Detsky Mir Increased GMV by 7.6% in Q1 2022. EBITDA Came in at RUB 2.6 bn

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Detsky Mir Increased GMV by 7.6% in Q1 2022. EBITDA Came in at RUB 2.6 bn

Moscow, Russia, 16 May 2022. Detsky Mir Group ("Detsky Mir" 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 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.
• Gross profit increased 8.3% to RUB 11.4 bn.
  • Gross margin was 30.2%.
• Selling, general, and administrative (SG&A) expensesas a percentage of revenue increased 2.2 p.p. to 23.2%.
• EBITDA fell 9.8% to RUB 2.6 bn.
• Adjusted profit before tax came in at RUB 1.1 bn.
• The net debt/EBITDA LTM ratio stood at 1.7x. Net debt was RUB 31.2 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 245 stores 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 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.
• 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 bn 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 bn worth of goods.
• 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:

"At Detsky Mir, we are more than just the industry leader - we are a systemically important company that plays a socially significant role of providing children with essential food and non-food goods. No matter what happens, we remain focused on our number one objective - protecting the interests of our customers and providing a wide range of the goods they need at affordable prices across all regions of operation.

The first quarter of 2022 turned out to be a challenging one for Detsky Mir and the market more broadly. Despite macroeconomic turbulence, the Company managed to boost gross merchandise value by 7.6% and digital sales by 19.9%. The share of online sales in Russia reached 32% in Q1 2022, with the marketplace's share of online sales more than doubling to 8.7%. This strong growth of the marketplace has enabled the Company to expand its product range and improve the customer experience, all while optimizing its inventory investment. We continue to invest in logistics infrastructure, unlocking further growth for our digital channel.

We continue to push private labels across all categories, maintaining our strong focus on the transition to direct import contracts to provide the best price guarantee to our customers. In Q1 2022, the share of private labels and direct imports stood at 44.8% of total sales, up 4.3 p.p. year-on-year.

In the first quarter, our core focus was on ensuring uninterrupted operations, keeping a wide range of products at affordable prices on our shelves and online, and streamlining operating costs. We are doing everything we can to overcome the challenges facing us.

The Company is committed to a strong financial discipline, ensuring that its financial position remains stable. As at quarter-end, our net debt/EBITDA ratio remained at a comfortable 1.7x.

Despite the challenging macroeconomic environment, we are confidently looking to the future and are keeping our focus on further consolidation of the market."

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