Lenta Third-Quarter Sales Growth Slows on Food-Import Ban

Lenta Ltd., a Russian hypermarket operator backed by U.S. private-equity firm TPG Capital, reported slower revenue growth after the government’s ban on some food imports hurt September sales.

Third-quarter revenue increased 33 percent to 48.5 billion ($1.2 billion) rubles, St. Petersburg-based Lenta said today in a statement. The gain was less than the second quarter’s 39 percent jump because of the import restrictions, rising food-price inflation and currency shifts, Lenta said.

President Vladimir Putin in August prohibited purchases of certain food products from the European Union and the U.S. to retaliate for sanctions against Russia over the Ukrainian conflict. The policy contributed to an acceleration of food-price inflation to a three-year high of 11.4 percent in September that, combined with lower oil prices, triggered the ruble’s sharpest quarterly weakening since 1999.

Lenta numbers were “weak by the company standards,” though investors have already taken a growth slowdown into account with the stock’s recent selloff, Mikhail Terentiev, an analyst at Otkritie Capital, said in a note today. The weaker September gain also stemmed partly from aggressive promotions a year earlier during the company’s 20-year anniversary, he said.

Stock Declines

Lenta fell as much as 3.7 percent and was down 2.2 percent at $9.61 as of 12:47 p.m. in London. The global depositary receipts, which began trading in February in the only large Russian initial public offering this year, slid below their IPO price this week.

Demand has dropped for products including fresh fish and cheeses as the import ban caused “hyperinflation” for those items, Lenta Chief Executive Officer Jan Dunning said in a phone interview. “We see fewer customers buying salmon after supplier prices have gone up 40 percent to 45 percent.”

The company also had a “difficult” start to October, as “there is change in the customer behavior we have to analyze, and there is an inflationary impact on our sales,” Dunning said. “Still, we feel confident to confirm the guidance for full-year sales growth of 34 percent to 38 percent.”

The retailer is making efforts to find more local suppliers and move away from buying abroad, Dunning said. The company is trying to keep most of its debt in rubles to match its revenue currency. Lenta is seeking to double its selling space over three years in Russia, where there’s a lower level of modern retail formats per population than in western Europe.

X5 Retail Group NV, whose largest shareholder is billionaire Mikhail Fridman, also posted reduced sales growth in September versus August after the import ban. Billionaire Sergey Galitskiy’s OAO Magnit, Russia’s biggest retailer, maintained its sales-growth pace in September.

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