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LENTA SALES AND OPERATING HIGHLIGHTS FOR THE FIRST QUARTER ENDED 31 MARCH 2017

St-Petersburg, Russia; 20 April, 2017 - 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 first quarter ended 31 March 2017.

1Q 2017 Operating Highlights:

· Total sales grew 17.2% in 1Q 2017 to Rub 77.9bn (1Q 2016: Rub 66.5bn);

· Like-for-like ("LFL")1 sales growth of (1.7%) vs. 1Q 2016;

· LFL traffic growth of (2.0%) combined with a 0.3% increase in LFL ticket;

· Four new hypermarkets and four supermarkets opened during the first quarter of 2017 while one supermarket was closed;

· Total store count reached 247 stores as at 31 March 2017, comprising 195 hypermarkets and 52 supermarkets;

· Total selling space increased to 1,167,601 sq.m. as at 31 March 2017 (+30.3% vs. 31 March 2016); and

· Number of active loyalty cardholders2 increased to 11.1m (+25% y-o-y) with approximately 93% of transactions in the first quarter made using the loyalty card.

Material events in 1Q 2017 and after the reported period:

· The Company signed lease contracts with the ADG Group real estate development company to open 36 supermarkets (approx. 47,000 sq.m of total space and 30,300 sq.m of selling space) in Moscow shopping and entertainment centers in 2018-2019; and

· Lenta started expansion of its supermarket format in Novosibirsk with two stores opened in 1Q 2017.

[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 Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 March 2017 are considered active

Lenta's Chief Executive Officer, Jan Dunning commented:

"The macro and consumer environment for food retail remained challenging in the first quarter of 2017. While Lenta stores continue to win customers from competitors, sales growth came under pressure due to a combination of falling inflation, changes in customer behaviour, one day less in February and our own rapid expansion which resulted in expected higher cannibalization effects. We hope to see some improvement in the environment later in the year and are putting sales initiatives in place to capitalize on this to deliver a pick-up in sales growth.

Customer numbers are running ahead of sales growth in both new and LFL stores, but as expected, cannibalization effects increased due to our rapid expansion in cities with existing Lenta presence. Consumers continued trading up in our stores for the second consecutive quarter, but this was offset by historically low on-shelf inflation and lower volume as customers reduced their food spending to compensate for pressure on their budgets. We see some stabilization of customer's promo sensitivity, supported by the attractiveness of Lenta's offering and low inflation. Visit frequency declined across much of the food retail sector - Lenta traffic improved compared to the previous quarter, but still remained in a negative territory.

We continue rolling-out new supermarkets in Moscow, St.Petersburg and the Central region3 and, as planned, started expanding the format in Siberia with two successful store openings in Novosibirsk. Our store opening guidance for 2017 and our long-term growth targets are unchanged, but we have decided to shift some store openings planned for 2018 into the second half of the same year which in combination with more predictable and efficient construction cycles will enable us to reduce capital expenditure in 2017. This will result in reduced leverage and provide more financial flexibility in case small acquisition opportunities appear in the future."

3 The Company has included three supermarkets located in the Kaluzhskaya oblast in the Central region

Lenta Store Developments

In the first quarter of 2017, Lenta opened four new hypermarkets and four supermarkets, while one supermarket was closed4, taking the total number of stores to 247 (195 hypermarkets and 52 supermarkets).

Lenta added 21,453 sq.m of net selling space in the reported quarter. Total selling space as at 31 March 2017 increased to 1,167,601 sq.m, up 30.3% year-on-year.

Since the end of the first quarter Lenta opened one leased supermarket in the Moscow region, bringing the total number of stores to 248 (195 hypermarkets and 53 supermarkets). Total selling space as at 20 April 2017 increased to 1,168,324 sq.m.

4 In January 2017 the Company closed one leased supermarket in Electrostal (Moscow region) with selling space of 1,135 sq.m.

5 Within the reported period

Lenta's Operating Performance

Continuing selling space additions partly offset by a slight decline in LFL sales resulted in overall sales growth of 17.2% for the first quarter of 2017. Total sales amounted to Rub 77.9bn in the quarter, compared to Rub 66.5bn for the same period last year. Sales growth in the reported quarter was also impacted by one day less in February 2017 vs last year which resulted in approx. 1p.p of negative effect on total sales growth. 

Lenta continued to implement digital marketing activities to reach customers, with special offers tailored on an individual basis to enhance traffic and basket size. The number of active loyalty cardholders increased to 11.1m as at 31 March 2017 (+25% y-o-y) and the share of transactions made with the loyalty card was 93%, an approx. 2p.p increase y-o-y.

