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Retail

Lenta Rallies as Forecast Eases Profit Concern

By Steve Wynne-Jones
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Lenta Rallies as Forecast Eases Profit Concern

Russian budget hypermarket chain Lenta rallied the most since December as the retailer’s forecast for sales growth this year eased concern that Russia’s financial crisis will erode profits.

The hypermarket operator, backed by US private-equity fund TPG Capital, surged 15 per cent to $6.80 in London on the back of the news.

Lenta ended a four-day drop after it forecast that revenue will rise as much as 38 per cent this year, after increasing 35 per cent in 2014.

Sales will grow as the company opens new locations and more Russians seek the discounts it offers amid surging inflation, chief executive officer Jan Dunning said in a statement. Consumer prices rose 17.5 per cent in February from a year ago, the fastest pace since 2002, as a 40 per cent plunge in the ruble drove up import costs.

“The decline in disposable income and an uptick in inflation made Russian consumers frugal, but Lenta offered attractive prices, a solid variety of goods and a well thought-out marketing strategy, the combination of which led to a spike traffic,” Marat Ibragimov, a Moscow-based analyst at BCS Financial Group, said. “As the economy faces turbulence, Lenta has good footing to withstand the challenges.”

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Economists surveyed by Bloomberg estimate that Russia’s gross domestic product will probably contract four per cent this year as a plunge in oil, the country’s biggest export, exacerbates the impact of international sanctions linked to the Ukraine conflict.

Bloomberg News, edited by ESM

 

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