Russian shoe retailer Obuv Rossii's new store openings ahead of schedule

Russian shoe retailer Obuv Rossii's new store openings ahead of schedule
As incomes recover Russians are going shopping for new shoes.
By bne IntelliNews July 12, 2018

Russia’s leading shoe retailer and Moscow-listed Obuv Rossii (Shoes of Russia) is ahead of schedule having opened 71 new stores in the first half of this year, the company said on its website.

The 71 stores were opened in 61 Russian cities as part of a strategy to expand the network in Russia’s regions.

The company specialises in supplying middle-of-the-market quality shoes to Russia’s middle classes. Obuv Rossii raised $150mn with a rare IPO in October 2017 that was organised by BCS Global Markets and is using the money to grow its market share, especially in Russia’s regions. The company has been a big winner from the nascent economic recovery, aggressively pushing its strategy of opening new stores.

“The directly-operated store (DOS) network increased by 8% q/q with the largest openings under the Westfalika brand (51 stores). In terms of geographical expansion, 48% of the new stores were opened in Siberia, 22% in the central region of Russia, and 7% in the Far East region. Thus, the total number of stores increased by 6.5% q/q to 606 stores, including 113 franchise stores,” BCS GM said in a note.

Previously, the company targeted opening 60 new directly-operated stores in the first half of 2018, but is ahead of schedule thanks to the favourable commercial real estate market in the Russian regions.

“If the company continues this strong dynamic, the FY18 target of 100 DOS openings (+24% y/y) could be achieved by the autumn-winter season, which is supportive for the company’s investment case,” BCS GM said in a note.

Like-for-like sales of Obuv Rossii stood at 10.9% year-on-year in the fourth quarter of 2017. The sales expanded from 6% seen in the previous quarter, which Sberbank CIB on March 19 attributed to a pickup in consumer demand, stronger related product revenues and a better holiday sales period than in 2016.

"The group has significantly expanded its sales territory and has entered 27 new towns. The biggest number of stores was opened by Obuv Rossii in June — 20 new sales outlets began to operate in this month. The Company launched new stores all over the country, the biggest share of opened stores fell on Siberia — 48%, on the Urals and Central Russia — by 22%, on the Far East — 7%. Obuv Rossii develops all five retail chains of the Group. The biggest share in the volume of opened stores belongs to the main brand — Westfalika (72%). Thus, the company opened 51 Westfalika stores, seven Lisette and Peshekhod stores [and] three Emilia Estra and Rossita stores," Obuv Rossii said in a press release.

“We are consistent in the implementation of the chain development programme for this year. According to this programme, 100 new sales outlets have to be opened. We are even ahead of the schedule. Initially, we planned to launch 60 stores during the first six months of the year, but we have exceeded the target by 20% and have opened 71 stores. It will allow us to fully implement the 2018 development program by already the autumn-winter season,” says Anton Titov, CEO of Obuv Rossii Group. 

“It became possible because it is a favourable time for expanding a retail chain, and there is a big choice of good sites for stores in regions. In addition, the Russian shoe market is not consolidated well; federal and global chains are not represented well in many regions, which is why the opportunities to strengthen our positions in the regions and to increase our market share are good.”

In December 2017, RAEX (Expert РА) upgraded the creditworthiness rating of Obuv Rossii Group to ruBBB+ level, a "stable" forecast. 

In October 2017, Obuv Rossii raised RUB5.9bn rubles in an IPO on the Moscow Exchange (ticker: OBUV), the issuer being OR PJSC, and in doing so became the first publicly listed company within the Russian footwear and fashion market. In accordance with its audited financial statements under the IFRS Group, revenue amounted to RUB10.8bn for the full year of 2017, net profit was RUB1.31bn, and Ebitda was RUB2.74bn.

 

Obuv Rossii results RUBmn

 

4Q16

!Q17

3Q17

4Q17

1Q18

y-o-y

Revenues

3,343

2260

3,088

3,573

6.30%

9965

Gross income

1,830

1188

1,416

1,959

-9.20%

5859

Gross margin

54.70%

345

45.90%

54.80%

-31.10%

2540

SG&A expenses*

-895

83

791

-1,102

-43.20%

1183

EBITDA

988

61.50%

736

949

52.60%

-9.0 ppt

EBITDA margin

29.60%

23.60%

23.80%

26.60%

15.30%

-8.3 ppt

Net income

566

6.90%

322

641

3.70%

-3.2 ppt

Net margin

16.90%

 

10.40%

17.90%

 

 

OCF

 

 

 

 

 

 

Capex

 

 

 

 

 

 

FCF

 

 

 

 

 

 

* excluding depreciation and the long-term incentive program

 

 

 

 

 

 

Source: Company, Sberbank CIB Investment Research

 

Obuv Rossii results RUBmn

 

4Q16

!Q17

3Q17

4Q17

1Q18

y-o-y

Revenues

3,343

2 260

3,088

3,573

6.30%

9 965

Gross income

1,830

1 188

1,416

1,959

-9.20%

5 859

Gross margin

54.70%

345

45.90%

54.80%

-31.10%

2 540

SG&A expenses*

-895

83

791

-1,102

-43.20%

1 183

EBITDA

988

61.50%

736

949

52.60%

-9.0 ppt

EBITDA margin

29.60%

23.60%

23.80%

26.60%

15.30%

-8.3 ppt

Net income

566

6.90%

322

641

3.70%

-3.2 ppt

Net margin

16.90%

 

10.40%

17.90%

   

OCF

           

Capex

           

FCF

           

* excluding depreciation and the long-term incentive program

           

Source: Company, Sberbank CIB Investment Research

 

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