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DGAP-UK-Regulatory News vom 24.01.2020

Lenta Ltd.: 4Q/FY 2019 sales and operating results

Lenta Ltd. (LNTA;LNTR)
24-Jan-2020 / 08:00 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 FOURTH QUARTER AND FULL YEAR ENDED 31 DECEMBER 2019

 

St-Petersburg, Russia; 24 January, 2020 - Lenta Ltd, (LSE, MOEX: LNTA / "Lenta" or the "Company") one of the largest retail chains in Russia, is pleased to announce its consolidated sales and operating results for the fourth quarter and twelve months ending 31 December 2019.

 

4Q 2019 Operating Highlights:

  • Total sales declined by 1.4% in 4Q 2019 to Rub 117.9bn (4Q 2018: Rub 119.6bn), including retail sales flat at Rub 115.1bn (4Q 2018: Rub 115.1bn) and decline of 37.7% in wholesale;
  • Like-for-like ("LFL")[1] retail sales declined by 3.6%, excluding VAT, vs. 4Q 2018. This is equivalent to LFL retail sales decline of 3.1% including VAT, due to an increase in VAT from 1 January 2019;
  • LFL retail traffic decline of 1.8% combined with LFL retail ticket decline of 1.9%;
  • Lenta opened four hypermarkets during the fourth quarter of 2019, while one hypermarket was closed;
  • Store count reached 380 stores as at 31 December 2019, comprising of 249 hypermarkets and 131 supermarkets;
  • Total selling space increased to 1,489,497 sq.m as at 31 December 2019 (+1.5% vs. 31 December 2018); and
  • Number of active loyalty cardholders[2] increased to 15.8m (+10.1% YoY) with around 97% of transactions in the fourth quarter carried out using the loyalty programme.

 

12M 2019 Operating Highlights:

  • Total sales grew 1.0% in 12M 2019 to Rub 417.5bn (12M 2018: Rub 413.6bn), including retail sales growth of 4.0% to Rub 407.2bn (12M 2018: Rub 391.6bn) and a decline of 53.2% in wholesale sale;
  • LFL retail sales growth of 0.1% excluding VAT vs. 12M 2018. This is the equivalent of LFL retail sales growth of 0.9% including VAT, due to the increase in VAT from 1 January 2019;
  • LFL traffic growth of 0.0% combined with a growth of 0.1% in LFL ticket; and
  • Eight new hypermarkets and three supermarkets were opened in 12M 2019, while three hypermarkets and seven supermarkets were closed during the same period.

 

Events in 4Q 2019 and after the reported period:

  • The Company re-opened a hypermarket in St. Petersburg in a brand-new concept after a fire in November 2018. The layout of the store was designed to fulfil customers' different shopping missions - daily, weekly, or occasional shopping. The store is equipped with various innovations, including contrast and shelf-lighting and price-checkers, while it has also introduced new service developments such as café and food services to ensure a superior customer experience.  
  • Lenta's Board of Directors approved investments of around Rub 1.9bn into 29 supermarkets in Moscow with total selling space of ~24,000 sq.m. following signing of lease contracts with the ADG real-estate development back in 2017. The Company expects the stores to be opened during 2020-2021.
  • Lenta has started the redomiciliation process following shareholder's approval at the Extraordinary Meeting held on 22 October 2019. On 19 December 2019 the Company applied on to the Department of Registrar of Companies and Official Receiver (DRCOR) for continuance of the Company's incorporation into Cyprus. The Redomiciliation will become effective upon the issue by the DRCOR of a certificate of temporary registration in Cyprus to the Company.
  • Lenta also announced its intention to change the depositary appointed in connection with the Company's global depositary receipt programme from Deutsche Bank Luxembourg S.A. to its affiliate Deutsche Bank Trust Company Americas. Accordingly, neither the Redomiciliation nor the change of depositary should affect the ordinary course of trading of the Company's GDRs.

