LENTA SALES AND OPERATING HIGHLIGHTS FOR THE FOURTH QUARTER AND FULL YEAR ENDED 31 DECEMBER 2017 St-Petersburg, Russia; 25 January, 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 fourth quarter and twelve months ended ember 2017. Operating Highlights: Total sales grew 23.4% in to Rub 112.1bn (4Q 2016: Rub 90.8bn); Like-for-like ( LFL ) 1 sales of 5.2% vs. 4Q 2016; LFL traffic of 0.6% combined with a 4.6% increase in LFL ticket; 30 new hypermarkets and 33 new supermarkets opened during the fourth quarter of 2017; Total store count reached 328 stores as at ember 2017, comprising 231 hypermarkets and 97 supermarkets; Total selling space increased to 1,382,111 sq.m as at ember 2017 (+20.6% vs. 31 December 2016); and Number of active loyalty cardholders 2 increased to 12.3m (+17% y-o-y) with approximately 95% of transactions in the fourth quarter made using the loyalty card. 12M 2017 Operating Highlights: Total sales grew 19.2% in 12M 2017 to Rub 365.2bn (12M 2016: Rub 306.4bn); LFL sales of 0.9% vs. 12M 2016; LFL traffic of (1.4%) combined with a 2.3% increase in LFL ticket; Lenta started expansion of its supermarket format in Siberia and Ural regions; and 40 new hypermarkets and 49 new supermarkets were opened during 12M 2017 with 236.0 th. sq.m of net selling space addition in line with the Company s store opening guidance. Material events in and after the reported period: Lenta signed an agreement with the Holiday Group to acquire 22 supermarkets in the Siberia region, of which 6 were opened in December; Lenta has joined EMD, Europe s leading purchasing alliance to benefit from membership of the world s largest FMCG purchasing network; The Company started sales of Pirkka branded products (private label produced by Kesko of Finland) in Lenta stores across some regions; 130 new MAN trucks with refrigerated semitrailers were purchased to improve supply chain performance; and Steven Hellman was appointed as a non-executive Director of Lenta Ltd. with effect from 1 st December, 2017. Lenta s Chief Executive Officer, Jan Dunning commented: Lenta s sales accelerated to 23% in the fourth quarter of 2017, driven by an improvement in like-for-like sales to 5.2% combined with a 21% increase in selling space. Customers reacted positively to continuing improvements in our offering, range, marketing and communication and this led to substantial improvements in both like-for-like ticket and traffic. We were particularly pleased to achieve an increase in like-for-like traffic for the first time in the year. Although we continued to see some pressure from cannibalization and deflation in the quarter, these effects show some signs of abating. 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 ember 2017 are considered active 1 of 5
The Company continues to expand rapidly and again met its new store opening guidance with 40 hypermarkets and 49 supermarkets opened during the year. We doubled our supermarket network during 2017, opening more stores than in the previous four years since this format was launched in 2013. We also made notable progress in Moscow with 11 new hypermarkets and 10 new supermarkets, leading to year-on-year increases of over 70% in fourth quarter sales and selling space in this region. We are very pleased with the first operating results of the 14 ex-nash hypermarkets which were reopened under the Lenta brand in November 2017. Sales at the 11 hypermarkets acquired from Kesko in 2016 also continued to ramp-up rapidly. Lenta s ability to succeed in diverse markets with both acquired stores and organic openings provides a very clear demonstration of the attractiveness of Lenta s customer proposition. In December, we completed the purchase of 22 supermarkets in Siberia from Holiday. As a result of our expansion, Lenta s overall market position continued to improve in addition to being the country s leading hypermarket operator, we are confident that Lenta also became Russia s #3 food retailer during 2017. For 2018, the Lenta team will continue its efforts to drive sales by further strengthening our customer proposition. We also expect some improvement in the macroeconomic and consumer environment. Lenta Store Developments In the fourth quarter of 2017, Lenta opened 30 new hypermarkets and the total hypermarket count reached 231 stores across Russia. The Company entered five new cities during the quarter and is now present in 84 cities across the country. During the reported period the Company also opened 33 new supermarkets, including Lenta s first supermarkets in the Ural region. With the launch of supermarkets in the Urals, Lenta s supermarket network is now present in five