LFL sales growth of (1.7%) in the first quarter consisted of LFL traffic decline of 2.0% and average LFL ticket increase of 0.3%. LFL food sales declined by 0.9% and LFL non-food sales were under higher pressure.

Lenta continued gaining customers from competitors - the number of unique customers outpaced sales growth in both new and LFL hypermarkets and supermarkets in every region. The proportion of loyal customers remained stable, confirming the strength of Lenta's commercial model. LFL traffic in the reported period remained in negative territory while it has improved compared to the previous quarter. At expected, the Company's rapid expansion resulted in an increase in cannibalization effects due to customer migration from LFL to new stores and hence a negative effect on LFL traffic. The general trend toward lower frequency of visits observed across the food retail sector in 4Q2016 continued in the reported quarter, reflecting changes in customer behaviour.

The average LFL ticket was under pressure from continuing deceleration of shelf price inflation which fell to historically low levels. While customers continued trading up, they bought lower volumes per visit and visited stores slightly less frequently. Lenta maintained its customary price positioning with shelf price inflation significantly lower than official food price inflation of 3.8% in 1Q 2017 (vs 5.2% in 4Q 2016).

LFL growth of (1.7%) in 1Q 2017 was therefore due to a combination of factors - an increase in the number of customers despite increased cannibalisation from new Lenta stores, lower number of days in February and a change in customer purchasing behaviour with a reduction in visit frequency combined with soft average ticket growth due to very low on-shelf inflation.

During the first quarter of 2017, 16 hypermarkets and five supermarkets entered the LFL panel.

The average hypermarket ticket in the first quarter decreased to Rub 1,127 (-1.8% compared to the first quarter of 2016), which was below the LFL average hypermarket ticket growth of 0.3% reflecting large share of stores in a ramp-up phase and not included in the LFL panel. The average ticket in the supermarket format in the first quarter decreased by 3.3% to Rub 571 compared to a 0.7% increase in the LFL average ticket.

Total customer traffic increased by 20.1% in the first quarter of 2017 compared with the same period of the previous year, comprising 18.7% growth in hypermarket traffic and a 35.1% increase in traffic at Lenta's supermarket format.

The supermarket format demonstrated LFL sales growth of 0.9% with traffic returning to a positive zone for the first quarter of 2017 and its share of Lenta's total sales increased to 5.1% in the reported quarter. Lenta's supermarkets in combination with 13 hypermarkets operating in Moscow and the Moscow region continue to demonstrate very strong sales ramp-up dynamics with 32.0% y-o-y growth in total sales during the quarter - the share of this region in the Company's total sales was 10.6% in 1Q 2017.

Guidance

Lenta confirms its 2017 guidance to open about 30 new hypermarkets and about 50 new supermarkets. Long-term growth targets for 2017-2020 remain unchanged.

The Company has reviewed its 2018 new store opening programme and has decided to shift some pre-investments in 2018 stores from 2H2017 into 1H2018. This change partly reflects shorter and more predictable store construction cycles enabled by improved efficiency, optimization of starting dates and excess capacity in the construction industry. The total number of new stores planned for 2018 is not affected, but the proportion opened in 2H2018 will be higher than previously planned. As a result of this change, Lenta has reduces its 2017 capex guidance from Rub 40bn to Rub 30-35bn. Shifting capex from 2H2017 to 1H2018 will reduce leverage, providing more financial flexibility if small acquisition opportunities appear later this year or next year.

About Lenta

Lenta is the largest hypermarket chain in Russia (in terms of selling space) and the country's fifth largest retail chain (in terms of 2016 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 195 hypermarkets in 78 cities across Russia and 53 supermarkets in Moscow, St. Petersburg, Novosibirsk and the Central region with a total of approximately 1,168,324 sq.m of selling space. The average Lenta hypermarket store has selling space of approximately 5,700 sq.m. The average Lenta supermarket store has selling space of approximately 900 sq.m. The Company operates seven owned distribution centres.

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 45,689 people as of 31 December 2016.

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 TPG Capital and the European Bank for Reconstruction and Development, both of which are 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.

For further information please visit http://www.lentainvestor.com/en/or contact:

Forward looking statements:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal", "believe", or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Lenta's control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

Any forward-looking statements made by or on behalf of Lenta speak only as at the date of this announcement. Save as required by any applicable laws or regulations, Lenta undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.