 

Lenta's Chief Executive Officer, Herman Tinga commented:

 "We are not pleased with our performance in 2019 and especially in the fourth quarter. It partly reflected ongoing changes in consumer behaviour and competitive environment. In the context of intensified competition, we saw an inflow of new customers, but at the same time our consumers visited our stores less frequently and bought fewer items. Low-inflationary environment combined with increased level of promotional activity in the industry also put pressure on retail business. On top of that, we faced internal challenges as our non-food sales declined, as our offer did not meet consumers expectations.

Having these challenges in mind, we focused our efforts on initiatives that allowed us to provide distinctive shopping experience and increase the attractiveness of Lenta's offering to different categories of consumers. These initiatives included broad-scale communication to customers through on-line and off-line channels, tailored promo-campaigns and in-store events. We saw positive impact on the performance of fresh food, which we define as a key category for differentiation from our competitors, continue into the fourth quarter. As we are in the process of shaping our new strategy, we will keep working on our offer, assortment, marketing and communication activities to improve our operating results in 2020.

While not everything went the way we wanted in the latest quarter, I am happy with our results in supermarket format. We delivered a strong total sales growth of 7.8% thanks to the efforts we made for improving our offering and communication with the customer in the format.

We were also proud to announce the re-opening of one of our hypermarkets in St. Petersburg in November, which represents a brand new vision of shopping space. We completely changed the layout of the store so it could meet the need of different shopping missions, made an accent on presentation of our power categories, filled the store with innovative equipment and provided customers with unique services. We believe these changes will help us to demonstrate solid traffic and basket size and pave the way for in-store improvements across the chain".

Lenta's Operating Performance

The Company's retail sales reached Rub 115.1 in the fourth quarter 2019 staying almost flat year-over-year. Total sales amounted to Rub 117.9bn implying a decline of 1.4% when compared to the fourth quarter of the previous year. Sales to wholesale customers declined by 37.7% year-over-year accounting for the difference between retail sales and total sales performance in the reported period.

Amid challenging environment, the Company has been working on a series of initiatives to ensure the distinctive attractiveness of Lenta's offering to customers. The Company has continued improving its assortment, including the launch of various private-label ranges of product in the fourth quarter. Lenta has carried out a number of distinctive initiatives in the areas of customer marketing, our loyalty programme and customer communication. This included a pilot of a new loyalty programme, various targeted promo-campaigns that offered additional discounts and cashbacks to customers, as well as extensive in-store communication.

The Company has also maintained its 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 15.8m as at 31 December 2019 (+10.1% YoY) while the share of transactions made with a loyalty card was 97%. Lenta's Mobile App, which launched in October 2018, has now attracted more than 4.8 million users. Lenta took further steps to enrich the Mobile App's functionality, delivering a better customer experience through enhancing personalized promo offerings. We expect these and other initiatives to increase customer loyalty, increase sales and lower marketing costs.

Hypermarket retail sales reduced by 0.7% in the fourth quarter on the back of a decline in LFL retail sales by 4.3% in this format combined with a growth in selling space of 1.9% year-over-year. The supermarket format's total retail sales rose by 7.8% in 4Q 2019 driven by a strong LFL sales growth of 4.7% which was partly offset by a 3.0% decrease in selling space. The supermarket share of Lenta's retail sales was 8.5% in the reported quarter, as opposed to 8.3% in the third quarter of 2019 and 7.9% in the fourth quarter of 2018.

 

 

Quarterly

Year to Date

 

As at 31 December

4Q 2019

As at 31 December

4Q 2018

Net change

Change (%)

As at 31 December

FY 2019

As at 31 December

FY 2018

Net change

Change (%)

Total sales (Rub, million)

117,893

119,586

(1 693)

(1.4%)

 417,500

  413,562

      3,938

1.0%

Retail sales   (Rub, million)

 115,110

   115,121

(11)

(0.0%)

  407,257

  391,564

     15,693

4.0%

 Hypermarkets

105,349

106,069

(720)

(0.7%)

  372,285

  364,128

      8,157

2.2%

     Supermarkets

9,761

 9,052

709

7.8%

    34,972

    27,436

      7,536

27.5%

Wholesales (Rub, million)

   2,783

    4,465

(1,682)

(37.7%)

    10,243

     21,868

 (11,625)

(53.2%)

Retail average ticket (Rub)

      1,068

      1,094

      (26)

(2.4%)

