Fix Price announces key operating and financial results for Q2 and H1 2023

7 September 2023, Limassol, Cyprus Fix Price Group PLC (LSE and MOEX: FIXP, Fix Price, the Company or the Group), one of the leading variety value retailers globally and the largest in Russia, today announces its operating and auditor-reviewed IFRS financial results for the six months ended 30 June 2023 (H1 2023).

Operating summary for Q2 2023

• Revenue grew by 0.9% y-o-y to RUB 69.8 billion

• Retail revenue reached RUB 62.0 billion, up 1.1% y-o-y
• Wholesale revenue stood at RUB 7.8 billion, down 0.8% y-o-y

• LFL sales[1] were 7.9% lower y-o-y amid continued macroeconomic headwinds coupled with the high base effect from last year
• For the quarter, the Company opened 191 net new stores (including 25 franchises); the total number of stores reached 6,039
• The total selling space of Company-operated stores increased by 41.9 thous. sqm (+15.0% y-o-y) to 1,308.2 thous. sqm
• During the quarter, 0.9 million new members[2] joined the loyalty programme, bringing the total number of registered cardholders to 24.0 million (+25.4% y-o-y). Loyalty card transactions as a percentage of retail sales increased by 10.3 pps y-o-y and reached 62.5%. The average ticket for purchases with a loyalty card was 1.9x higher than the average ticket for non-loyalty-card purchases

Operating and financial summary for H1 2023

• Revenue was up 3.0% y-o-y and stood at RUB 135.7 billion

• Retail revenue reached RUB 120.1 billion, up 2.9% y-o-y
• Wholesale revenue grew by 3.3% y-o-y and stood at RUB 15.6 billion

• LFL sales were down 6.6%

• During the past six months, 376 stores were opened on a net basis, including 333 Company-operated stores and 43 franchise outlets, which is in line with store opening guidance for 2023

• In H1 2023 the total selling space of the store network grew by 82.8 thous. sqm to 1,308.2 thous. sqm
• The total number of registered loyalty cardholders grew by 2.2 million to 24.0 million, with penetration in retail sales reaching 62.9%
• Gross profit increased by 3.8% y-o-y to RUB 45.1 billion. Gross margin was up 29 bps y-o-y to 33.3%
• SG&A costs (excl. LTIP expense[3] and D&A) as a percentage of revenue totalled 15.7%, compared to 13.8% a year ago, driven by increased staff costs amid the negative operational leverage effect and high labour market competition
• Adjusted EBITDA[4] under IFRS 16 stood at RUB 24.1 billion. Adjusted EBITDA margin was 17.8%
• EBITDA under IFRS 16 was RUB 23.6 billion, with an EBITDA margin of 17.4%, reflecting strong gross margin dynamics offset by pressure on SG&A (excl. LTIP and D&A) costs
• Operating profit amounted to RUB 16.3 billion, while operating margin was 12.0%, compared with 14.9% in H1 2022
• Profit for the period grew by 286.0% to RUB 19.6 billion. Net profit margin improved to 14.5%, versus 3.9% in H1 2022
• CAPEX as a percentage of revenue decreased to 2.5% for H1 2023 from 2.8% for H1 2022 due to the completion of the active phase of the construction of distribution centres which had started in 2022

Since our Company was founded, we have been committed to building an efficient, profitable and scalable business. Sixteen years later, Fix Price is the undisputed leading variety value retailer in Russia, a company with strong purchasing power, a reliable logistics platform to ensure uninterrupted supplies and support network growth, as well as advanced IT systems. All this combined with a flexible business model, low debt and a net cash position gives us a large safety margin at various stages of economic cycles.

While subdued consumer sentiment and the effect of last years high base weighed on second-quarter revenue trends and like-for-like sales, our fundamentals remained strong. Our stores profit margins and return on investment are among the highest in the industry.

We continued our brisk expansion in the first half of the year, enlarging our network with the addition of 376 new stores, and we are confident that we will reach our annual target of 750 net openings in 2023. In the spring of this year, the independent agency Infoline reiterated that the variety value retail market in Russia and neighbouring countries, where Fix Price is the absolute leader, has the capacity to sustain about 18,600 stores, which suggests a more than threefold increase in our network.

In the second quarter, we continued our international expansion with the opening of the first Fix Price stores in Armenia through our franchise programme. We see considerable potential to expand our brand in this promising market. Earlier this year, we began operations in Mongolia with the opening of two stores in Ulaanbaatar. Thus, we have expanded our brand presence to nine countries since the beginning of 2023. We are also currently working to launch our stores in the United Arab Emirates, and we hope that the first Fix Price stores in the region will open their doors to customers next year.

