First half of 2018 update Latest retail & consumer market trends

Transcription

1 First half of 2018 update Latest retail & consumer market trends

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3 Executive summary In the first half of 2018 Russian GDP is growing slower comparing to the same period in the previous year. Despite low official inflation and continuous real wages growth consumers do not feel positive changes in their financial situation. They continue cutting their spend. Strong trend for buying less and cheaper products is remaining determinant in Russian consumers behavior. Highly competitive market demands an efficient approach for marketing and promo as well as for cost optimization and operational excellence. 3

4 In the first half of this year GDP shows slower growth comparing with the previous year Russian real GDP, Q2,16 Q2,18 growth, Y-o-Y, % (constant 2016 prices) Russian real GDP growth, Q-o-Q, Q4,16 Q2,18, % Q2,16 Q2,17 Q2, Q4,16 Q1,17 Q2,17 Q3,17 Q4,17 Q1,18 Q2,18 Source: Federal State Statistics Service 4

5 Despite the lowest inflation rates consumers expectations and estimations are not so optimistic Inflation, Y-o-Y, Q1,17 Q2,18, % Inflation, Y-o-Y, Jan,18 Jun,18, % -1.8 p.p p.p Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Jan, 18 Feb, 18 Mar, 18 Apr, 18 May, 18 Jun, 18 Observed Expected Current Source: Central Bank of Russian, FOM 5

6 Comment The negative inflationary expectations affect the consumers behavior, despite low official inflation rates in the current year Martijn Peeters Retail & Consumer Leader 6

7 Excluding a significant jump in the first quarter due to the presidential election, real wages are constantly growing in 2018 Average real wage growth, Q-o-Q, % p.p. 0 Q1,17 Q2,17 Q3,17 Q4,17 Q1,18 Q2,18 Source: Federal State Statistics Service 7

8 % of respondents % of respondents Consumers expectations became more skeptical There is no significant improvement in consumer financial situation How did your financial situation change in the last 12 months? The strong trend for buying less and cheaper products remaining determinant in consumer behavior What of the below have you started doing over the last month? +8 p.p p.p p.p Jan,18 Feb,18 Mar,18 Apr,18 May,18 Jun,18 Jul,18 Jan,18 Feb,18 Mar,18 Apr,18 May,18 Jun,18 Jul,18 Improved No change Worsened Buy less Buy cheaper products Source: FOM, PwC analysis 8

9 which led to changes in their buying behavior There is very significant degrease in consumer expectations Consumer indexes reflects people s perception of the state and expectation around their financial situation and country economy / index (from 0 to 200) p.p leading to lack of readiness for large purchases Do you consider now a bad or a good time for large purchases? Jan,18 Feb,18 Mar,18 Apr,18 May,18 Jun,18 Jul,18-40 Jan,18 Feb,18 Mar,18-5 p.p. Apr,18 May,18 Jun,18 Jul,18 Current state Expectations Good Bad Source: FOM, PwC analysis 9

10 Comment Consumer crisis behavior force retailers to optimize for the New normal paying more attention to the operational efficiency and continuing their marketing and promotional activities to compete for customers. Martijn Peeters Retail & Consumer Leader 10

11 Retail turnover growth in Q1-Q is mostly driven by FIFA World Cub Retail turnover growth, Q1 17 Q2 18, Q-o-Q, % Q1,17 Q2,17 Q3,17 Q4,17 Q1, Q2,18 Source: Federal State Statistics Service 11

12 Jan,17 Feb,17 Mar,17 Apr,17 May,17 Jun,17 Jul,17 Aug,17 Sep,17 Oct,17 Nov,17 Dec,17 Jan,18 Feb,18 Mar,18 Apr,18 May,18 Jun,18 Jul,18 Average check, RUB Average check has reached its minimum for two years Average check, Jan 17 Jul 18, M-o-M, RUB p.p p.p p.p Average check growth, % Source: ROMIR 12

