Lenta PLC (LNTA;LNTR)
Lenta PLC: 1Q 2020 operating results
23-Apr-2020 / 09:03 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 HAS DELIVERED 4.0% LIKE-FOR-LIKE RETAIL SALES GROWTH IN 1Q
St-Petersburg, Russia; 23 April 2020 - Lenta PLC, (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 first quarter
ending 31 March 2020.
1Q 2020 Operating Highlights:
? Total sales increased 7.0% in 1Q 2020 to Rub 106.0bn (1Q
2019: Rub 99.0bn), including:
? Retail sales growth of 7.5% to Rub 104.4bn (1Q 2019: Rub
97.1bn) driven by strong LFL sales growth
? Wholesale business decline of 16.7%
? Like-for-like (LFL)[1] retail sales adjusted for Leap Day
(29 February) increased by 4.0% vs. 1Q 2019 representing
? LFL retail traffic growth of 2.0%
? LFL retail ticket growth of 2.0%.
? Unadjusted LFL retail sales increased 5.7% driven by
? LFL retail traffic growth of 3.4%
? LFL retail ticket growth of 2.3%
? A total of 380 stores as at 31 March 2020, comprising of 249
hypermarkets and 131 supermarkets;
? Total selling space of 1,489, 439 sq.m as of 31 March 2020
(+1.7% vs. 31 March 2019);
? Number of active loyalty cardholders[2] increased to 16.0m
(+8.0% YoY) with around 97% of transactions in the first
quarter carried out using the loyalty programme.
Events in 1Q 2020 and after the reported period:
? Lenta completed its redomiciliation by obtaining a permanent certificate
of incorporation in Cyprus
? Lenta took comprehensive operating measures across its business in
response to COVID-19
? Lenta launched its own online grocery store in partnership with delivery
companies IGoods and Sbermarket.
Lenta's Chief Executive Officer, Herman Tinga commented:
"We had a good start of the first quarter, but eventually were faced with
exceptional challenges due to COVID-19. Customer behaviour changed
significantly in the second half of March. Various measures implemented by
the authorities in response to COVID-19 resulted in considerable pressure on
our stores as customers stocked up on essential goods.
Our commercial, logistic and operation teams responded well to the
challenge. Due to the great commitment from all our employees, we secured
the on-shelf availability of essential goods in our stores. At the same time
we put a lot of effort into ensuring the safety and well-being of our
colleagues and customers, as well as the continuity of our business
operations in the most efficient way.
I am very proud of the contribution made by each member of our team during
this period and pleased with the results we achieved. For the quarter our
LFL sales, adjusted for the Leap Day in February, increased 4.0%. Both our
LFL traffic and LFL ticket increased by 2.0%
In the first two months of the year we experienced a strong customer inflow
as a result of our own marketing efforts. March sales growth was mainly
driven by customer response to COVID-19, which resulted in less traffic, but
larger baskets. This trend is continuing in April.
The stocking up of essential goods triggered by COVID-19 also resulted in
increased demand for online grocery purchases. Sales through our delivery
partners almost tripled in the last weeks of March when compared to the last
weeks of February. In response we accelerated our fast-delivery project
Lentochka and moved the launch of online ordering through our own website
forward.
I am pleased with our strong performance in 1Q. Looking ahead we will face
many uncertainties, including further measures the authorities may implement
in response to COVID-19, the duration of such measures, continued
macro-economic volatility and consequent customer sentiment. We are working
with different scenarios to evaluate any impact on our operations and
performance. And we continue to focus on our cash discipline and operating
efficiency."
COVID-19 Response
Governance. We established a COVID-19 response team, including top
management members and functional experts, to monitor, coordinate and track
daily actions. The COVID-19 response team cooperates closely with relevant
authorities.
Safety and support for employees. We are taking comprehensive measures to
ensure the safety and well-being of our employees. This includes, but is not
limited to, restricting travel, daily health and temperature checks, remote
work for office-based employees, intensified cleaning, making sanitizer
available, providing special working regimes for vulnerable employees and
providing personal protection equipment and protective barriers between
cashiers and customers.
