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Detsky Mir’s GMV Increases 7.6% in Q1, with Online Sales Growing 19.9%

Moscow, Russia, 19 April 2022 – Detsky Mir (“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 operating results for the first quarter ended 31 March 2022.

Q1 2022 Operating Highlights

  • The Group’s gross merchandise value (GMV) increased 7.6% to RUB 42.7 bn (incl. VAT).
  • The Group’s total online sales grew 19.9% to RUB 13.1 bn (incl. VAT):
    • The share of online sales in Russia reached 32.0%.
  • The Group’s net revenue increased 6.1% to RUB 37.9 bn.
  • Sales of private labels and direct imports in Russia totaled 44.8% of total sales.
  • The Company opened 8 new stores:3 Detsky Mir branded stores in Russia, 2 Detsky Mir stores in Kazakhstan, 2 Detmir stores in Belarus, and 1 Zoozavr store.
  • The total number of Group stores amounted to 1,125 (up 27.8% year-on-year) across 447 cities and towns in Russia, Kazakhstan and Belarus.
  • The Group’s total selling space increased 8.9% year-on-year to 982,000 sq. m.
  • Total warehouse space was 238,000 sq. m.

Q1 2022 Key Events

  • Detsky Mir launched a new distribution center in PNK Park Berezovsky, a Class A+ industrial park near Yekaterinburg. With 63,000 sq. m of floor space and a design capacity of 2.4 million SKUs, the distribution center will support the smooth 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 distribution center’s throughput is expected to be over 35,000 orders per day. The launch of the new warehouse facility will also create 1,000 new jobs for local communities.
  • The Company cut the prices of essential goods to make them as affordable as possible. Items include baby and toddler food, baby hygiene products, baby feeding supplies, and a selection of items from our apparel and footwear category. The total list of these essential goods encompasses about 90 SKUs from the Detsky Mir product assortment.
  • Detsky Mir introduced a range of temporary support measures for its suppliers. Amid increased consumer demand and supply chain difficulties, the Company has suspended its penalty system for under-deliveries and also reduced its review period for suppliers’ new prices to five working days until the end of April 2022.
  • Detsky Mir has automated its transport management processes. The Company announced the introduction of a carrier web portal that integrates with its in-house automated Transport Management System (TMS), unlocking streamlined management of transport processes and monitoring at all stages.
  • The rating agency RAEX (Expert RA) affirmed Detsky Mir’s credit rating at ruAA- with a stable outlook.
  • Detsky Mir Group named Georgy Kononov as its New Chief Operating Officer. Georgy will oversee the ongoing development of the Group’s various store formats and sales channels, and be responsible for increasing space productivity, introducing state-of-the-art technologies, and accelerating our digital transformation.
  • Elvira Kakurkina was appointed as the new Commercial Director for Consumer Goods at Detsky Mir Group. Elvira will be responsible for managing procurement and assortment, developing category strategies, defining our assortment policy, overseeing pricing and promotions, and expanding the Company’s market share across a range of categories, including newborn products (food, diapers, large-size products, and hygiene products), toys, sports, and stationery.
  • Detsky Mir celebrated five years since its IPO on the Moscow Exchange. In February 2017, Detsky Mir held a successful IPO on the Moscow Exchange, a move that played a pivotal role in the Company’s corporate development and that was Russia’s first major market transaction targeting international investors since 2014. Since the IPO, the Group’s Gross Merchandise Value (GMV) has more than doubled from RUB 88.7 billion to RUB 184.3 billion.
  • In a bid to grow its digital product offering, Detsky Mir has published its first mobile game aimed at children. Risovashka is a mobile app that lets users bring children’s drawings to life as cartoons. The app fosters creative thinking and imagination among children, all while cutting down screen time. Over 80 different stories are currently available on the app.
  • The Company announced the launch of an open market buyback program for its ordinary shares listed on the Moscow Exchange totaling up to RUB 3.5 billion over a period until 9 August 2022 unless extended or terminated by the Company earlier.