13 The food retail market has been consolidating top 5 retailers having about 25% of total turnover Top retailers market share, Q1 17 Q % 1.3% 2.1% 2.4% 76.8% 1.2% 2.1% 2.5% 78.1% 1.1% 1.9% 2.4% 77.5% 1.2% 1.8% 2.8% 75.4% 1.1% 2.1% 2.7% 75.1% 1.0% 2.1% 2.8% Other O KEY DIXY Lenta 8.2% 8.3% 7.8% 7.6% 8.5% 8.5% Magnit 0.6% 1.4% 0.6% 1.3% 0.6% 1.2% 0.7% 1.4% 0.7% 1.6% 0.6% 1.5% Karusel Perekrestok 6.8% 7.2% 6.9% 7.0% 7.9% 8.4% Pyaterochka Q1,17 Q2,17 Q3,17 Q4,17 Q1,18 Q2,18 Source: Company reports, PwC Analysis 13

14 Comments (For Page 13) 1. X5 Retail Group continues to increase its market share mostly driven by Pyaterochka (1,4 p.p. growth in 6 months 2018 comparing with the same periods in 2017) 2. Perekrestok s growth rate of net retail revenue was 22.8%, the highest rate among X5 3. Karusel s slowdown in overall growth was discussed by the closure of six hypermarkets for reconstruction 4. Magnit and DIXY restores its positions in the first half of 2018 after decrease in the end of OKEY shows slight 0,2 p.p. decrease in the second quarter of Lenta s positions remain stable in 2018 after 0,4 p.p. growth in the last quarter of Lenta s total sales area as of June 30, 2018 was 1,403,145 sq m (+ 19.6% compared to June 30, 2017) 14

15 The main growth driver in grocery retail is opening new stores, while LfL growth has low or even negative effect Estimation of H-o-H revenue growth by factors*, H1 18 to H1 17, % Perekrestok 5,2% 17,6% 23% Pyaterochka -0,3% 21,6% 21% Lenta 4,7% 13,4% 18% Magnit -4,5% 11,7% 7% Karusel O'Key -2,3% 1,2% -6,4% 2,2% -9% 3% LfL growth -2% Growth via opening/closing stores Total revenue change, H1 18 to H1 17 *LfL effect was estimated based on reported revenue numbers and LfL revenue growth rates. LfL revenue growth rates have been applied to total revenue of the previous period, as share of LfL revenue is not available. Source: Company reports, PwC Analysis 15

16 Convenience store format became more attractive for clients LFL sales growth adjusted for food inflation, Q-o-Q % Q1,17 Q2, 17 Q3,17 Q4,17 Q1,18 Q2,18 LFL average basket growth in 6 months 2018 adjusted for food inflation, Y-o-Y % -2.3 Magnit conveniece stores and supermarkets 0.0 Perekrestok Pyaterochka LFL traffic growth in 6 months 2018 adjusted for food inflation, Y-o-Y % Perekrestok Pyaterochka Source: Company reports, PwC Analysis Magnit convenience stores and supermarkets -3.6 Magnit conveniece stores and supermarkets Perekrestok -0.8 Pyaterochka 16

17 at the same time, the traffic of hypermarkets is decreasing LFL sales growth adjusted for food inflation, Q-o-Q, % Q1, Q2, Q3, Q4, Q1, Q2,18 LFL average basket growth in 6 months 2018 adjusted for food inflation, Q-o-Q, % -5.2 Magnit hypermarkets 3.4 Karusel 3.2 Lenta LFL traffic growth in 6 months 2018 adjusted for food inflation, Q-o-Q, % 0.9 Karusel Magnit hypermarkets Lenta hypermarkets Source: Company reports, PwC Analysis -1.7 Magnit hypermarkets -2.9 Karusel Lenta 17

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19 Contacts Martijn Peeters Partner, Retail & Consumer Leader +7 (495) PwC Russia ( provides industry-focused assurance, tax, legal and business consulting services. Over 2,500 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Rostov-on- Don, Krasnodar, Voronezh, Vladikavkaz and Ufa share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global network of PwC firms brings together more than 250,000 people in 158 countries. * PwC refers to OOO PricewaterhouseCoopers Advisory, or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity OOO PricewaterhouseCoopers Advisory. All rights reserved. 19

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