April 12, 2012. Moscow, Russia. Detsky Mir Group, Russia’s largest children’s products retail chain, has released its 2011 US GAAP financials.

FINANCIAL HIGHLIGHTS

The 2011 revenue was RUB 23,007 mln (US$ 783 mln), which is a 15.1% (19.0% in dollar terms) increase as compared to 2010.

LFL sales throughout the retail chain grew by 14.9% in 2011.

Gross profit increased by 6.0% (9.6% in dollar terms) over the year and reached RUB 9,000 mln (US$ 306 mln). In 2011 the gross margin decreased by 3.3p.p. to 39.1%.

Selling and administrative expenses as a percentage of revenue decreased by 0.6p.p. to 35.9%.

The 2011 OIBDA was RUB 806 mln (US$ 27 mln) which is a 34.7% decrease as compared to 2010. In 2011 the OIBDA margin was 3.5%.

The Group’s net loss in 2011 was RUB 217 mln (US$ 7 mln) as compared to the 2010 profit in the amount of RUB 12 mln (US$ 0.4 mln).

There was a 31.8% reduction in the Group’s net debt to RUB 1,616 mln (US $50 mln).

The operating cash flow of the Group in 2011 increased more than threefold and reached RUB 1,109 mln (US$ 38 mln).

OPERATING HIGHLIGHTS AND KEY EVENTS

In May 2011 Gennady Lyovkin was appointed CEO of the Detsky Mir Group, following in this position George Kravchenko, executive vice president of JFSC Sistema, who led Detsky Mir since October 2010. Before joining Detsky Mir, during 9 years, Gennady Lyovkin held various top management positions in Sportmaster, where he was responsible for marketing, sales, and operational management of 210 stores network.    

In 2011 the Group's share of the Russian children’s products market grew by 0.9p.p. to 6.5%.

In 2011 the Group opened 21 stores in Russia and CIS, including its first store in Kazakhstan. As of the end of 2011 Detsky Mir Group had 150 stores, with total retail space increasing by 10% to reach 236,000 sq. m.

During the first year of its operation the online shop expanded its service area to include 13 Russian cities. In December 2011 the online shop received approximately 1 mln unique visitors.

Gennady Lyovkin, CEO of the Detsky Mir Group,comments on the 2011 year-end operating results:

“The Company demonstrated active growth during the past year: we capitalized on successful experience of leading retail chains and engaged the best industry professionals to build a strong senior management team. We also resumed the development program of our retail chain to add 21 new stores, including our first store outside Russia, in Kazakhstan.  We have focused on updating the product range and the pricing policy of the chain and cost reduction.

As part of our goal to achieve higher operating efficiency we developed a new concept for our stores which was used for 4 store openings in 2011.  Modern in-store equipment, new merchandizing, advanced retail technologies, original visual solutions – all of these are intended to substantially increase the efficiency of retail space and make the stores more attractive and customer friendly.

We actively developed e-commerce sales channel launched in late 2010. The first year of the online shop operation demonstrates an excellent development potential: we have significantly diversified the product range and expanded the geographic reach to include 13 Russian cities.    

An important achievement in 2011, was that the Company’s development fully financed with its own funds, the operating cash flow hit its historic high, and the net debt decreased significantly as compared to the previous year.

In 2012 the Group will focus on further improvement of operating efficiency of the retail chain while maintaining high growth rates.  The new format will be used on a wider scale – over 40 new stores are expected to be launched. Online shopping will continue to develop rapidly, including through further expansion of geographic reach.”