Detsky Mir Grows its Share of Online Sales to 36% in Q4 2021
Moscow, Russia, 15 March 2022 – Detsky Mir Group (“Detsky Mir”, the “Group” or the “Company”, MOEX: DSKY), a multi-vertical digital retailer and the leader in the children’s goods sector in Russia and Kazakhstan, announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the fourth quarter of 2021 (Q4 2021) and its audited consolidated financial results in accordance with IFRS for the full year ending 31 December 2021 (FY 2021).
Q4 2021 Financial Highlights
- The Group’s gross merchandise value (GMV) increased 8.5% to RUB 53.3 bn (incl. VAT).
- Total online sales in Russia grew 33.2% to RUB 18.9 bn (incl. VAT):
- The share of online sales in Russia reached 37.4%.
- The Group’s revenue increased 6.3% to RUB 47.3 bn.
- Gross profit increased 1.4% to RUB 14.0 bn
- Gross margin was 29.7%
- SG&A as a percentage of revenue increased 2.2 p.p. to 20.2%.
- Adjusted EBITDA fell 21.8% to RUB 4.7 bn
- Adjusted EBITDA margin reached 9.8%
- EBITDA totaled RUB 4.6 bn (–18.3% year-on-year).
- Adjusted net profit amounted to RUB 2.4 bn; net profit totaled RUB 2.3 bn.
- The net debt/adjusted EBITDA LTM ratio stood at 1.4x. Net debt was RUB 25.0 bn.
- Sales of private labels and direct imports in Russia totaled 42.7% of total sales.
- The Company opened 105 new stores: 33 Detsky Mir branded stores in Russia, 2 Detsky Mir stores in Kazakhstan, 1 Detmir store in Belarus, 27 Detmir Mini stores, and 42 Zoozavr stores.
- The total number of Group stores amounted to 1,119 (+28.9% year-on-year) across 445 cities and towns in Russia, Kazakhstan and Belarus.
- The Group’s total selling space increased 9.3% year-on-year to 981,000 sq. m.
- Total warehouse space was 175,000 sq. m.
FY 2021 Financial Highlights
- The Group’s GMV increased 16.9% to RUB 184.3 bn (incl. VAT)
- Total online sales in Russia increased 39.1% to RUB 54.0 bn (incl. VAT)
- The share of online sales in Russia reached 30.8%
- The Group’s revenue increased 15.0% to RUB 164.3 bn
- Gross profit increased 14.7% to RUB 50.4 bn
- Gross margin was 30.7%
- SG&A as a percentage of revenue increased 1.0 p.p. to 19.9%
- Adjusted EBITDA grew 6.2% to RUB 18.0 bn
- Adjusted EBITDA margin reached 11.0% (–0.9 p.p. year-on-year)
- EBITDA totaled RUB 18.8 bn (+15.6% year-on-year)
- Adjusted net profit for the period came in at RUB 10.3 bn (+23.8% year-on-year); net profit totaled RUB 11.2 bn.
- Sales of private labels and direct imports in Russia totaled 46.2% of total sales (+1.7 p.p. year-on-year).
- The Company opened 251 new stores: 72 Detsky Mir branded stores in Russia, 4 Detsky Mir stores in Kazakhstan, 8 Detmir stores in Belarus, 94 Detmir Mini stores, and 73 Zoozavr stores.
Q4 2021 Key Events
- Detsky Mir shareholders approved an interim dividend of RUB 3,842,800,000 for 9M 2021, or RUB 5.20 per ordinary share. The dividend amounted to 60% of the adjusted RAS profit for 9M 2021.10 The dividend payout for 2021 will total RUB 8.3 bn, up about 7% compared to that for 2020.
- The Company launched its third regional distribution center in the Novosibirsk Region. The fulfillment center, hosted by Russian Post, will ensure next-day delivery of at least 80% of online orders to Detsky Mir customers in the Siberian Federal District. At the fulfillment warehouse, Russian Post will be able to store simultaneously up to 200,000 SKUs from Detsky Mir’s product assortment, while shipping up to 90,000 online orders per month. The center will be able to handle goods of all categories, from diapers and toys to children’s furniture, strollers, and pet supplies.
- Black Friday brought in more than 1.5 million orders for Detsky Mir. Over the course of the event, more than 1.5 million orders were placed on our online store and mobile app, generating a total of RUB 3 bn. The biggest discounts were available from 6:00 pm on 25 November until 11:59 pm on 26 November, when more than 450,000 orders were placed for a total of more than RUB 930 m, up 37% from 2020.
- The Global Shopping Day set a number of online sales records for Detsky Mir. At the sale’s peak on 11 November, 273,000 orders were placed via our online platform and marketplace for a total of RUB 570 m – a 63% increase on last year’s event. At the same time, the range of products on offer topped 320,000 SKUs, with over 80% of our marketplace sellers taking part in the sales event, and the order processing speed reaching 18,000 fulfillments per hour.
