Lenta Ltd LENTA Q3 SALES AND OPERATING HIGHLIGHTS (4897C)

TIDMLNTR TIDMLNTA

RNS Number : 4897C

Lenta Ltd

16 October 2015

LENTA SALES AND OPERATING HIGHLIGHTS FOR THE THIRD QUARTER

ENDED 30 SEPTEMBER 2015

St-Petersburg, Russia; 16 October, 2015 - 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 third quarter and nine months ended 30 September 2015.

3Q 2015 Operating Highlights:

   --      Total sales grew 29.3% in 3Q 2015 to Rub 62.8bn (3Q 2014: Rub 48.5bn); 
   --      Like-for-like ("LFL")1 sales growth of 8.5% vs.3Q 2014; 
   --      LFL traffic growth of 2.1% combined with a 6.2% increase in LFL ticket; 
   --      Six hypermarkets opened during the third quarter of 2015; 
   --      Total of 149 stores at 30 September 2015, comprising 122 hypermarkets and 27 supermarkets; 

-- Total selling space increased to 787,804 sq.m. as at 30 September 2015 (+38.3% vs. 30 September 2014); and

-- Number of active loyalty cardholders2 increased to 8.0m (+33% y-o-y) with approximately 90% of transactions in the third quarter made using the loyalty card.

9M 2015 Operating Highlights:

   --      Total sales grew 32.1% in 9M 2015 to Rub 177.7bn (9M 2014: Rub 134.4bn); 
   --      LFL sales growth of 10.4% vs. 9M 2014; 
   --      LFL traffic growth of 3.7% combined with a 6.4% increase in LFL ticket; 
   --      14 hypermarkets and three supermarkets opened during the first nine months of 2015. 

Material events in 3Q 2015 and after the reported period:

-- Lenta issued two tranches of bonds on MoEx for a total amount of Rub 10bn with 10 years maturity and a coupon rate of 12.4%3 (both tranches rated "BB-" by Fitch Ratings);

-- S&P Ratings Services upgraded the long-term credit rating of Lenta Ltd. and its main operating company Lenta LLC to "BB-" with a "stable" outlook;

   --      Moody's Investors Service upgraded Lenta's credit rating to "Ba3", outlook "stable"; 

-- Lenta acquired three new stores and four land plots from O'KEY Group; one of the acquired stores opened in September and the other two will open before the end of 2015. New stores will be developed on the four land plots to open during 2016-2017.

Lenta's Chief Executive Officer, Jan Dunning commented:

"In the third quarter of 2015, Lenta again delivered strong growth, with total sales up 29% despite a high base for comparison. Lenta remains well positioned to win in a tough market environment generating strong 8.5% LFL sales and 2% LFL traffic growth despite continuing pressure on consumer incomes and decelerating food inflation. Further adjustments to our offer to meet evolving consumer needs, including intensified tailored promotions, resulted in an acceleration of sales growth in September with double-digit LFL sales growth.

We continued to benefit from effective cost management and further improvements in our supply chain, which together with improved supplier terms enabled us to absorb part of the effect inflation has on our customers without sacrificing profitability.

Returns on investment in new stores have remained consistently strong. Our new store pipeline has also continued to strengthen, enabling us to increase our hypermarket opening target for 2015 to at least 30 stores.

The upgrade of S&P's credit rating to 'BB-' with a stable outlook, assigned to Lenta in August and upgrade of Moody's credit rating to "Ba3" with a "stable" outlook in October, reflect our strong operational performance, robust profitability and improved financial position which enable the Company to grow its share of the Russian food retail market."

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

 
 Lenta                               Instinctif Partners 
  Anna Meleshina,                     International Media: 
  Public Relations & Government       Mark Walter and Saule Jandossova 
  Affairs Director                    el:[phone] 
  Tel: [phone]               E-mail: [e-mail] 
  E-mail: [e-mail] 
                                      Primum 
  Yana Mogileva, PR Manager           Russian Media: 
  el:[phone]               Alexandra Semenova and Nikolay 
  E-mail: [e-mail]     Konchurkov 
                                      el:[phone] 
                                      E-mail: [e-mail] 
 

Lenta Store Developments

In the third quarter of 2015, Lenta opened six hypermarkets (three owned standard stores in Murmansk, Moscow and Novokuznetsk, two owned compact stores in Kemerovo and Volgograd and one leased compact store in Moscow), taking the total number of stores to 149 (122 hypermarkets and 27 supermarkets). The Company entered one new city in the third quarter of 2015 and is now present in 634 cities. Lenta added 36,359 sq.m. of new selling space in the reported quarter. Total selling space as at 30 September 2015 increased to 787,804 sq.m., up 38.3% year-on-year.