         998

     1,017

  (19)

(1.8%)

     Hypermarkets

      1,187

      1,210

         (23)

(1.9%)

      1,107

      1,107

-

0.0%

     Supermarkets

         512

         516

         (4)

(0.8%)

          486

          488

           (2)

(0.4%)

Retail customer traffic (million)

    107.8

   105.2

        2.6

2.5%

    408.1

    385.1

      22.9

6.0%

     Hypermarkets

    88.8

        87.7

            1.1

1.2%

      336.2

     328.9

            7.2

2.2%

     Supermarkets

       19.1

       17.5

            1.5

8.7%

         71.9

         56.2

         15.7

27.9%

 

Total retail customer traffic increased by 2.5% in the fourth quarter of 2019 compared with the same period in 2018, comprising 1.2% growth in hypermarket traffic and an 8.7% increase in retail traffic for Lenta's supermarket format.

During the reported period, one hypermarket and 11 supermarkets entered the LFL panel. LFL retail sales declined by 3.6% (excluding VAT) in the fourth quarter, representing a 1.8% decline in LFL retail traffic and a 1.9% decline in LFL retail ticket. LFL retail non-food sales decreased by 15.2% YoY (3Q 2019: -6.7% YoY). LFL retail food sales decreased by 1.8% (3Q 2019: 0.5% YoY).

 

 

Quarterly

Year to Date

LFL sales growth

4Q 2019

LFL average ticket growth

4Q 2019

LFL traffic growth

4Q 2019

LFL sales growth

FY 2019

LFL average ticket growth

FY 2019

LFL traffic growth

FY 2019

Total retail sales growth, %

(3.6%)

(1.9%)

(1.8%)

0.1%

0.1%

0.0%

  Hypermarkets

(4.3%)

(1.2%)

(3.1%)

(0.7%)

0.9%

(1.6%)

  Supermarkets

4.7%

(0.6%)

5.3%

11.8%

1.6%

10.0%

 

Lenta has been winning new customers in both new and LFL hypermarkets and supermarkets with the ongoing growth in the number of unique customers.

LFL sales decreased by 4.3% in the hypermarket format, mainly impacted by declining traffic. Customer traffic growth in the LFL stores turned negative at 3.1% mainly due to a reduction in visit frequency which was not fully compensated by an increase in the number of new customers.

LFL average retail ticket growth in the format declined by 1.2% due to on-shelf deflation combined with the declining average number of items per basket that outweighed ongoing the trading-up effect in the fourth quarter. Lenta's hypermarkets continued to perform in a deflationary environment in the reported period due to more intensive promo-activity.

The supermarket format demonstrated strong growth with an increase in LFL sales of 4.7% in the fourth quarter. Higher traffic was the main driver for LFL retail sales growth thanks to a significant increase in new, unique customers to the format. Lenta continued working on tactical changes to the offering, such as extending the product assortment and changing marketing activities to enhance the attractiveness of stores to customers.

Lenta's supermarkets also operated in a deflationary environment in the fourth quarter as Lenta intensified promotional activity. Shelf price deflation combined with the lower average number of articles per basket resulted in a decline of 0.6% in the LFL retail ticket in the reported period.

The 3.6% fall in LFL retail sales in 4Q 2019 was therefore due to a combination of factors: an increase in the number of customers and ongoing trading-up effects were outweighed by on-shelf deflation, a lower frequency of visits and a reduced number of articles per basket.

 

4Q 2019 monthly operational results

 

October

November

December

Total  sales growth

(2.2%)

1.9%

(2.6%)

Retail sales growth

(0.0%)

3.6%

(2.2%)

  Hypermarkets

(1.0%)

3.2%

(2.8%)

  Supermarkets

11.0%

7.9%

5.6%

Wholesale growth

(45.6%)

(39.5%)

(16.5%)

Total retail customer traffic growth 

0.5%

3.1%

3.1%

  Hypermarkets

(1.1%)

2.5%

2.0%

  Supermarkets

8.7%

6.0%

8.5%

Total retail average ticket growth

(0.6%)

0.4%

(5.2%)

  Hypermarkets

0.1%

0.6%

(4.8%)

  Supermarkets

1.7%

0.9%

(3.5%)

 

Lenta Store Developments

Lenta opened four hypermarkets in the fourth quarter, including one owned compact hypermarket in Arkhangelsk with selling space of 5,237 sq.m. and two leased compact hypermarkets in Samara and Ufa with selling space of 4,389 sq.m. and 3,219 sq.m. respectively, and it re-opened a standard hypermarket in St. Petersburg with a selling space of 7,998 sq.m. The Company closed one leased hypermarket in Moscow.