- Detsky Mir opened its milestone 900th branded store and its 100th Detmir Mini store. The new branded store with floor space of more than 1,200 sq. m is located in a shopping mall in Krasnokamensk. The milestone small-format Detmir Mini store with floor space of 167 sq. m opened in Novovoronezh.
- Detsky Mir celebrated 10 years of operating in Kazakhstan. Over the past five years, the Company has expanded its presence in the country more than sixfold, growing the chain from 7 to 45 stores, with the current floor space totaling 40,000 sq. m.
- Detsky Mir won silver on Russia’s Best Employers List by Forbes and KPMG. In the third ranking of the country’s top employers, which rated 104 companies, Forbes and KPMG focused on corporate ESG practices.
- The IR team at Detsky Mir Group was recognized as Russia’s best: the Company was placed top in the Best Corporate by Small Cap IR Russia 2021 category.
- The Detsky Mir flagship store in the MEGA Teply Stan shopping mall earned a finalist finish in the Global Retail Real Estate Awards, an annual international industry award to celebrate achievements in retail and retail real estate.
- Detsky Mir won one of the most prestigious professional awards in e-commerce and omnichannel, Large Turnover 2021, in the Breakthrough of the Year category and was a finalist of its Grand Prix.
- Detsky Mir’s marketplace was recognized as the best niche marketplace in 2021 according to ECOM AWARDS, an e-commerce and retail professional award launched this year.
Key Events After the Reporting Date
- Detsky Mir opened a new distribution center in Yekaterinburg. With 63,000 sq. m. of floor space and a design capacity of 2.4 million SKUs, the new distribution center will support delivery of goods to Detsky Mirchain stores and next-day deliveries of at least 80% of all online orders across the Ural Federal District. Goods destined for the Russian Far East and Kazakhstan will also be handled by the center.
- The Company announced the launch of an open market buyback program of its ordinary shares listed on the Moscow Exchange totaling up to RUB 3.5 bn over a period until 9 August 2022 unless extended or terminated by the Company earlier.
ESG Highlights
- In December, the Detsky Mir Charitable Foundation, part of Detsky Mir Group, announced that it would work with the Stolitsa Miloserdia Charitable Foundation, Pharmeco Group, and MC Intermark Auto to donate items to orphans and children from large and low-income families in St. Petersburg and the Novosibirsk Region. The donations, worth over RUB 6 m, included goods that children need: hygiene products, toys, apparel, furniture, strollers, and sporting goods.
- The Detsky Mir Charitable Foundation and Kimberly-Clark’s Huggies brand launched their first joint charity campaign – Appreciating Every Night. The initiative is aimed at helping children in hospices or palliative care units of hospitals.
- Three thousand customers of the Zoozavr chain took part in a campaign to help homeless pets. More than 890 kg of pet food and treats for dogs and cats were collected, as well as over 150 items of essential goods, including hygiene products, toys, and pads.
Maria Davydova, CEO of PJSC Detsky Mir:
“Dear shareholders, colleagues, customers and partners,
We have successfully overcame the challenges and difficulties that defined 2021. Working in a complex epidemiological, economic and operating environment, we have only become tougher and more united. Detsky Mir has learned to be flexible while staying resilient. We have successfully adapted to a dynamically changing environment, redefined our processes, including logistics, and thus gained an extensive experience of operating in an uncertain market.
Detsky Mir delivered solid financial performance in 2021, with revenue up 15% to RUB 164.3 bn. Effective pricing, together with product range expansion and rapid order fulfillment, helped drive a 34.7% increase in online store sales in Q4 2021, while the online segment made up a record 36.1% of Group sales.
As 2022 unfolds, all Russian businesses, including us, are facing new major challenges. We are leveraging our years of experience and our expertise to safeguard the interests of our shareholders and partners, and we will do our best to maintain a vast assortment of reasonably priced goods our customers need across our footprint. Detsky Mir’s retail stores and online platforms are operating as normal, and we are doing our best to ensure the continued smooth operation of our supply chain.
Detsky Mir’s financial position remains strong, thanks to discipline and the Company’s ability to generate substantial operating cash flow. Our net debt/adjusted EBITDA ratio sat at a comfortable 1.4x as of year-end 2021, all while we continued to deliver on our investment program.
In the current highly uncertain environment, our main objective remains to ensure business continuity while making sure we meet all our obligations to customers and partners in a timely manner. We decided to cancel our management conference call, where we were supposed to discuss the Company’s FY 2021 financial performance due to the constantly changing market conditions. At the same time, we will be happy to answer any questions you might have.”