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Retail

Lenta's Hypermarket Footprint Could Cause Challenges For New CEO, Says Analyst

The appointment of Vladimir Sorokin as the new chief executive of Russian retailer Lenta should enable the business to 'fine-tune' its supermarket operations, but its hypermarket operations could present another challenge, a leading analyst has said.

Artur Galimov of Sova Capital was commenting following the announcement that Sorokin, a former director general of X5 Retail Group's Perekrestok chain, as well as commercial director at Magnit, has replaced Herman Tinga as Lenta's CEO, effective immediately.

Valuable Appointment

Commenting, Galimov said that Sorokin's experience should be "valuable to the development of Lenta’s supermarkets and to improving the group's commercial function.

"That said, we are not sure whether he will be able to push the company’s core hypermarkets business forward given the structural weakness of large boxes and the increased appeal of smaller formats."

According to Lenta's half-year results, published in July, both Lenta's hypermarkets and supermarkets put in a solid performance at the start of the year, growing by 6.6% and 12.0% respectively.

However, recent years have indicated a trend away from hypermarkets and more towards supermarkets.

Lenta currently operates 248 hypermarkets and 131 supermarkets. It closed one hypermarket in the first half of the year, and opened three supermarkets.

Management Team

Galimov believes Sorokin may look to develop his own management team at the business in the coming months.

"We do not rule out further management changes in the company, as Mr. Sorokin may want to create his own team. It may also take some time for him to get acquainted with the company and to conduct a business review of sorts," he said.

"The new strategy on which the company has been working since April 2019, when Severgroup acquired a 42% stake from TPG and EBRD, should follow. The BoD was supposed to approve the new strategy by the end of 3Q20 and present it to the market by YE20, but the management reshuffle may postpone this."

Lenta chairman Alexey Mordashov said that he believes Sorokin's "extensive professional experience, many successes, and stellar reputation in the Russian food retail sector make him the right person to lead Lenta going forward and to build upon its already very strong foundation".

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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