O`KEY GROUP NET RETAIL REVENUE INCREASES BY 11.5%, DA! DISCOUNTERS REVENUE GROWTH ACCELERATES TO 68.5% IN Q2 2022

Press release
28 July 2022

O`KEY GROUP NET RETAIL REVENUE INCREASES BY 11.5%,
DA! DISCOUNTERS REVENUE GROWTH ACCELERATES TO 68.5% IN Q2 2022

O`KEY Group S.A. (LSE, MOEX: OKEY, the Group or the Company), one of Russias leading food retailers, has announced its unaudited operating results for the second quarter (Q2) and the first six months (H1) of 2022.

All materials published by the Group are available on its website www.okeygroup.lu.

Q2 2022 operating highlights

• Group net retail revenue[1] rose by 11.5% YoY to RUB 49.6 bn, driven mainly by discounters LFL performance and OKEYs online sales growth and supported by discounter and hypermarket openings.
• O`KEY hypermarkets net retail revenue declined slightly to RUB 35.4 bn in Q2 2022 vs RUB 36.0 bn in Q2 2021 mainly due to geopolitical and macroeconomic turmoil that resulted in lower traffic to shopping malls and changes in the product mix on the shelves compared to the same period last year. However, that was largely offset by the additional revenue of four newly opened OKEY hypermarkets in April 2022.
• OKEY total online sales grew by 42.8% YoY to RUB 1.4 bn and accounted for 4.0% of O`KEYs net retail revenue in Q2 2022.
• DA! discounters accelerated their revenue growth in Q2 2022, both year-on-year and quarter-on-quarter, again delivering one of the fastest paces in the industry thanks to better brand recognition and a well-balanced product mix based on private labels. DA! showed an impressive 68.5% YoY net retail revenue growth to RUB 14.1 bn. This was driven by a 37.1% LFL net retail revenue increase and a 33.7% YoY growth in the chains selling space.
• DA! discounters share in the Groups net retail revenue increased by 9.7 pps YoY to 28.5%.
• The Group expects that the discounters and online business will remain the Companys main growth drivers in the medium term.

H1 2022 operating highlights

• Group net retail revenue increased by 10.4% YoY to RUB 96.8 bn.
• O`KEY hypermarkets net retail revenue declined by 1.1% YoY to RUB 71.3 bn.
• OKEY total online sales grew by 53.6% YoY to RUB 3.0 bn and reached 4.3% of O`KEY's net retail revenue.
• DA! discounters net retail revenue rose by 63.2% YoY to RUB 25.5 bn, driven by a 35.2% LFL net retail revenue growth and the chains expansion.

Key events after the reporting date

• In July 2022, Expert RA affirmed the credit rating of ruA- with a Stable outlook for O`KEY LLC, the main operating subsidiary of O`KEY Group S.A. The rating agency noted an improvement in the Groups revenue and EBITDA, with the discounters' EBITDA more than doubling in the financial year 2021.

The full text of the announcement is available at https://okeygroup.lu/press-center/press-releases/2022/1807/. 

Operating review

Group Net Retail Revenue in Q2 and H1 2022

Group Net Retail Revenue Metrics for Q2 and H1 2022

Group Like-for-like Net Retail Revenue Performance in Q2 and H1 2022

Note: Q2 2022 LFL metrics are calculated based on 74 O`KEY and 120 DA! stores.

The Groups net retail revenue rose by 11.5% YoY to RUB 49,562 mln, driven mainly by DA! discounters and OKEY online revenue growth and supported by both the hypermarket and discounter chains expansions.

Net retail revenue of O`KEY hypermarkets decreased by 1.7% YoY to RUB 35,414 mln in Q2 2022. The decline was due to a 3.8% decrease in OKEYs LFL net retail revenue in the quarter, which was largely offset by new store openings in April 2022.