Alongside rapid growth, taking care of customer needs remains our priority. Our team carefully monitors changing consumer preferences, expands our supplier base and regularly rotates our product range to ensure that we have everything customers need at the best possible price.

I would like to thank the entire Fix Price team for their dedication to creating a better shopping experience during these challenging times. I believe that the initiatives we are implementing will bring about important long-term benefits for our customers, shareholders, employees and society as a whole.

Dmitry Kirsanov, Fix Price CEO

Operating results

Store network expansion

• The total number of stores reached 6,039 as of 30 June 2023 (14.7% growth y-o-y), with the share of franchise stores in the total store count remaining flat y-o-y at 11.0%
• During Q2 2023, the Company opened 191 new stores on a net basis, including 166 Company-operated stores and 25 franchise stores, compared to 184 net new stores in Q2 2022, including 166 Company-operated stores and 18 franchise stores
• Fix Price closed 29 Company-operated stores in Q2 2023, compared to 34 stores in Q2 2022. The Company is still focusing on improving its lease terms
• Some 9.9% of net openings in Q2 2023 were outside of Russia, as a part of the Groups international expansion. As of the end of the reporting period, the share of stores in international geographies increased to 10.1% of the total store base, compared to 9.4% as of 30 June 2022
• Total selling space reached 1,308.2 thous. sqm by the end of the reporting quarter (15.0% growth y-o-y), driven by an increase of 41.9 thous. sqm during Q2 2023. The average Fix Price store selling space was 217 sqm as of 30 June 2023
• During the quarter, the Company opened stores in 41 new localities, including the first two stores in Armenia. Fix Prices international presence now covers nine countries

LFL sales growth

• In Q2 2023, LFL sales were 7.9% lower y-o-y on the back of the high base effect from the previous year, when customers were stockpiling amid rising Inflation and uncertainty over the future availability of essential products. The LFL average ticket grew by 1.8%; LFL traffic was 9.6% lower y-o-y as macroeconomic headwinds continued to further subdue overall consumer sentiment and reduce demand for non-food impulse purchases in particular
• LFL sales of Company-operated stores in Russia were down 9.3%. However, rouble-denominated LFL performance in Kazakhstan and Belarus was supportive due to the low base from the previous year and the currency conversion effect on the back of rouble depreciation
• In their national currency, stores in Belarus improved versus the low base from the previous year, when the Company had temporarily reduced its assortment due to government restrictions, while Kazakhstans performance was still affected by inflationary pressure impacting consumer behaviour

Assortment and category mix[5]

• The share of food decreased to 27.7% versus the peak of 30.9% in Q2 2022, when the demand for essentials was fuelled by consumer stockpiling. As a result, the share of non-food items in retail sales grew to 44.5% in Q2 2023, compared to 42.7% in Q2 2022. Demand for drogerie (household chemicals and hygiene products) remained strong thanks to efficient assortment management, which supported an increase in the share of drogerie in retail sales to 27.9% in Q2 2023 from 26.4% in Q2 2022
• In Q2 2023, the Company recorded positive LFL sales in kitchenware and party and celebration products. On the back of a fading high base effect and demand stabilisation in June 2023, LFL sales started to improve in DIY, electronics and appliances, pet care, books and stationery, cosmetics and hygiene products, and accessories
• The Company continued switching to local producers, which resulted in a decline in the share of imports in retail sales to 21.4% in Q2 2023 versus 22.0% in Q2 2022
• In the reporting period the share of price points above RUB 99 in retail sales reached 42.4%, versus 34.7% in Q2 2022, on the back of assortment rotation and granular work with products at higher fractional price points. The share of price points above RUB 199 in retail sales remained almost flat y-o-y at 13.7% in Q2 2023, reflecting the stronger consumer appeal of low- and mid-priced items in the current uncertain macroeconomic environment
• The average ticket for all Company-operated Fix Price stores grew by 2.1% y-o-y to RUB 314 in Q2 2023, as a result of constant assortment rotation and gradual repricing

Loyalty programme development

• As of 30 June 2023, the total number of registered loyalty cardholders reached 24.0 million, up 25.4% y-o-y. The Company managed to attract 0.9 million new cardholders in Q2 2023 thanks to the programmes appealing terms for customers and promotional tools. On average near 54% of loyalty programme cardholders were active members[6] in Q2 2023
• The share of purchases with loyalty cards reached 62.5% of total retail sales in Q2 2023, compared to 52.2% in Q2 2022
• The average ticket for a loyalty-card purchase was RUB 438, which was 1.9x higher than the average ticket for non-loyalty-card purchases

The Groups revenue was up by 3.0% y-o-y and stood at RUB 135.7 billion in H1 2023 as a result of a 2.9% increase in retail revenue and 3.3% growth in wholesale revenue.