regions (comprising Moscow, St Petersburg, Central, Siberia and Ural regions), with a total of 97 stores. The supermarket format s share in the Company s total selling space rose to 6.1% as at the end of the year. Lenta added 179,245 sq.m of net selling space in the reported quarter. Total selling space as at 31 December 2017 increased to 1,382,111 sq.m, up 20.6% year-on-year, with 18.0% in the hypermarket format and 82.6% in the supermarket format. Total number of stores 4Q 2016 FY 2016 328 240 88 36.7% 328 240 88 36.7% Hypermarkets 231 191 40 20.9% 231 191 40 20.9% Supermarkets 97 49 48 98.0% 97 49 48 98.0% Number of net store openings 3 63 43 20 46.5% 88 68 20 29.4% Hypermarkets 30 36-6 -16.7% 40 51-11 -21.6% Supermarkets 33 7 26 371.4% 48 17 31 182.4% Total selling space 4 (sq.m.) 1,382,111 1,146,148 235,963 20.6% 1,382,111 1,146,148 235,963 20.6% Hypermarkets 1,297,583 1,099,863 197,720 18.0% 1,297,583 1,099,863 197,720 18.0% Supermarkets 84,528 46,285 38,243 82.6% 84,528 46,285 38,243 82.6% 3 Within the reported period. In January 2017 the Company closed one leased supermarket in Electrostal (Moscow region) with selling space of 1,135 sq.m. 4 Selling space is shown after the adjustments made to the total reported selling space and store network described below 2 of 5
Total net selling space added 3 (sq.m.) 179,245 182,778-3,533-1.9% 235,963 263,765-27,802-10.5% Hypermarkets 152,933 176,912-23,979-13.6% 197,720 250,991-53,271-21.2% Supermarkets 26,312 5,866 20,446 348.6% 38,243 12,774 25,469 199.4% Adjustments to Reported Selling Space During 2017, store reconstruction and refurbishment activities resulted in selling space increases in some operating stores and reductions in others. The net effect was a reduction of 372 sq.m in hypermarket selling space and an increase of 6 sq.m in supermarket selling space, giving an overall net reduction of 366 sq.m in total selling space (-0.03% of total selling space). Total selling space after these adjustments was 1,382,111 sq.m as of ember 2017. All the above mentioned s are reflected on the Company s website at http://www.lentainvestor.com/en/about/lentas-geography/our-hypermarkets and http://www.lentainvestor.com/en/about/lentas-geography/our-supermarkets Lenta s Operating Performance Selling space additions combined with positive LFL sales resulted in overall sales of 23.4% for the fourth quarter of 2017. Total sales amounted to Rub 112.1bn in the quarter, compared to Rub 90.8bn for the same period last year. Lenta continued implementing a series of initiatives launched earlier in 2017 to increase the distinctive attractiveness of Lenta s offering to customers. These initiatives included s in assortment (including introduction of new private label product ranges), marketing, Lenta s loyalty program and customer communication. The Company maintained 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 12.3m as at ember 2017 (+17% y-o-y) and the share of transactions made with the loyalty card was 95%, an increase of approximately 2p.p y-o-y. Hypermarket sales accelerated significantly to 22.4% in the fourth quarter, up from 18.2% in 3Q 2017. A significant improvement in LFL sales to 5.4% from 0.5% in the previous quarter more than offset slightly slower selling space. The supermarket format s total sales also substantially increased to 43.7% in from 30.9% in 3Q 2017, primarily driven by rapid selling space, while LFL sales reduced to 1.4%. The supermarket format s share of Lenta s total sales increased to 5.1% in the reported quarter. Lenta also continues to grow rapidly in the Moscow region. The Company entered the Moscow market in 2013 and now has 24 hypermarkets and 43 supermarkets in the region, representing 12.2% of Lenta s total selling space. With 11 hypermarket and 10 supermarket openings during the year, net selling space in Moscow and the Moscow region increased 72% y-o-y. Total sales in Moscow grew 76.5% y-o-y during the quarter and the share of this region in the Company s total sales increased to 14.4%. Sales (Rub, million) 4Q 2017 4Q 2016 FY 2017 FY 2016 112,090 90,846 21,244 23.4% 365,176 306,352 58,824 19.2% Hypermarkets 106,326 86,835 19,491 22.4% 346,989 292,624 54,364 18.6% Supermarkets 5,764 4,011 1,753 43.7% 18,188 13,728 4,460 32.5% Average ticket (Rub) 1,220 1,221-2 -0.1% 1,124 1,135-11 -1.0% 3 of 5
