ADG will allow us to reach well over 100 supermarkets in Moscow within the next three years or so.”
• Lenta is the largest hypermarket chain in Russia (in terms of selling space) and the country’s fifth largest retail chain (in terms of 2015 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 191 hypermarkets in 77 cities across Russia and 49 supermarkets in Moscow, St. Petersburg and the Central region with a total of approximately 1,146,148 sq.m of selling space. The average Lenta hypermarket store has selling space of approximately 5,800 sq.m. The average Lenta supermarket store has selling space of approximately 900 sq.m. The Company operates seven owned 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 45,689 people as of 31 December 2016 9.
• 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.
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.
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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
2 After the adjustments to reported selling space and store network described below
3 Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December 2016 are considered active
4 In March 2016 the Company closed one leased standard hypermarket in Novokuznetsk with selling space of 7,700 sq.m. The company has reclassified one of the purchased Kesko stores in Saint-Petersburg with a selling space of 1,520 sq.m from supermarket to hypermarket
9 FTE (full-time equivalent). Average FTE for 2016 was 35,677 employees
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