LNTR.L Regulatory News (LNTR)

LENTA SALES AND OPERATING HIGHLIGHTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2018

St-Petersburg, Russia; 29 October, 2018 - 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 ended 30 September 2018.

3Q 2018 Operating Highlights:

· Total sales grew 12.5% in 3Q 2018 to Rub 100.8bn (3Q 2017: Rub 89.6bn);

· Like-for-like ("LFL")1 sales growth of -0.6% vs. 3Q 2017;

· LFL traffic growth of -0.3% combined with a 0.3% decrease in LFL ticket;

· 10 new supermarkets were opened during the third quarter of 2018, while two supermarkets were closed;

· Total store count reached 354 stores as at 30 September 2018, comprising 233 hypermarkets and 121 supermarkets;

· Total selling space increased to 1,410,073 sq.m as at 30 September 2018 (+17.2% vs. 30 September 2017); and

· Number of active loyalty cardholders2 increased to 13.8m (+17% y-o-y) with approximately 96% of transactions in the third quarter made using the loyalty card.

9M 2018 Operating Highlights:

· Total sales grew 16.1% in 9M 2018 to Rub 294.0bn (9M 2017: Rub 253.1bn);

· LFL sales growth of 2.9% vs. 9M 2017;

· LFL traffic growth of 0.6% combined with a 2.2% increase in LFL ticket; and

· Two new hypermarkets and 27 supermarkets were opened during 9M 2018 while three supermarkets were closed.

Lenta's Chief Executive Officer, Jan Dunning commented:

"Sales growth of 12.5% in the third quarter came below our original expectations and reflects the economic pressure on consumers. Lenta continues to win new customers in both formats, demonstrating the attractiveness of our customer offer. However, consumers are in a saving mode, shopping less frequently and buying less per visit. These trends have continued and even accelerated in October. We will keep improving our offer, assortment, and marketing activities in an effort to offset the weak economy and to support our customers.

The long-term fundamentals of the fragmented Russian food retail industry remain attractive for the most effective players. We believe our robust business model will enable us to continue to grow market share and deliver attractive returns. However, in the near term Lenta remains focused on operational efficiency, cash generation and returns on investment. We therefore plan to grow selling space at a significantly slower pace in 2019 which will result in positive free cash flow. We also believe that Lenta's current market valuation understates the fundamental value of the business, and that this provides an attractive opportunity to create value for shareholders through a buyback programme while maintaining our strong balance sheet with conservative leverage."

We have announced today that the Board of Directors has authorised a GDR buyback program under which total purchases of up to Rub 11.6bn may be made within the next 12 months, corresponding to 10% of all GDRs3. This is a sign of our confidence in the business as well as our focus on creating value for shareholders.

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 30 September 2018 are considered active

3 Based on the GDR quoted sale price as of the close of trading on October 26, 2018.

Lenta Store Developments

In the third quarter of 2018, Lenta opened four owned and six leased supermarkets in St.Petersburg and Siberia. As a result total number of stores reached 354 (233 hypermarkets and 121 supermarkets). The Company remains present in 84 cities across the country.

In the reported quarter Lenta added 6,928 sq.m of net selling space. Total selling space as at 30 September 2018 increased to 1,410,073 sq.m, up 17.2% year-on-year.

Since the end of the reported period Lenta opened four supermarkets, increasing total store count to 358 (233 hypermarkets and 125 supermarkets) with total selling space of 1,412,820 sq.m.

4  Within the reported period. In June 2018 the Company closed one leased supermarket in Moscow with selling space of 963 sq.m and in August 2018 one leased supermarket in Tula with selling space of 702 sq.m.

Lenta's Operating Performance

Selling space additions partly offset by negative LFL sales growth resulted in overall sales growth of 12.5% for the third quarter of 2018. Total sales amounted to Rub 100.8bn in the quarter, compared to Rub 89.6bn for the same period last year.

Lenta continued working on a series of initiatives to increase the distinctive attractiveness of Lenta's offering to customers. These initiatives include changes in assortment (including the introduction of new private label product ranges), marketing, Lenta's loyalty program and customer communication.

The Company maintained its focus on 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 13.8m as at 30 September 2018 (+17% y-o-y) and the share of transactions made with the loyalty card was 96%, an approx. 2p.p increase y-o-y.