Hypermarkets 1,302 1,283 20 1.5% 1,190 1,192-3 -0.2% Supermarkets 562 599-38 -6.3% 548 563-15 -2.7% Customer traffic (million) 91.9 74.4 17.5 23.5% 324.9 269.8 55.0 20.4% Hypermarkets 81.6 67.7 13.9 20.6% 291.7 245.4 46.2 18.8% Supermarkets 10.3 6.7 3.6 53.3% 33.2 24.4 8.8 36.2% The average hypermarket ticket in the fourth quarter increased 1.5% to a historically high level of Rub 1,302, while LFL average hypermarket ticket grew 4.5%. The difference reflects the large share of stores in the ramp-up phase which are not included in the LFL panel. The average ticket in the supermarket format in the fourth quarter decreased by 6.3% to Rub 562 compared to a 3.2% increase 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 23.5% in the fourth quarter of 2017 compared with the same period of the previous year, comprising 20.6% in hypermarket traffic and a 53.3% increase in traffic at Lenta s supermarket format. During the fourth quarter of 2017, 19 hypermarkets and one supermarket entered the LFL panel. LFL sales of 5.2% in the fourth quarter consisted of LFL traffic of 0.6% and average LFL ticket increase of 4.6%. LFL food sales increased by 5.8% and LFL non-food sales returned to positive territory for the first time since 2016, with an increase of 1.4% y-o-y. LFL sales LFL average ticket LFL traffic LFL sales LFL average ticket LFL traffic Lenta total 5.2% 4.6% 0.6% 0.9% 2.3% -1.4% Hypermarkets 5.4% 4.5% 0.9% 0.8% 2.2% -1.4% Supermarkets 1.4% 3.2% -1.7% 1.9% 3.1% -1.1% Lenta continued gaining customers ahead of sales the number of unique customers outpaced sales in both new and LFL hypermarkets and supermarkets. LFL traffic in the reported quarter improved due to an increase in the frequency of customer visits, and returned to positive territory despite continuing cannibalization effects of new stores. Supermarkets demonstrated some deterioration of LFL traffic compared to the preceding quarter, which was largely attributable to seasonal effects. The average LFL ticket improved versus the previous quarter. This was achieved despite continuing shelf price deflation. Deflationary effects in the fourth quarter were much the same as in the third quarter on average, but underlying trends have been improving since reaching a low-point in October. The effects of deflation were more than compensated by trading up (which continued for the sixth quarter in a row) and a further increase in the number of articles per basket which became the key driver of LFL basket improvement in the fourth quarter. LFL sales of 5.2% in was therefore due to a combination of factors an increase in the number of customers, trading up effects and significantly stronger volumes, partly offset by cannibalisation from new Lenta stores and on-shelf price deflation. Update on Operating Performance of Hypermarkets previously operated under the NASH brand During November, the Company reopened all 14 leased hypermarkets previously operated under the NASH brand (seven in Moscow and another seven stores in Obninsk, Nizhniy Novgorod, Chelyabinsk, Perm, Ryazan, Yaroslavl and Rostov-on-Don). The stores had been closed for refurbishment for 4 of 5
approximately three months prior to reopening under the Lenta brand. The stores demonstrated rapid sales ramp-ups during the remainder of the year (approx. six weeks of operation in November and December), delivering 0.9% (approx. Rub 3.2bn) contribution to Lenta s 2017 total sales. The speed of ramp-up reflects the attractiveness of the Lenta customer offer and the high potential for further even in a very competitive environment. Guidance Guidance on hypermarket and supermarket openings as well as capex for 2018 will be published after the financial results announcement scheduled for mid-march 2018. About Lenta Lenta is the largest hypermarket chain in Russia, and the country s third largest retail chain. The Company was founded in 1993 in St. Petersburg. Lenta operates 231 hypermarkets in 84 cities across Russia and 97 supermarkets in Moscow, St. Petersburg, Novosibirsk, Yekaterinburg and the Central region with a total of approximately 1,382,111 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 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 40,383 people as of 30 June 2017 5. 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 Ex and on the Moscow Ex 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 or contact: Lenta Mariya Filippova PR and GR manager Tel: +7 812 380-61-31 ext.: 1892 E-mail: maria.filippova@lenta.com Forward looking statements: Russian Media: NW Advisors Anton Karpov & Victoria Afonina Тel:+7 495 795 06 23 E-mail: lenta@nwadvisors.com International Media: FTI Consulting Leonid Fink & Jenny Payne Тel: +44 7497 783 705 E-mail: Leonid.Fink@fticonsulting.com 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 in its expectations or to reflect events or circumstances after the date of this document. 5 FTE (full-time equivalent). Average FTE for 1H 2017 was 40,197 employees 5 of 5