During the reported period Lenta also opened two supermarkets, including one leased store in Moscow with 611 sq.m in selling space and one owned supermarket in Siberia with 700 sq.m in selling space.

As a result, in the reported period Lenta's total selling space increased by 17,850 sq.m when compared to the previous quarter. As at 31 December 2019 the total number of stores amounted to 380, including 249 hypermarkets and 131 supermarkets with total selling space of 1,489,497 sq.m, an increase of 1.5% year-over-year. Lenta retained its presence in 88 cities across the country.

 

 

Quarterly

Year to Date

 

As at 31 December

4Q 2019

As at 31 December

4Q 2018

Net change

Change, YoY

As at 31 December

FY 2019

As at 31 December

FY 2018

Net change

Change, YoY

Total number of stores

380

379

1

0.3%

380

379

1

0.3%

     Hypermarkets

249

244

5

2.0%

249

244

5

2.0%

     Supermarkets

131

135

(4)

(3.0%)

131

135

(4)

(3.0%)

Number of net store openings

5

25

(20)

(80.0%)

1

51

(50)

(98.0%)

     Hypermarkets

3

11

(8)

(72.7%)

5

13

(8)

(61.5%)

     Supermarkets

2

14

(12)

(85.7%)

(4)

38

(42)

(1.1x)

Total selling space (sq.m)

1,489,497

1,467,482

22,015

1.5%

1,489,497

1,467,482

22,015

1.5%

     Hypermarkets

1,378,849

1,353,465

25,384

1.9%

1,378,849

1,353,465

25,384

1.9%

     Supermarkets

110,648

114,017

(3,369)

(3.0%)

110,648

114,017

(3,369)

(3.0%)

Total net selling space added (sq.m)

17,850

56,775

(38,925)

(68.6%)

22,015

84,737

(62,722)

(74.0%)

     Hypermarkets

16,459

45,297

(28,838)

(63.7%)

25,384

55,248

(29,864)

(54.1%)

     Supermarkets

1,391

11,478

(10,087)

(87.9%)

-3,369

29,489

(32,858)

(1.1x)

 

Guidance

In the announcement of its 1H 2019 financial results, the Company stated it has been considering closing seven hypermarkets which have low potential to reach expected returns. During the reported period, one store was closed in Moscow. The Company decided not to close three hypermarkets as Lenta successfully completed rent negotiations that should have a positive impact on their profitability. The remaining three hypermarkets may be closed subject to rent negotiation. There are no plans to close other hypermarkets or supermarkets except for those mentioned in the respective announcement.  

Lenta will provide details on its opening guidance and capital expenditure projections for 2020 following the publication of the FY 2019 financial results scheduled to be announced on 25 February 2020.

 

About Lenta

Lenta is the largest hypermarket chain in Russia and the country's fourth-largest retail chain. The Company was founded in 1993 in St. Petersburg. Lenta operates 249 hypermarkets in 88 cities across Russia and 131 supermarkets in Moscow, St. Petersburg, and the Siberia, Urals and Central regions, with a total of approximately 1,489,497 sq.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 840 sq.m. The Company operates 12 distribution centers.

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 48,391 people as of 31 December 2019[3].

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 Severgroup, which is 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.
  • For further information please visit www.lentainvestor.com, or contact:  
  •  
  • Lenta
  • Mariya Filippova

PR&GR Director

 

Russian Media:

NW Advisors

Victoria Afonina

Тel:+7 495 795 06 23

E-mail: [email protected]

 

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", and 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. 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.


[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 YoY performance

[2] Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December 2019 are considered active.

[3] FTE (full-time equivalent). Average FTE for FY 2019 was 51,908 employees




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