ESG Highlights

  • The Detsky Mir Charitable Foundation announced the 2021 results of its key campaigns: “Uchastvuyte!” (“Participate!”) and “Uyut v Priyut” (“Comfort to Shelters”). Over the reporting period, the Foundation collected and donated more than RUB 1 billion worth of goods.
  • The Company sent goods to the Kaluga-based homeless animal shelter “Podari Zhizn” (“Gift of Life”). At the beginning of March 2022, the Detsky Mir Charitable Foundation donated more than 1,500 items to Podari Zhizn, including food and items needed to furnish and insulate animal enclosures. The donation was worth over RUB 1.8 million.
  • The Detsky Mir chain and the Meine Liebe household chemicals brand launched a learning club for children’s sustainability influencers. In a series of 10 sessions held over 3 months, the free learning club will cover the basics of social media presence and activity, digital security, creating thoughtful content, choosing different techniques, and other important details, as well as the importance of developing various social skills, from finding topics to cover and persuading and working your audience, to appearing in front of a camera and being flexible to feedback and external changes.
  • Detsky Mir launched a book recycling project at its stores in Krasnodar. The pilot project will see books collected at 11 Detsky Mir stores in Krasnodar until 30 April 2022, with all books collected to be sent for recycling. A decision on further expanding the initiative will be made based on the pilot project’s performance.
  • Detsky Mir teamed up with the World Wildlife Fund (WWF) to design and launch a limited collection of T-shirts and sweatshirts for 2 to 6 year olds that feature images of vulnerable species of animals that can be found in Russia, including the bowhead whale, snow leopard, polar bear, sea otter, oriental stork, as well as the symbol of the WWF – the panda. All garments in the collection are made using Better Cotton Initiative-certified cotton.
  • Detsky Mir and Dmitrov RTI Plant, Russia’s largest recycling plant, announced the results of their 2021 campaign The New Life of Your Unwanted Clothes and Shoes and Its Benefits for You. In the reporting year, 2.7 tonnes of waste from shoe and textile manufacturing were collected and handed over for recycling.

Maria Davydova, CEO of PJSC Detsky Mir:

“The first quarter of 2022 was marked by serious challenges for the Company, the retail sector and the broader Russian economy – our key market. Forex volatility, a significant acceleration in inflation, supply chain disruptions, the rising cost of debt, announcements that suppliers would cut back or outright terminate operations in Russia, compounded by many other factors, forced us to act swiftly and decisively to seek a way out of any situation that arose. Thanks to many years of experience and a wealth of accumulated knowledge, on top of the Company’s business flexibility, Detsky Mir successfully adapted its business processes to the rapidly-changing conditions.

The Group’s GMV rose 7.6% in Q1 2022 to reach RUB 42.7 billion. We observe a slowdown in sales growth on the back of the ongoing coronavirus pandemic, coupled with challenging macroeconomic conditions and changing consumer behavior in Russia. However, protecting the interests of our customers and providing a wide range of the goods they need at affordable prices across all regions of operation remain top of mind for us in any market. We cut the prices of essential goods to make them as affordable as possible, including baby and toddler food, diapers, and children’s apparel and footwear. We have also decided to halt our capex program in a highly uncertain macroeconomic environment.

Amid the ongoing coronavirus pandemic and supported by the Company’s assortment expansion and high order processing speeds, online sales enjoyed further growth in popularity in the first quarter. In the reporting period, digital sales were up 19.9% year-on-year, with the total share of online sales reaching 30.7%. We will continue working towards achieving our 2020–2024 strategy’s target share of online sales.

Amid changing consumer behavior, the development of an exclusive offering at affordable prices remains an important focus for us. In Q1 2022, sales of private labels and direct imports in Russia totaled 44.8% of total sales (up 4.3 p.p. year-on-year). During the reporting period, we launched a range of private labels in the pet supplies segment, which have already received great feedback from consumers, and we have continued to develop our existing private labels in the children’s goods segment.

In the current highly uncertain environment, our main objective remains to ensure smooth business operations while making sure we meet all our obligations to customers and partners in a timely manner. We maintain our focus on further consolidating the market, developing our private labels and delivering strong performance both offline and online.”

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