In H1 2023, the Company reported retail revenue of RUB 120.1 billion; the increase was mainly due to the expansion of the Companys selling space. Wholesale revenue reached RUB 15.6 billion and was supported by the opening of new franchise stores. The share of wholesale revenue remained generally flat y-o-y at 11.5% of the Companys total revenue.

Gross profit grew by 3.8% y-o-y and reached RUB 45.1 billion in
H1 2023. Gross margin improved by 29 bps y-o-y and stood at 33.3% thanks to efficient assortment and category mix management; it was also supported by favourable trends in the rouble exchange rate for the purchase and delivery of imported products that were sold in the reporting period.

Transportation costs were up 13 bps y-o-y to 1.7% of revenue in H1 2023 on the back of higher tariffs in Russia as well as an increase in the volume of third-party logistics services related to the sale of the Companys vehicle fleet last year.

Inventory write-downs increased by 6 bps y-o-y to 1.1% of revenue in H1 2023, reflecting negative operating leverage effect and higher accruals in H1 2023 compared to the same period of the previous year, based on the results of the actual FY 2022 inventory count.

Selling, general and administrative expenses (SG&A) excluding LTIP and D&A expenses increased by 192 bps y-o-y to 15.7% of revenue. This growth was mainly attributable to the 189 bps uptick in the share of staff costs, excluding LTIP, to 11.7% of revenue. The negative operating leverage effect on the back of a slowdown in revenue as well as the opening of three new DCs in H2 2022 and Q1 2023 contributed to the growth of staff costs as a percentage of revenue. Tense competition in the labour market also resulted in continued salary indexation across all the Companys countries of operation.

LTIP expense reached RUB 531 million.

Depreciation and amortisation (D&A) expenses were up 50 bps y-o-y to 5.3% of revenue. Depreciation of right-of-use assets increased by 39 bps to 4.0% of revenue, reflecting the growing amount of right-of-use assets on the back of store network expansion coupled with the negative operating leverage effect. The share of other depreciation and amortisation expenses grew by 11 bps, as the Company opened two new owned DCs in September 2022 and March 2023.

The Groups total SG&A expenses grew by 280 bps y-o-y to 21.5% of revenue, as the LTIP expense contribution amounted to 39 bps, and the share of D&A expenses rose 50 bps.

Rental expense (under IFRS 16) was down 21 bps y-o-y to 0.6% of revenue (down 24 bps to 0.7% of retail revenue), as slower revenue growth dynamics led to a decrease in the share of the variable component in the lease payment structure.

Rental expense (under IAS 17) grew by 27 bps y-o-y to 5.1% of revenue (up 30 bps to 5.7% of retail revenue), reflecting the greater impact of lease expenses under fixed-rate contracts, which comprise 36% of the total contract base and are generally less sensitive to store revenue dynamics. DC rent rate indexation and the opening of a leased DC in Samara in H2 2022 also added to the y-o-y growth in rental expense in the reporting period.

Bank charges grew by 22 bps y-o-y to 1.2% of revenue on the back of the low base of the previous year, which reflected reduced acquiring commissions on bank card transactions, which were set by the Central Bank of Russia for businesses selling socially important products and services from 18 April to 31 August 2022.

Security costs were up 8 bps y-o-y to 0.7% of revenue, reflecting growing fees for security services alongside the negative operating leverage effect.

Repair and maintenance costs decreased by 11 bps y-o-y to 0.3% of revenue due to efficiencies gained through the ongoing switch to electronic tickets as well as lower spending on consumable and transportation materials due to the considerable stocks formed last year amid uncertainty regarding the future availability of these materials. In August 2022, the Company sold its vehicle fleet, which also contributed to a decrease in maintenance costs.

Utilities were almost flat y-o-y at 0.3% of revenue, while other expenses were up 5 bps and stood at 0.5% of revenue.

Advertising costs were down 2 bps to 0.3% of revenue.

Other operating income and the share of profit of associates decreased by 33 bps y-o-y to 0.2% of revenue mainly due to lower proceeds from the sale of recyclables amid a decline in market prices. In addition, on the back of prevailing uncertainties over developments in the western regulatory framework, the Group suspended recognition of revenue from its depositary bank in connection with the Companys IPO.