Safety and support for customers. We are taking every effort to ensure our
customers continue feeling safe shopping in our stores. Protective barriers
were placed at cashier desks and our own culinary sections, as well as
visual markings on floors to control the distance between customers. We have
equipped our stores with hand sanitizers for employees and customers. In
addition, a large-scale communication programme was launched to encourage
customers to keep their distance; use self-scanners and check-outs; and,
when possible, pay by debit or credit. Additionally, customers with the high
average ticket can also order free taxis within a radius of 10 km. We have
also launched social initiatives to support vulnerable groups of customers.
Elderly people and those at higher risk are encouraged to shop at specific
hours. We have dedicated separate checkout lines for them and offered
additional discounts as an incentive to visit our stores. A volunteer
programme aimed at helping elderly people getting their daily groceries was
established, and we support doctors, nurses and other medical workers by
providing them with special discounts. We have other initiatives in progress
with similar objectives.
Supply-chain. Our key task is to ensure support for our suppliers and
maintain the on-shelf availability of food and non-food items. We have
increased safety stocks for the essential goods and we are in constant
contact with suppliers to ensure this.
Lenta's Operating Performance in 1Q 2020
Total sales increased 7.0% YoY, reaching Rub 106.0bn, driven by an increase
in retail sales of 7.5% and partly offset by an ongoing decline in wholesale
business. In 1Q 2020, sales to wholesale customers declined by 16.7% when
compared to the first quarter of 2019.
Strong LFL performance, combined with added selling space, resulted in
retail sales growth of 7.5% in 2020. Retail sales reached Rub 104.4bn in the
reported period versus Rub 97.1bn in the same period of the last year.
Traffic increased 5.1%, while the average ticket rose 2.3%, reaching Rub
1,021.
Hypermarket sales dynamics improved over 4Q 2019 due to an LFL sales growth
of 3.2%, the contribution from Leap Day in February and an increase of 1.9%
in the format's selling space over the year. As a result, total sales in
hypermarkets reached Rub 94.5bn, implying an increase of 6.9% YoY.
Supermarket sales increased 14.2% in 1Q 2020, driven by accelerated LFL
sales growth, although the selling space decreased marginally by 0.1% YoY.
The supermarket share accounted for 9.3% of Lenta's total sales, an increase
from 8.5% in 4Q 2019.
Total sales performance
1Q 2020 1Q 2019 Net change Change (%)
Total sales (Rub, million) 106,004 99,042 6,962 7.0%
Retail sales (Rub, 104,352 97,058 7,294 7.5%
million)
Hypermarkets 94,541 88,469 6,072 6.9%
Supermarkets 9 807 8,589 1,217 14.2%
Wholesales (Rub, million) 1 652 1,984 (332) -16.7%
Retail average ticket 1,021 998 23 2.3%
(Rub)
Hypermarkets 1,134 1,102 32 2.9%
Supermarkets 522 507 15 3.0%
Retail customer traffic 102.2 97.3 4.9 5.1%
(million)
Hypermarkets 83.4 80.3 3.1 3.8%
Supermarkets 18.8 16.9 1.8 10.8%
In the 1Q Lenta continued working on its digital marketing activities,
communication initiatives and the development of its loyalty programme to
reach new and existing customers. The Company maintained its focus on
providing special offers tailored to the individual customer to increase
traffic and basket size.
Lenta's mobile app, which was launched in October 2018, attracted 1.1mn new
users in the first quarter, bringing the total number to more than 6.0mn.
Lenta took further steps to enrich the mobile app's functionality,
delivering a better customer experience through enhancing personalized promo
offerings.
The continued development of analytical models enabled the Company to
improve its product range and promotions effectively, as well as predict and
respond to changes in customer preferences. The number of active loyalty
cardholders increased to 16.0mn as at 31 March 2020 (+8.0% YoY), with the
share of transactions made with the loyalty card staying at 97%.
