Lenta Ltd. (LNTA;LNTR)
Lenta Ltd.: 4Q/FY 2019 sales and operating results
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 YEARED 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 As at Net Change As As at Net Change
at 31 change (%) at 31 change (%)
31 Decem 31 Decem
Dece ber Dece ber
mber mber
4Q FY
4Q 2018 FY 2018
2019 2019
Total 117, 119,5 (1 693) (1.4%) 417, 413,5 3,938 1.0%
sales 893 86 500 62
(Rub,
million)
Retail 115, 115,1 (11) (0.0%) 407, 391,5 15,693 4.0%
sales 110 21 257 64
(Rub,
million)
Hypermarke 105, 106,0 (720) (0.7%) 372, 364,1 8,157 2.2%
ts 349 69 285 28
Supermarke 9,76 9,052 709 7.8% 34,9 27,43 7,536 27.5%
ts 1 72 6
Wholesales 2,78 4,465 (1,682) (37.7%) 10,2 21,86 (11,62 (53.2%)
(Rub, 3 43 8 5)
million)
Retail 1,06 1,094 (26) (2.4%) 998 1,017 (19) (1.8%)
average 8
ticket
(Rub)
Hypermarke 1,18 1,210 (23) (1.9%) 1,10 1,107 - 0.0%
ts 7 7
Supermarke 512 516 (4) (0.8%) 486 488 (2) (0.4%)
ts
Retail 107. 105.2 2.6 2.5% 408. 385.1 22.9 6.0%
customer 8 1
traffic
(million)
Hypermarke 88.8 87.7 1.1 1.2% 336. 328.9 7.2 2.2%
ts 2
Supermarke 19.1 17.5 1.5 8.7% 71.9 56.2 15.7 27.9%
ts
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 LFL LFL LFL LFL LFL
growth average traffic sales average traffic
ticket growth growth ticket growth
growth growth
4Q 2019
4Q 2019 FY 2019 FY 2019
4Q 2019 FY 2019
Total (3.6%) (1.9%) (1.8%) 0.1% 0.1% 0.0%
retail
sales
growth
, %
Hyperm (4.3%) (1.2%) (3.1%) (0.7%) 0.9% (1.6%)
arkets
Superm 4.7% (0.6%) 5.3% 11.8% 1.6% 10.0%
arkets
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 As at Net Change, As at As at Net Change,
31 31 change YoY 31 31 change YoY
Decem Decemb Decemb Decem
ber er er ber
4Q 4Q FY FY
2019 2018 2019 2018
Total 380 379 1 0.3% 380 379 1 0.3%
number
of
stores
Hyperm 249 244 5 2.0% 249 244 5 2.0%
arkets
Superm 131 135 (4) (3.0%) 131 135 (4) (3.0%)
arkets
Number 5 25 (20) (80.0%) 1 51 (50) (98.0%)
of net
store
openin
gs
Hyperm 3 11 (8) (72.7%) 5 13 (8) (61.5%)
arkets
Superm 2 14 (12) (85.7%) (4) 38 (42) (1.1x)
arkets
Total 1,489 1,467, 22,015 1.5% 1,489, 1,467 22,015 1.5%
sellin ,497 482 497 ,482
g
space
(sq.m)
Hyperm 1,378 1,353, 25,384 1.9% 1,378, 1,353 25,384 1.9%
arkets ,849 465 849 ,465
Superm 110,6 114,01 (3,369 (3.0%) 110,64 114,0 (3,369) (3.0%)
arkets 48 7 ) 8 17
Total 17,85 56,775 (38,92 (68.6%) 22,015 84,73 (62,722 (74.0%)
net 0 5) 7 )
sellin
g
space
added
(sq.m)
Hyperm 16,45 45,297 (28,83 (63.7%) 25,384 55,24 (29,864 (54.1%)
arkets 9 8) 8 )
Superm 1,391 11,478 (10,08 (87.9%) -3,369 29,48 (32,858 (1.1x)
arkets 7) 9 )
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 [1].
· For further information please visit www.lentainvestor.com [2], or
contact:
·
· Lenta Russian Media:
· Mariya Filippova
NW Advisors
PR&GR Director
Victoria Afonina
· Tel: +7 812 380-61-31 ext.:
1892
?el:+7 495 795 06 23
· E-mail:
maria.filippova@lenta.com
E-mail: lenta@nwadvisors.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", 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
ISIN: US52634T2006, US52634T1016
Category Code: FR
TIDM: LNTA;LNTR
LEI Code: 213800OMCE8QATH73N15
OAM Categories: 2.2. Inside information
Sequence No.: 42442
EQS News ID: 960307
End of Announcement EQS News Service
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