Hypermarket sales growth of 10.2% in the third quarter was primarily driven by selling space growth of 14.2%, while sales in the LFL stores decreased 0.8% y-o-y. The supermarket format's total sales growth accelerated to 57.1% in 3Q 2018, which was primarily driven by rapid selling space addition supported by a significant improvement of LFL sales growth.

Lenta continues to grow rapidly in the Moscow region with y-o-y sales growth of 34.2% in 3Q 2018, including 40.6% in the hypermarket format. Net selling space in Moscow and the Moscow region increased 66.1% y-o-y. The Company entered the Moscow market in 2013 and now has 24 hypermarkets and 45 supermarkets in the region, representing 12.1% of Lenta's total selling space and 13.5% of total sales.

The average hypermarket ticket in the third quarter decreased 2.8% to Rub 1,127, while LFL average hypermarket ticket reduced only 0.1%. The difference reflects the large share of stores in the ramp-up phase which are not included in the LFL panel and overall reduction of the basket size. The average ticket in the supermarket format in the third quarter decreased by 11.8% to Rub 457 compared to a 0.6% decrease in the LFL average ticket - as for hypermarkets, the difference reflects the large share of younger stores which are not included in the LFL panel.

Total customer traffic increased by 20.1% in the third quarter of 2018 compared with the same period of the previous year, comprising 14.9% growth in hypermarket traffic and a 68.5% increase in traffic at Lenta's supermarket format, outpacing sales growth in both formats.

During the third quarter of 2018, two hypermarkets and six supermarkets entered the LFL panel.

LFL sales growth of -0.6% in the third quarter consisted of LFL traffic growth of -0.3% and average LFL ticket growth of -0.3%. LFL food sales decreased by 1.5% and LFL non-food sales growth was +5.6%.

Lenta continued to win new customers in both new and LFL hypermarkets and supermarkets - growth of number of unique customers outpaced sales growth. LFL sales growth of -0.8% in the hypermarket format was impacted by declining ticket and traffic growth. Customer traffic growth in the LFL stores turned negative at -0.7% as a significant increase in the number of new customers was not enough to outpace a reduction in visit frequency. LFL average ticket growth slowed again due to a reduction in the average number of articles per basket combined with continuing shelf-price deflation, which was only partially offset by trading up effects.

LFL sales growth in supermarkets in 3Q 2018 improved to 2.9%, compared to 0.5% in the previous quarter. Higher traffic growth of +3.5% was the key driver of improved LFL sales growth, largely as a result of tactical changes to the offering, including extension of the assortment and changes in marketing activities. LFL traffic growth in the format came at the highest level for the last 2.5 years. LFL ticket growth remained almost flat versus the previous quarter and was under pressure mainly due to lower basket size and deflationary effects. The supermarket format's share of Lenta's total sales increased to 6.8% in the reported quarter.

LFL sales growth of -0.6% in 3Q 2018 was therefore due to a combination of factors: an increase in the number of customers with lower frequency of visits and strong trading up effects; offset by on-shelf price deflation and a reduction in the average number of items per basket.

Guidance

Lenta confirms its 2018 guidance of about 18 new hypermarkets and about 40 new supermarkets, with capital expenditures of Rub 25-30bn.

For 2019, Lenta will slow its organic expansion with significantly fewer new stores than in 2018. The Company will continue to consider value-accretive bolt-on acquisitions if suitable opportunities arise. FY 2019 store opening and capex guidance will be provided in early 2019.

As a result, the Company is no longer targeting to double total selling space during the period of 2017-2020.

About Lenta

Lenta is the largest hypermarket chain in Russia (in terms of selling space) and the country's third largest retail chain (in terms of 2017 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 233 hypermarkets in 84 cities across Russia and 125 supermarkets in Moscow, St. Petersburg, Novosibirsk, Yekaterinburg and the Central region with a total of approximately 1,412,820 sq.m of selling space. The average Lenta hypermarket store has selling space of approximately 5,600 sq.m. The average Lenta supermarket store has selling space of approximately 800 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 50,600 people as of 30 June 20185.

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 www.lentainvestor.com, or contact:

5 FTE (full-time equivalent). Average FTE for 1H2018 was 49,643 employees

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.