Russian retailer Lenta has posted a 2.9% increase in like-for-like sales in the first half of its financial year, to 30 June, with store traffic up 2.1% and average basket size up 0.7%.
The sales increase comes despite what the company's CEO said was a "challenging" period for the sector.
It posted a 5.0% increase in like-for-like sales in the first quarter of the year, followed by a 0.8% increase in the second quarter.
The group said that its half-year performance is equivalent to a 3.7% increase in like-for-like sales including VAT, due to an increase in VAT at the start of the year.
Total Sales
Total sales grew 3.1% in the half-year period, to RUB 199.2 billion (€2.7 billion), including retail sales growth of 7.2%, while its wholesale operation declined by 62.2%.
It reported a gross margin of 22.5%, which was up 60 basis points on the previous year, due to the decrease of the low-margin wholesale business as a percentage of total sales. EBITDA was RUB 16.1 billion, down 5.7% on the previous year.
“In the first half of the year, Lenta again proved its competitive strength and ability to remain attractive for customers," commented Hermann Tinga, Lenta chief executive. "We continued to see further inflows of new unique customers to our stores from other market players, both large federal and smaller regional retail chains. In addition, despite continued intense promotional activity across the industry, we were able to maintain our retail gross margins year-on-year."
Tinga added that the group's performance came against a backdrop of a "challenging" macroeconomic and consumer environment, which placed "further pressure on customer wallets, resulting in negative growth of real disposable household income and a growing consumer debt burden.
"This, combined with fast growth of selling space in the industry and continuing price competition, resulted in lower visit frequency and smaller basket size," he added.
Store Performance
The group opened three new hypermarkets and one supermarket during the first half of 2019, while one hypermarket and four supermarkets were closed, leading the group with a total of 377 stores as of 30 June 2019.
In the first half of the year, it implemented a 'bottom-up' store performance review, to identify stores that have low potential to reach expected returns. As a result of this review, the company has closed seven supermarkets, and may close up to nine hypermarkets, seven of which may be closed due to rent negotiation, it said.
It said that supply chain costs as a percentage of sales grew by 17 basis points in the period, to 1.3%, mainly due to higher fuel prices and increased personnel expenses, following an expansion of its truck fleet.
Future Focus
Looking ahead to the remainder of the year and beyond, Lenta's chief financial officer, Rud Pedersen, said, "After more than five years of being growth focused in an under-penetrated market, we have to change our focus to operating efficiencies across the entire business.
"As Lenta’s store base matures while the potential for further organic expansion in our core hypermarket format becomes increasingly more difficult, we must put additional efforts into supporting LFL sales growth in our stores to create a strong platform for implementation of a new strategy”.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