During Q2 2022, we kept our promotional activity in hypermarkets limited to secure sufficient stock levels, ensure full on-shelf availability, and protect our margins in a highly inflationary and turbulent environment. The average ticket growth was supported by limited promos and Inflation and offset partially by a smaller average basket and changes in the sales mix on the shelves. However, we see that customers are adapting to the new product offering and the environment, which has already had a positive impact on our sales dynamics in July.

In Q2 2022, shopping malls in Moscow and St Petersburg and their surroundings saw decline in customer footfall, both YoY and QoQ, due to the geopolitical and global economic headwinds the market faced. We see that, in order to support traffic in shopping malls, landlords are actively reshaping their portfolios of tenants attracting new partners and brands.

OKEYs total online sales, including our own and external delivery services, rose by 42.8% YoY to RUB 1,427 mln in Q2 2022. The share of total online sales in O`KEYs net retail revenue grew by 1.2 pps YoY to 4.0% in Q2 2022 compared to 2.8% in Q2 2021. In Q2 2022, in order to further optimise online order delivery time and costs, the company opened six new pick-up points in its hypermarkets in Moscow and in St Petersburg. As of the end of Q2 2022, the company had 19 zones in its hypermarkets to cater for both online order pick-up and home delivery.

DA! discounters delivered a strong 68.5% YoY growth in net retail revenue, which reached RUB 14,148 mln in Q2 2022 on the back of a 37.1% LFL revenue growth and a 33.7% YoY increase in the chains selling space. The LFL revenue growth was driven by rising brand recognition and customer loyalty thanks to the chains active expansion, as well as its well-balanced offering of products at the best possible prices with a special focus on own brands. The share of own brands in the discounters net retail revenue rose by 8.5 pps YoY to 58.7% in Q2 2022.

The discounters share in the Groups net retail revenue rose by 9.7 pps YoY to 28.5% in Q2 2022. The Company expects the DA! discounter chain to be one of the key drivers of the Groups top- and bottom-line growth.

Group Stores and Selling Space in H1 2022

In Q1 2022, in the course of ongoing real estate portfolio revision and optimisation, the Group closed 3 O`KEYs  two stores in Saratov and one in Moscow.

In Q2 2022, the Group opened 4 hypermarkets in the Moscow Region to replace the stores it had acquired from X5 Group and solidify O`KEY presence in Central Russia.

In H1 2022, the Group also opened 12 discounters (net of closures) under the DA! brand in Central Russia.

As of 30 June 2022, the Group operated 79 O`KEY hypermarkets and 164 DA! discounters, with a total selling space of 638,638 sq m.

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ABOUT O`KEY GROUP

O`KEY Group S.A. (LSE, MOEX: OKEY) is one of the leading grocery retailers in Russia, operating hypermarkets under the O`KEY brand and discounters under the DA! brand.

As of 30 June 2022, the Group operated 243 stores across Russia (79 hypermarkets and 164 discounters) with the total selling space of 638,638 square meters. The Company opened its first hypermarket in St. Petersburg in 2002 and has since demonstrated continuous growth. O`KEY was the first Russian food retailer to launch e-commerce operations in St. Petersburg and Moscow, offering a full range of hypermarket products for home delivery. The Group has nine e-commerce pick-up points in Moscow and ten e-commerce pick-up points in St. Petersburg. In 2015, the Group launched the first discount chain in Russia under the DA! brand. The Group operates five distribution centres in Russia three in Moscow and two in St. Petersburg. The Group employs more than 22,000 people.

In 2021, Groups revenue amounted to RUB 187.1 billion, while EBITDA reached RUB 15.5 billion.

The O`KEY Group shareholder structure is as follows: NISEMAX Co Ltd 49.11%. GSU Ltd 34.14%, free-float and other holders 16.75%.

DISCLAIMER

These materials contain statements about future events and expectations that are forward-looking statements. These statements typically contain words such as expects and anticipates and words of similar import. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

None of the future projections, expectations, estimates or prospects in this announcement should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in this announcement. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.

[1] Hereinafter, net retail revenue, LFL net retail revenue, and the average ticket metrics are provided net of VAT.