 
                      As at      As at                            As at      As at 
                      30 Sept    30 Sept      Net       Change    30 Sept    30 Sept      Net       Change 
                      3Q 2015    3Q 2014     change      (%)      9M 2015    9M 2014     change      (%) 
 Number of 
  stores                  149        103         46     44.,7%        149        103         46      44.7% 
     hypermarkets         122         87         35      40.2%        122         87         35      40.2% 
     supermarkets          27         16         11      68.8%         27         16         11      68.8% 
 
 Number of 
  new stores5               6          7         -1     -14.3%         17         16          1       6.3% 
     hypermarkets           6          5          1      20.0%         14         10          4      40.0% 
     supermarkets           -          2          -          -          3          6         -3     -50.0% 
 
 Total selling 
  space (sq.m.)       787,804    569,800    218,004      38.3%    787,804    569,800    218,004      38.3% 
     hypermarkets     758,474    550,905    207,572      37.7%    758,477    550,905    207,572      37.7% 
     supermarkets      29,327     18,895     10,432      55.2%     29,327     18,895     10,433      55.2% 
 
 Total selling 
  space added 
  (sq.m.)5             36,359     27,526      8,833      32,1%     86,656     64,136     22,520      35.1% 
     hypermarkets      36,359     25,140     11,219      44,6%     83,890     57,065     26,825      47,0% 
     supermarkets           -      2,386          -          -      2,766      7,071     -4,305     -60.9% 
 

Lenta's Operating Performance

Continuing selling space additions and LFL growth supported overall sales growth of 29.3% for the third quarter of 2015. Total sales amounted to Rub 62.8bn in the third quarter, compared to Rub 48.5bn for the same period last year.

In the third quarter of the year Lenta continued to implement digital marketing activities to reach customers, with special offers tailored on an individual basis to enhance traffic. The number of active loyalty cardholders increased to 8.0 million as at 30 September, 2015 (+33% y-o-y).

LFL sales growth of 8.5% in the third quarter was supported by LFL traffic growth of 2.1% and average LFL ticket increase of 6.2% due to inflationary effects partly offset by a reduction in the number of items per basket, changes in the product mix and increased promotions. LFL food sales increased by 10.0%, while LFL non-food sales growth remained negative. In addition to the effects of trading down, sales in the third quarter were also affected by the high base of last year, especially in July and August. Sales growth strengthened in September with double-digit LFL sales growth and robust LFL traffic growth; LFL ticket growth was impacted by decelerating inflation, however trading down stabilized - while growth in number of articles per basket and product mix still remained negative y-o-y, the dynamics have improved since July.

Lenta's expansion resulted in an increase in the number of new maturing stores included in the LFL store base for comparison. During the third quarter of 2015, six hypermarkets entered the LFL panel.

 
                     LFL sales   LFL average   LFL traffic   LFL sales   LFL average   LFL traffic 
                       growth       ticket        growth       growth       ticket        growth 
                                    growth                                  growth 
                      3Q 2015      3Q 2015       3Q 2015      9M 2015      9M 2015       9M 2015 
 
 Lenta total 
  (%)                     8.5%          6.2%          2.1%       10.4%          6.4%          3.7% 
     hypermarkets         8.3%          6.3%          1.9%       10.2%          6.5%          3.5% 
     supermarkets        14.7%          9.0%          5.2%       19.1%          9.7%          8.5% 
 

The average hypermarket ticket in the third quarter increased to Rub 1,122 (+3.1% compared to the third quarter of 2014), lower than the 6.3% increase in the LFL average hypermarket ticket due to the increase in the proportion of young stores. As of 30 September 2015 the share of selling space younger than three years increased to 60% compared to 52% as at 30 September 2014 and the share of stores operating for less than one year increased to 28% compared to 27% a year ago. The same trend was visible in the supermarket format, where the average ticket in the third quarter increased by 4.7% to Rub 531 compared to 9.0% increase in the LFL average ticket.

Total customer traffic increased by 26.6% in the third quarter of 2015 compared with the same period of the previous year, comprising 24.1% growth in hypermarket traffic and 64.8% increase in traffic at Lenta's supermarket format.

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