Annual Report 2017

Message from CEO


Obuv Rossii Group has successfully completed its first year as a public company, demonstrating high performance indicators and fulfilling the declared plans. In 2017, we were actively expanding our retail chain: in 2017, it grew by 83 stores and had 535 retail outlets by the end of the year. Thus, we have substantially strengthened our position of the leader of the mid-price segment of the footwear market and increased the separation from our nearest competition. We are intending to maintain these high rates of our chain growth in the future. In 2017 the revenue of the Group increased by 8.4% (to 10.8 billion rubles), the like-forlike sales increased by 2.8%. The Company demonstrated high indicators of profitability growth. EBITDA increased by 7.8% and was 2.74 billion rubles, in comparison with 2.54 billion rubles in 2016. The net profit increased by 10.8% (to 1.3 billion rubles). The results of 2017 showed that the EBITDA profitability was 25.3%, which is a high result among the leading world fashion retailers. We have managed to achieve such impressive results for several reasons. First, the Russian footwear market started to restore in 2017: it returned to growth in volume terms for the first time since 2014. In addition, we see growth of demand and change of customer preferences: customers start to be interested in the more fashionable colour footwear made of genuine leather again.

Second, in 2017 we went on improving our collections. Taking into account the change of customer trends, we started to increase the share of the more modern and fashionable footwear of interesting design in our collections again.

While the share of such footwear was 15% of collections in 2016, it was 20% in 2017, and it is 30% in the new spring-summer season of 2018. We also expanded collections of casual sport footwear, since the popularity of such footwear grows. In 2017, the share of casual sport doubled in retail sales. Third, in 2017, under the strategy of diversification of the product line, we went on developing the assortment of related products under our own trademarks. We started to more professionally work with the clothes category and expanded this assortment. As a result, the share of related products in the retail revenue of the company was 31% in 2017 (this indicator was 28% in 2016). The diversified product line increases the complexity of purchases, the average ticket size, and facilitates the business profitability growth.

Our company focuses on brands in its development strategy. We develop all the assortment represented in our chains under our own brands, including footwear, accessories and related products. We follow the concept of Total look and offer our customers an opportunity to form a fashionable look for a season. We launch branded marketing campaigns, using all communication channels, including the digital one. All these allow us to achieve the high recognition of our brands and form a wide audience of loyal customers. Thus, in 2017 the number of holders of our loyalty cards increased by 25% and was 1.95 million people, 60% of purchases in our stores were made with the use of loyalty cards.

Development of the model of omni-channel sales, our own Internet stores and online services for customers is an important strategic direction for the company. In 2017, we improved the operation of our online sites, launched the renewed mobile versions of websites, expanded the partnership with the online hypermarkets of Wildberries, OZON. All these gave us the growth of sales in e-commerce by 56%, its share in the retail revenue was 10%. It is the development of our own Internet stores that will be of priority for us in the future, the results of 2017 showed that their share in the total revenue of online sales was 90%.

Summing up the results of activity in 2017, we note that the company has achieved high results in all the fields, has demonstrated high indicators of profit and profitability. Thus, we are following the declared plans and will be actively developing in the future. According to forecasts by Discovery Research Group, in the nearest 5 years the Russian footwear market will on the average grow by 4-5% in volume terms and by 6-8% in value terms. Taking into account the favourable situation on the market, Obuv Rossii intends to further consolidate the market, using the advantages of the unique business model that includes the development of a portfolio of recognizable brands, a diversified assortment of goods and services, an innovation loyalty program, and development of the omnichannel model of sales.

Sincerely yours, Anton Titov,

Chief Executive Officer
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