25 July 2019

2Q 2019 sales and operating results

St-Petersburg, Russia; 25 July, 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 second quarter ended 30 June 2019.

View the full press release here

2Q 2019 Operating Highlights:

  • Total sales grew 0.4% in 2Q 2019 to Rub 100.2bn (2Q 2018: Rub 99.8bn), including retail sales growth of 4.7% to Rub 97.8bn (2Q 2018: Rub 93.4bn) and wholesales decline of 62.4%;
  • Like-for-like (“LFL”)1 retail sales growth of 0.8% excluding VAT vs. 2Q 2018. This is equivalent to LFL retail sales growth of 1.6% including VAT, due to increase in VAT from 1 January 2019;
  • LFL retail traffic growth of 0.6% combined with LFL retail ticket growth of 0.2%;
  • Two hypermarkets and one supermarket were opened during the second quarter of 2019;
  • Total store count reached 377 stores at 30 June 2019, comprising 246 hypermarkets and 131 supermarkets;
  • Total selling space increased to 1,472,937 sq.m as at 30 June 2019 (+5.0% vs. 30 June 2018); and
  • Number of active loyalty cardholders2 increased to 15.2m (+13.5% y-o-y) with around 97% of transactions in the second quarter made using the loyalty card.

1H 2019 Operating Highlights:

  • Total sales grew 3.1% in 1H 2019 to Rub 199.2bn (1H 2018: Rub 193.2bn), including retail sales growth of 7.2% and wholesale decline of 62.2%
  • LFL retail sales growth of 2.9% excluding VAT vs. 1H 2018. This is the equivalent of LFL retails sales growth of 3.7% including VAT, due to increase in VAT from 1 January 2019;
  • LFL traffic growth of 2.1% combined with a 0.7% growth in LFL ticket; and
  • Three new hypermarkets and one supermarket were opened during 1H 2019 while one hypermarket and four supermarkets were closed.

Events in 2Q 2019 and after the reported period:

  • Severgroup LLC acquired 34.45% and 7.47% of Lenta’s issued and outstanding voting shares from TPG and EBRD respectively. As a result, Severgroup launched a cash offer on 30 April 2019 to acquire all of the issued shares and GDR’s of Lenta;
  • Once Severgroup acquired in aggregate more than 50% of the Lenta voting shares, the Board used its authority to fill the four vacated seats on the Board with the nominees of Severgroup, namely Messrs. Alexey Mordashov, Roman Vasilkov, Maxim Bakhtin and Alexey Kulichenko;
  • Upon completion of the mandatory tender offer on 4 June 2019, Severgroup’s holding was a combined total of approximately 78.73% of Lenta’s voting rights (c. 77.99% of Lenta’s share capital).

Lenta’s Chief Executive Officer, Herman Tinga commented:

“Lenta delivered healthy retail sales growth of 4.7% and like-for-like sales growth of 0.8% in the second quarter. The results mainly reflect a deteriorated economic situation for our consumers, negative impact of calendar effects in the second quarter and overall tough competition in the retail industry.

Stagnating household disposable income and a shift in Easter holidays especially affected our performance in hypermarkets with a decline of like-for-like retail sales by 0.2%. The pressure mainly came from negative like-for-like traffic of 1.4% due to lower frequency of customer visits, and slower growth of the average ticket.

Despite these challenges we have being encouraged by ongoing inflow of new customers to our stores throughout the second quarter thanks to further improvements in offering and balanced promotional activity. This trend also supported our supermarket format, which continued to demonstrate solid like-for-like sales growth driven by strong increase in traffic.

Amid pressure from the market environment, we remain focused on improving operational efficiency of our existing business, while we keep working on initiatives that should drive sales and deliver continued growth this year.

I would also like to welcome Severgroup as our new major shareholder and long-term strategic partner. The management team will be looking forward to working together on the strategy that would help to further strengthen Lenta’s business and deliver strong returns to all of our shareholders. ”

About Lenta
Lenta is the largest hypermarket chain in Russia and the country’s third largest retail chain. The Company was founded in 1993 in St. Petersburg. Lenta operates 245 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 1,468,978 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 800 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 45,759 people as of 31 December 20183.

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.

View the full press release here

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

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

Russian Media:
NW Advisors
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. 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 y-o-y performance
2 Cardholders who made at least 2 purchases at Lenta during the 12 months to 30 June 2019 are considered active.
3 FTE (full-time equivalent). Average FTE for FY2018 was 43,283 employees