Adjusted EBITDA under IFRS 16 amounted to RUB 24.1 billion, while adjusted EBITDA margin stood at 17.8%.

EBITDA under IFRS 16 stood at RUB 23.6 billion for H1 2023 (-9.3% y-o-y). The EBITDA margin was 17.4% (versus 19.7% in H1 2022), as a strong gross margin was offset by the increase in SG&A expenses (excl. D&A).

EBITDA under IAS 17 amounted to RUB 17.4 billion for H1 2023, down by 15.8% y-o-y. The IAS 17-based EBITDA margin amounted to 12.8%, compared to 15.6% for H1 2022.

Net finance costs in H1 2023 were down by 63.7% y-o-y to RUB 591 million on the back of a decrease in loans and borrowings, lower average loan rates yo-y and higher interest income due to an increase in available liquidity. These results were partially offset by an increase in interest expense due to organic growth in lease liabilities.

In the reporting period, the Group recorded an FX gain of RUB 907 million, compared to a RUB 1,888 million loss in H1 2022, on the back of rouble depreciation and a subsequent gain on the revaluation of rouble-denominated intra-group accounts payable of the Groups international entities, as well as a gain on the revaluation of the Groups bank accounts and deposits denominated in foreign currencies, which were partially offset by a loss on the revaluation of trade accounts payable.

Income tax benefit amounted to RUB 3.0 billion in H1 2023 versus an expense of RUB 11.0 billion in H1 2022, when an income tax provision was accrued as a result of Group managements reassessment of certain tax risks. In the reporting period, the Group reassessed the relevant uncertainties again, resulting in a release of tax provisions.

Profit for the period grew by 286.0% y-o-y to RUB 19.6 billion. H1 2023 net profit margin rose to 14.5%, compared to 3.9% a year earlier.

Non-current loans and borrowings stood at RUB 4.5 billion, up RUB 0.2 billion from the beginning of the year. Current loans and borrowings decreased by RUB 2.6 billion from the beginning of the year to RUB 15.0 billion, as the Company further reduced its current debt on the back of a solid accumulated cash position. Total loans and borrowings decreased to RUB 19.5 billion as of 30 June 2023, versus RUB 21.9 billion as of 31 December 2022. Lease liabilities grew to RUB 13.4 billion from RUB 12.6 billion at the start of the year, driven by an increase in the number of lease contracts on the back of store network expansion. As a result, the Groups total loans, borrowings and lease liabilities decreased by 4.7% from the start of the year and amounted to RUB 32.9 billion.

As of the end of the reporting period, the Companys IAS 17-based net cash position further improved and stood at RUB 9.9 billion, versus RUB 1.7 billion at the start of the year, on the back of accumulated cash reserves. The Groups IAS 17-based net cash to EBITDA ratio was 0.2x, versus 0.04x as of 31 December 2022.

Net trade working capital[9] improved to RUB 12.0 billion as of 30 June 2023, compared to a peak of RUB 18.0 billion as of 30 June 2022, despite organic network expansion and a slowdown in revenue growth, reflecting efficient assortment management and flexibility of the business model.

CAPEX for H1 2023 was RUB 3.4 billion, down from RUB 3.7 billion in H1 2022, due to the completion of the active phase of the construction of distribution centres which had started in 2022. The new distribution centres will to a large extent cover the Groups warehouse space needs in the Central region of Russia for the next few years.

About the Company

Fix Price (LSE and MOEX: FIXP), one of the leading variety value retailers globally and the largest in Russia, has been helping its customers save money every day since 2007. Fix Price offers its customers a unique and constantly refreshed product assortment of non-food goods, personal care and household products and food items at low fixed price points.

As of 30 June 2023, Fix Price was operating 6,039 stores in Russia and neighbouring countries, all of them stocking approximately 2,000 SKUs across around 20 product categories. As well as its own private brands, Fix Price sells products from leading global names and smaller local suppliers. As of 30 June 2023, the Company was operating 12 DCs covering 80 regions of Russia and 8 neighbouring countries.

In 2022, the Company recorded revenue of RUB 277.6 billion, EBITDA of RUB 54.2 billion and net profit of RUB 21.4 billion, in accordance with IFRS.

Contacts

Fix Price Investor Relations

Fix Price Media Relations

Elena Mironova 

ir@fix-price.com

Ekaterina Goncharova

pr@fix-price.ru