LNTR.L Regulatory News (LNTR)

LENTA SALES AND OPERATING RESULTS

FOR THE FIRST QUARTER ENDED 31 MARCH 2014

Robust sales growth of 37.3% and LFL of 13.6%, with selling space increased by 36.3%

St-Petersburg, Russia; 17 April, 2014- 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 2014¹. 

1Q 2014 Operating Highlights:

· Total sales grew 37.3% in 1Q 2014 to RUB 39.6bn (1Q 2013: RUB 28.8bn);

· Like-for-like ("LFL")² sales growth of 13.6% vs. 1Q 2013;

· LFL traffic growth of 6.1% combined with a 7.0% increase in LFL average ticket;

· Two new hypermarkets opened during the first quarter of 2014;

· Total of 89 stores, comprising 79 hypermarkets and 10 supermarkets;

· Total selling space increased to 522,000 sq.m. at 31 March 2014 (+36.3% vs. 31 March 2013);

· Active loyalty cardholders³ increased to 5.3m (+35% y-o-y) with approximately 90% of transactions in the first quarter made using the loyalty card;

· 3.1% increase in average hypermarket ticket to Rub 1,089 (1Q 2013: Rub 1,056).

Lenta's Chief Executive Officer, Jan Dunning commented:

"Lenta's distinctive hypermarket model continues to prove its value to customers, as demonstrated by LFL sales growth of 13.6% in the first quarter. We are delighted that LFL sales growth in 1Q 2014 exceeded the 4Q 2013 result of 11.1% which was driven by strong year-end trading. Our focus on promotions, pricing and assortment attracted a 6.1% increase in LFL traffic. The combination of strong LFL growth and selling space increase of 36.3% year-on-year enabled Lenta to accelerate total sales growth to 37.3% in the first quarter, up from 35.0% in 4Q 2013.

Lenta's development is in-line with our expectations for this year. We have not seen significant changes in consumer behaviour in our stores in the quarter, 1Q 2014 LFL growth was strong in both older and newer stores and across all regions. New store openings are progressing well. We expect that continued robust LFL growth and additional store openings will ensure rapid sales growth for the rest of the year. The first quarter results provide the best evidence to support our confidence, though we will continue to be vigilant because of the many uncertainties which may impact consumer spending during the remainder of 2014.

We are delivering on our exciting vision for growth which will gain significant momentum in 2014 as we seek to open 24 hypermarkets and 15 supermarkets this calendar year. In the longer term, we aim to capture a substantial share of the potential in the Russian food retail market by doubling our net selling space over the next three years."

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

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1 Numbers in the Announcement are preliminary and not reviewed or audited by the auditor. Insignificant deviations in % change or totals is explained by rounding. This note applies to all tables in this Announcement

2 Lenta's stores are included in the LFL store base starting 12 months after the end of the month they are opened

3 Cardholders who made at least 2 purchases at Lenta during the 12 months to March 31, 2014 are considered active

Lenta Store Developments

In the first quarter of 2014, Lenta opened two new standard format owned hypermarkets, in Novorossiysk and Tyumen, taking the total number of hypermarkets to 79. Total selling space at quarter end increased to 522,000 sq.m, up 36.3% compared to the end of 1Q 2013.

Lenta opened a rented hypermarket of compact format in Ryazan after the end of the reporting period, increasing the total selling space to 526,000 sq.m. Further openings of both hypermarkets and supermarkets are planned in 2Q 2014.

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4 Within the reported period

Lenta's Operating Performance

Lenta performed strongly during the first quarter, as demonstrated by its robust sales growth. Continuing improvements made to Lenta's offering, along with special promotions on St. Valentine's Day and Women's Day, seasonal and regular weekly promotional campaigns and an increase in selling space led to significant sales growth of 37.3%. Total sales were Rub 39.6bn in the first quarter of 2014, compared with Rub 28.8bn for the same period last year.

Lenta expanded the reach of its "Big Data" customer insights initiative, which uses data from individual purchases with the Lenta loyalty card to provide valuable feedback on customer shopping habits. This enabled Lenta to enhance its attractiveness to customers by tailoring its offering more precisely to match their needs and preferences. The number of active cardholders5 increased to 5.3m as at March 31, 2014 (+35% y-o-y).

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5 Cardholders who made at least 2 purchases at Lenta during the 12 months to March 31, 2014 are considered active

These continued promotional and commercial efforts played an important role in delivering Like-for-like sales growth of 13.6%, driven in large part by a 6.1% increase in customer traffic. This strong traffic growth was partly due to Lenta's accelerated store opening programme which resulted in a higher number of new maturing stores entering the LFL store base for comparison, as well as healthy increases in traffic in older existing stores across all regions.

In addition to visiting Lenta stores more frequently, customers purchased more on a per-trip basis. LFL average ticket in the first quarter increased by 7.0% to RUB 1,130 due to a combination of an increase in the number of articles in the average basket, product mix improvement (number of more expensive articles in the average basket) and the effects of inflation.

The total average hypermarket ticket spend in the first quarter increased to Rub 1,089 (+3.1%) compared to the first quarter of 2013, somewhat less than the increase in the LFL average hypermarket ticket due largely to the increase in the proportion of younger stores which typically have slightly lower ticket size than mature stores.

Total customer traffic was up 36.2% in the first quarter of 2014 vs the same period of the previous year, comprising 30.0% growth in hypermarket traffic and 6.2% from Lenta's new supermarket format, which was launched in April 2013.

The performance of Lenta supermarkets was encouraging in terms of traffic, average ticket and sales per square meter of selling space. Notably, sales per square meter were similar for hypermarkets and supermarkets in 1Q 2014, despite the relative immaturity of the supermarkets, which were all less than one year old as of March 31, 2014. These results provide confidence in the further roll out of Lenta's supermarket opening programme in Moscow and the Moscow region.

Guidance

Based on its first quarter operating results and a strong new store pipeline, Lenta confirms its initial guidance of 24 hypermarkets and 15 supermarkets openings in 2014. The Company expects these new store openings to translate into an increase of at least 30% in total net selling space by year end 2014. Lenta also maintains its long-term target to double net selling space over the next three years.

About Lenta

Lenta is one of the largest retail chains in Russia and the country's second largest hypermarket chain (in terms of 2013 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 80 hypermarkets in 45 cities across Russia and 10 supermarkets in Moscow and the Moscow region, with a total of approximately 526,000 sq.m. of selling space. The average Lenta hypermarket store has selling space of approximately 6,400 sq.m. The Company operates four distribution centres that service hypermarkets and one dedicated to supermarkets.

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 27,800 people as of 31 December 2013.

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, the European Bank for Reconstruction and Development and VTB Capital Private Equity, all of whom 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 can be seen at: http://www.lentainvestor.com/about/lenta-video

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.