LFL sales performance[3]
LFL sales LFL average LFL traffic
growth ticket growth growth
1Q 2020 1Q 2020 1Q 2020
Total retail sales 4.0% 2.0% 2.0%
growth, %
Hypermarkets 3.2% 2.8% 0.4%
Supermarkets 12.4% 2.6% 9.6%
LFL retail sales increased 4.0% in 1Q 2020, significantly improving from a
decline of 3.6% in 4Q 2019 and despite the high base of 1Q 2019. LFL sales
growth was driven by an increase in LFL traffic of 2.0% and LFL ticket
growth of 2.0%. During the reported period, five hypermarkets and three
supermarkets entered the LFL panel.
Lenta has been winning over new customers in both new and LFL hypermarkets
and supermarkets with an ongoing growth in the number of customers.
LFL sales increased 3.2% in the hypermarket format driven by both higher
traffic and an increase in average ticket. LFL traffic increased 0.4% driven
by an inflow of new customers. A combination of effective promo-campaigns
and in-store communication initiatives contributed to traffic performance.
The LFL average ticket increased 2.8% reflecting the attractiveness of
hypermarkets for big-basket purchases and one-stop shopping once a week in
light of the authorities' response to COVID-19. The increase in number of
items per basket, combined with the ongoing trading-up effects in 1Q 2020,
offset on-shelf deflation in the same period. Lenta's hypermarkets continued
to perform in a deflationary environment due to overall inflation dynamics
in Russia in the first quarter and more intensive promo-activity when
compared to the previous year.
Supermarket LFL sales accelerated in 1Q 2020 to 12.4% when compared with
4.7% in 4Q 2019, driven by both traffic and ticket growth. LFL traffic
increased 9.6%, being driven by new customer inflows and higher frequency of
visits. The average ticket increased 2.6%, driven by trading-up effects,
which offset on-shelf deflation in the format. Lenta continued working on
changes to its customer-value proposition in its supermarkets to enhance the
attractiveness of stores to customers and strengthen its position in this
format.
LFL sales growth, including Leap Day effect[4]
LFL sales LFL average LFL traffic
growth ticket growth growth
1Q 2020 1Q 2020 1Q 2020
Total retail 5.7% 2.3% 3.4%
sales growth, %
Hypermarkets 5.0% 3.0% 1.9%
Supermarkets 13.9% 2.7% 10.8%
1Q 2020 monthly operational results
January February March
Total sales growth 0.2% 8.6% 11.4%
Retail sales growth 1.3% 9.4% 11.2%
Hypermarkets 0.4% 8.9% 10.6%
Supermarkets 10.1% 14.4% 17.6%
Wholesale growth (55.5%) (20.9%) 24.6%
Total retail average ticket growth (3.4%) (0.9%) 10.3%
Hypermarkets (2.9%) (0.3%) 10.9%
Supermarkets (1.2%) (1.0%) 10.7%
Total retail customer traffic growth 4.8% 10.4% 0.8%
Hypermarkets 3.4% 9.3% (0.3%)
Supermarkets 11.4% 15.6% 6.2%
The performance of retail sales has been improving throughout the first
quarter with total sales accelerating from 1.3% YoY growth in January to
11.2% YoY in March. The average ticket improved every consecutive month.
Retail sales increased 9.4% in February due to a positive effect from Leap
Day and effective promotional campaigns. Traffic increased 10.4%,
representing a strong customer inflow coupled with a higher frequency of
visits in both formats. The increase in traffic largely offset the lower
average ticket, which declined due to the lower number of items per basket
when compared to the previous year.
Retail sales growth accelerated to 11.2% in March, mainly due to a change in
customer behaviour amid COVID-19. Traffic increased 0.8%, representing a
decline of 0.3% in hypermarkets and an increase of 6.2% in supermarkets.
