Russia's O’Key Weighed Down By 'Big Box' Estate, Says Analyst

By Steve Wynne-Jones
Share this article
Russia's O’Key Weighed Down By 'Big Box' Estate, Says Analyst

Russian retailer O'Key continues to be weighed down by its 'big box' retail estate, however its hard discounter business is showing strong potential, a leading retail analyst has said.

Artur Galimov of Sova Capital was commenting as O'Key reported its first-half results, in which it saw group revenue rise 4.2% year-on-year to RUB 88.67 billion (€1.03 billion).

Its O'Key hypermarket business saw sales rise 0.8% year-on-year, while its Da! hard discounter arm posted a 23.9% increase.

Consolidated EBITDA margin fell 50 basis points in the period, to 7.4%, which was largely driven by a contraction in margin at the business' core hypermarket estate, Galimov said in a briefing note.

"O’Key reported a soft set of 1H21 IFRS 16 results that showed a YoY contraction in operating margins," Galimov said. "The group’s hypermarkets continued to underperform, reporting no growth and shrinking margins, although their poor performance was somewhat mitigated by the better results from its hard discounter format."


EBITDA margin at the group's discounter business rose 70 basis points to 4.3%, he noted.

'Structurally Disadvantageous'

"We still believe that the retailer’s large boxes are continuing to struggle in a structurally disadvantageous market environment," said Galimov.

"Meanwhile, the Da! hard discounter business has shown improvements, but its rollout is not fast enough to accelerate the group’s consolidated performance, not to mention create visible competition for larger convenience chains that have recently started to develop their own hard discounter projects.

"We reiterate our cautious view on the stock, and we do not see any powerful positive mid-term triggers for the retailer."


O'Key group plans to open a further 35-40 Da! discounter outlets by the end of the year, while also reopening three newly-renovated hypermarkets.

Combination Strategy

Commenting on the group's performance, Armin Burger, O'Key Group chief executive, said that the business "delivered a strong set of financial results fully in-line with our expectations. The revenue growth was driven by both hypermarkets and discounters.

"Our strategy based on a combination of clearly positioned store formats enables us to cover all customer segments and benefit from the synergies."

He added that he anticipates a "substantial profitability improvement" as the group's Da! expands.

© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

Get the week's top grocery retail news

The most important stories from European grocery retail direct to your inbox every Thursday

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our terms & conditions and privacy policy. You can unsubscribe at any time.