24 January 2019

4Q and FY2018 sales and operating results

St-Petersburg, Russia; 24 January, 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 fourth quarter and twelve months ended 31 December 2018.

The Company made a decision to provide a more detailed breakdown of operating results, with separate sales data for retail and wholesale operations. Detailed information on a quarterly basis for the previous reported periods of 2017-2018 is available in Annex 1 and Annex 2 to this Announcement.

View the full release here

4Q 2018 Operating Highlights:

  • Total sales grew 6.6% in 4Q 2018 to Rub 119.5bn (4Q 2017: Rub 112.1bn), including retail sales growth of 11.3% to Rub 115.3bn (4Q 2017: Rub 103.7bn) and wholesales growth of -50.7%;
  • Like-for-like (“LFL”)1 retail sales growth of 2.1% vs. 4Q 2017;
  • LFL retail traffic growth of 0.0% and LFL retail ticket growth of 2.1%;
  • 11 hypermarkets and 14 supermarkets opened on net basis2 during the fourth quarter of 2018;
  • Total store count reached 379 stores as at 31 December 2018, comprising 244 hypermarkets and 135 supermarkets;
  • Total selling space increased to 1,467,482 sq.m as at 31 December 2018 (+6.1% vs. 31 December 2017); and
  • Number of active loyalty cardholders3 increased to 14.4m (+17% y-o-y) with approximately 96% of transactions in the fourth quarter made using the loyalty card.

12M 2018 Operating Highlights:

  • Total sales grew 13.2% in 12M 2018 to Rub 413.5bn (12M 2017: Rub 365.2bn), including retail sales growth of 13.6% to Rub 392.1bn (12M 2017: Rub 345.0bn) and wholesales growth of 6.0%;
  • LFL retail sales growth of 1.3%, which excludes LFL wholesales growth of 5.3%;
  • LFL retail traffic growth of 0.5% combined with a 0.8% increase in LFL retail ticket; and
  • 13 hypermarkets and 38 supermarkets were opened on net basis4 during 12M 2018 with 84.7 th. sq.m of net selling space addition.

Events in 4Q 2018 and after the reported period:

  • Herman Tinga appointed as Chief Executive Officer of the Company;
  • Dmitry Bogod appointed as Chief Strategy Officer;
  • Rud Pedersen nominated as Chief Financial Officer. Mr. Pedersen will take up the CFO role and become a director of the Company during the first quarter of 2019, upon completion of the notice period with his current employer;
  • Lenta signed a strategic partnership with Li & Fung, a leading global sourcing agency of non-food products, to upgrade non-food ranges, enhance quality and improve the efficiency of non-food supplies;
  • The Board authorised a GDR buyback programme to be conducted between 29 October 2018 and 29 October 2019, under which total purchases of up to Rub 11.6bn may be made (equivalent to 10% of all the Company’s GDRs at the time the program was announced)5.

Lenta’s Chief Executive Officer, Herman Tinga commented:

“2018 was a challenging year for the Russian food retail sector, with strong competition for customers in a weak macro environment. In this context Lenta delivered robust retail sales growth of 11% in Q4, with positive same store sales alongside an increase of 6% in total selling space.

Our hypermarket business continues to deliver solid growth with sales up 8% in 4Q. Customers reacted positively to continuing improvements in our offering, range, marketing and communication which led to an acceleration in LFL sales to 1.8%. We were particularly pleased to achieve an increase in like-for-like each month of the reported period from October to December with traffic returning to a strong positive level in the last month of the year and customers continue trading up in our stores. We continue winning customers from competitors, especially other hypermarket players, regional chains and focusing on differentiation to compete with smaller formats.

Our supermarket format showed very rapid growth with sales up 60% in the quarter combined with LFL sales up 7.6% due to a combination of improvements in our offer to customers and new stores entering the LFL panel. While we are pleased with the impact of the improvements we made during the year we are not fully satisfied with progress and plan a series of new initiatives in 2019 to further improve the competitiveness and profitability of this business.

We saw a major decline in sales to wholesale customers in 4Q, primarily as a result of changes in the distribution strategy of some key wholesale suppliers. We expect this trend to continue in 2019.

The Company extended its lead in the hypermarket format during 2018 with 14 new stores. We entered four new cities during the year and improved our market position in all key regions. Four hypermarket openings which were planned for 2018 slipped into the first half of 2019 due primarily to bureaucratic delays.

While we are feeling some pressure from the challenging market conditions, overall Lenta is weathering the storm effectively. We have a strong team, a robust business model and a clear strategy to deliver improvements in 2019 and beyond.”

View the full release here

For further information please visit www.lentainvestor.com, or contact:

Lenta
Mariya Filippova
PR and GR manager
Tel: +7 812 380-61-31 ext.: 1892
E-mail: maria.filippova@lenta.com

Russian Media:
NW Advisors
Anton Karpov & Victoria Afonina
Тel:+7 495 795 06 23
E-mail: lenta@nwadvisors.com

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 One hypermarket in Saint-Petersburg with selling space of 7,219 sq.m was closed in November 2018 as a result of fire. It is expected that this hypermarket will be repaired and returned to operation during 2019
3 Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December 2018 are considered active
4 Three supermarkets were closed during the reported period: two supermarkets in Moscow with selling space of 963 sq.m and 721 sq.m and one store in Tula (Central region) with selling space of 702 sq.m
5 Based on quoted GDR price as of the close of trading on 26 October 2018