$1 =
 63.3901 RUR
€1 =
 68.2458 RUR
Search the Archives:
Today is Dec. 9, 2016 12:53 PM (GMT +0300) Moscow
Forum  |  Archive  |  Photo  |  Advertising  |  Subscribe  |  Search  |  PDA  |  RUS
Open Gallery...
A thousand-ruble banknote got caught in a mousetrap.
Photo: Kirill Tulin
Other Photos
Open Gallery... Open Gallery... Open Gallery...  
Ad Market to Dip in 2009
Gazprom Builds Big Gas Reservoir
Serbia Lets the Gas In
Peugeot Plans Sales Spike in Russia
Ukraine Ready to Winter With No Gas of ...
Readers' Opinions
You are welcome to share your opinion on the issue.
Apr. 14, 2008
Print  |  E-mail  |  Home
Chains Drown in Debts
// Kommersant publishes the Top 50 Russian Retailers rating
Major Russian retailers kept growing faster than the market in 2007 (please see the chart). However, many participants of the rating had to pay for that growth with a share of their business. Due to the liquidity crisis, debt instruments for retailers became so expensive that they could not draw funds in any other way. Evroset, Dixy, Kopeika, Paterson, and 36.6, already credited up to there, have had especially hard times. They slowed down their expansion and are trying to raise the effectiveness of their old stores.
According to the Russian Federal Statistics Service, the turnover of retail trade in Russia grew in 2007 by 15.2%, up to $457.1 billion, as compared to the previous year. Food sector grew by 12.3%, up to $206.9 billion. Nonfood sector increased by 17.6%, up to $250.2 billion. The retailers who are in the rating grew faster in 2007, by 25220%. However, debt load of retail chains grew together with their profits. For many retailers, it reached its critical level in a most unsuitable moment. Due to the international financial crisis, banks reduced credit limits, depriving trade chains of the opportunity to refinance loans.

For several years running, banks willingly credited retail trade, believes Oleg Gordienko, head of Raiffeisenbanks bonded loan department. Even relatively small retailers now have quite aggressive debt ratios. For instance, the debt ratio to EBITDA of Matritsa chain in Bashkiria at year-end of 2007 was equal to 9, and of Grossmart chain over 6. Although, even a quickly-growing company should better keep it a little above 3, said the expert. Bankers are now trying to choose borrowers with smaller debt load, and prefer working with large chains, said Denis Gaevsky, managing director of the capital market transactions department at the Bank of Moscow. Ilya Timchenko, director general of Bely Veter Tsifrovoi company, said that for his chain the ruble credit rates grew from 9-10% annually in 2007 up to 11-12% in 2008. Banks became more attentive to the subject of pledge and a chains total debt. By late 2008, we expect rate growth by 0.5-1 percentage point, he said.

When making the rating we took into account the net profits of retail chain companies own Russian stores in 2007. We did not consider franchising stores, stores outside Russia, and funds that went through retail chains as payments for side services, like mobile communication payments to cell phone operators. The data was provided by retailers themselves. If the companies did not provide the data, we used consensus estimation by several experts in those sectors and/or market participants. If the experts could not make the estimation, we put the n.d. (no data) mark.

The Top 50 Russian Retailers rating for 2007 prepared by Kommersant is not very different from the one for 2006. However, there are significant changes in the positions they took in the rating. For instance, Evroset was second in 2006, and fifth in 2007. The company grew slower than other leaders of the rating, just by 22% in 2007 in profits, and by 1% in the new floorspace. Krasnodars Magnit at last year-end was second largest food retailer in Russia, but moved down to the ratings third position this year. Metro Cash & Carry chain outran it by nearly $200 million. Its profits in 2007 made up around $3.9 billion (the rating has the total profit of Metro Group in Russia, including Real and Media Markt). The Top 5 of household appliances and electronics retailers has undergone changes as well. Regional retailer Domo outran Moscow chain Mir in profit, becoming the fourth largest retailer in the sector.

Moreover, billionaire-companies have joined the rating. In 2007, 17 retailers gained profits of over $1 billion each, while there were just 12 of them in 2006. Food retailers, who work on an absolutely non-consolidated market, grew more than others in 2007. According to the prognosis by Russias Ministry of Economic Development and Trade, food retail will keep growing steadily till 2010 by at least 13-15% annually. The only sector consolidated less than food retail is clothes retail. It grows by at least 25% a year, and the trend will persist for a few more years, believes Anna Lebsak-Kleimans, director general of Fashion Consulting Group. The only clothes chain to enter the rating this year is Sportmaster, although sport goods predominate over sport clothes in the structure of its profits. Most clothes chains work along franchising scheme, and that is why they are not in the rating. For instance, profits of Gloria Jeans exceeded $340 million at year end of 2007, but its major part belongs to franchising stores.

Some players and sectors slow down their growth. For instance, the market of household appliances and electronics is actually divided among chief players, who grow primarily due to small acquisitions in the regions and inflation. Thus, according to the RATEK association, the market of household appliances and electronics grew by 15% as compared to 2006, but will grow by not over 12-13% this year, according to the associations prognosis.

M&A Journal estimated that merger and acquisition deals worth $3.7 billion in total took place in trade in January-October 2007. Food retailers (16) and pharmacy chains (12) carried out most deals.

Kristina Busko, Irina Parfentieva

Top-50 Russian Retailers >>


All the Article in Russian as of Apr. 11, 2008

Print  |  E-mail  |  Home

Forum  |  Archives  |   Photo  |  About Us  |  Editorial  |  E-Editorial  |  Advertising  |  Subscribe  |  Subscribe to Printed Editions  |  Contact Us  |  RSS
1991-2016 ZAO "Kommersant. Publishing House". All rights reserved.