While Lenta continued attracting new unique customers, this was offset by a
decline in frequency of visits. However, a 10.3% increase in average ticket
due to the increased number of items per basket largely compensated for
lower traffic.
Lenta Online
The Company has been developing several separate projects to serve the
increasing demand for online grocery shopping across Russia.
Partnership with delivery companies
Lenta has been developing partnerships with delivery companies across
Russia. As of 1Q 2020, cooperation has been carried out with 22 delivery
companies in 29 Russian cities.
In 1Q 2020, the number of orders increased 131.5%, mainly due to the
expansion of partnerships in 2019 and cities of presence, as well as an
increased number of orders due to changes in customer behaviour. As a
result, sales through this channel increased by 109.5% YoY and amounted to
approximately 0.5% of total sales, vs. 0.3% in 1Q 2019 and 0.2% for all of
2019.
In 1Q 2020, Lenta launched its online store, offering customers the
opportunity to order through our own website. Delivery is carried out by the
Company's partners IGoods and Sbermarket and is currently available in 29
large and regional Russian cities.
1Q 2020 1Q 2019 Change
Sales (Rub, ths) 488,099 233,005 109.5%
Number of tickets, ths. 213 92 131.5%
Lentochka.
The pilot project was launched in 4Q 2019 with the opening of two dark
stores in urban areas of Moscow to test quick delivery based on a limited
number of SKUs (1,500).
Due to changing customer behaviour and significant increased demand for
online grocery purchases, Lenta accelerated the roll-out of Lentochka.
During 1Q 2020, the Company expanded its operations to five additional
locations within two weeks based on existing supermarkets, bringing the
total number of locations to seven. The number of SKUs available to order
was expanded to 2,500, making it possible to cover a wider range of
customer needs.
Lenta's Store Base
1Q 2020 1Q 2019 Net change Change, YoY
Total number of 380 377 3 0.8%
stores
Hypermarkets 249 245 4 1.6%
Supermarkets 131 132 -1 -0.8%
Number of net store - -4 4 -100.0%
openings
Hypermarkets - 0 0 -100.0%
Supermarkets - -4 4 0.0%
Total selling space 1,489,439 1,464,461 24,978 1.7%
(sq.m)
Hypermarkets 1,378,791 1,353,653 25,138 1.9%
Supermarkets 110,648 110,808 -160 -0.1%
In 1Q 2020, Lenta had a total of 380 stores, including 249 hypermarkets and
131 supermarkets. That represents a total selling space of 1,489,439 sq.m,
an increase of 1.7% YoY. The Company retains its presence in 88 cities
across the country.
Outlook
COVID-19 and the volatility of the rouble may have a material impact on the
performance of the Company in 2020. We continue working with various
scenarios to understand the potential impact on Lenta's business and prepare
appropriate measures. This in part depends on further measures the
authorities may implement in response to COVID-19, the duration of such
measures, continued macro-economic uncertainty and consequent customer
sentiment. The full impact is impossible to predict with a high degree of
certainty. At this stage it would not be prudent to provide further guidance
for 2020.
The Company will inform the market in the case of any revision of guidance.
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 1,489,439 sq.m. of selling
space. The average Lenta hypermarket store has a 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
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 48,391 people as of 31
December 2019[5].
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'
? For further information please visit www.lentainvestor.com [1], or
contact us at:
?
? 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.
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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. Both total sales growth
and LFL sales growth are reported excluding VAT;
[2] Cardholders who made at least two purchases at Lenta in the 12 months
leading up to 31 March 2020 are considered active.
[3] Adjusted for 29 February due to the leap year
[4] Additional operating day (29 February) due to the leap year
[5] FTE (full-time equivalent). Average FTE for FY 2019 was 51,908 employees
ISIN: US52634T2006, US52634T1016
Category Code: QRF
TIDM: LNTA;LNTR
LEI Code: 213800OMCE8QATH73N15
OAM Categories: 2.2. Inside information
Sequence No.: 59936
EQS News ID: 1028105
End of Announcement EQS News Service
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