Russian retailer Lenta announced that its year of rapid expansion, which saw it add 51 hypermarkets and 17 supermarkets, cost the company RUB 54.3 billion (€892 million), with SG&A costs accounting for 15.2% of sales.
Like-for-like growth for the 2016 financial year was 3.9%, with total sales for the year growing 21.2% to RUB 306.4 billion (€5 billion).
CEO Jan Dunning commented on the results, "We managed to further increase productivity in like-for-like stores by optimising processes and leveraging synergies from the increasing scale of the business. However, these initiatives were offset by cost investments to support our rapid expansion and additional marketing expenses reflecting the increased promo sensitivity of Russian consumers."
Speedy organic expansion, as well as the acquisition of Finnish company Kesko's food retail business in Russia and other capital expenditures cost RUB 54.3 billion, an increase of 73% compared to 2015.
It reached its 2016 goal of doubling its selling space in November, with an area totalling 1,151,668 square metres, an increase of 29.9% on 2015. However, footfall decreased by 0.1%.
It also opened a seventh own distribution centre in Moscow for its supermarkets.
Other new developments for the retailer include signing lease contracts with real estate firm ADG Group to open an additional 36 supermarkets in shopping and entertainment districts in the capital between 2018 and 2019, as well as acquiring eight properties in Novosibirsk earmarked for supermarkets.
Dunning mused about the future, "Our outlook for the short-to-medium term remains quite cautious. Pressure on disposable household income has impacted food retail sales growth in the country, which declined in both real and nominal terms in the recent past.
"Continued deterioration in consumers’ purchasing power combined with increasing price sensitivity and promo orientation is putting additional pressure on retailers and we don’t see signs of improvement in consumer budgets in the short-term".
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Karen Henderson. Click subscribe to sign up to ESM: The European Supermarket Magazine.
