Magnit · RUS:MGNT
Magnit — Investor Day (February 2021)
64 slides from Magnit's investor day presentation, Feb 18, 2021
Slide 1: Magnit Capital Markets Day
— !Magnit Capital Markets Day z,
Slide 2: Disclaimer
Disclaimer This presentation ("Company Presentation") comprises No representation or warranty, express or implied, is given Certain statements in this Company Presentation may certain written materials/ slides prepared by Public Joint- by or on behalf of the Company or any of its respective constitu
Slide 3: Magnit 2020 Highlights
Magnit 2020 Highlights Top Russian retailer Serving consumers Unique capabilities One of the largest retail chains with multi-format in all highly populated Russian One of the largest private employers in offering and vast by geographical coverage regions Russia, with country wide supply chain and v
Slide 4: Geographic Coverage
Geographic Coverage North North Southern Central Volga Urals Siberian Total 3,752 Caucasus West Cities & Towns Convenience 421 2,243 4,182 3,996 1,703 1,465 901 14,911 7 Stores Federal Regions Supermarkets & Superstores 19 125 87 125 37 54 23 470 North West Central Urals Drogerie Volga Siberian Stor
Slide 5: Operating Highlights
Operating Highlights Net retail sales, bn Rub Number of stores, EOP Selling space, ths. sq.m Net retail sales YoY growth, % Selling space YoY growth, % 1,510 1,333 1,131 1,217 20,725 21,564 1,069 18,348 7,238 7,497 948 16,298 6,425 14,059 22.9 5,755 12,089 5,068 24.3 4,414 14.8 12.8 13.3 13.6 11.6 1
Slide 6: Financial Performance
Financial Performance Concise Profit & Loss Core achievements 2018 2019 2020 YoY Sales, bn Rub 1,237.0 1,368.7 1,553.8 +13.5% Improvement of sales Gross margin, % 23.9 22.8 23.5 +0.7pp densities across all formats SG&A, % 20.5 21.3 20.5 (0.8pp) EBITDA, bn Rub 89.6 83.1 109.4 +31.6% Margin regain EBI
Slide 7: Achievements to Date
Achievements to Date • Significant progress with CVP1 improvement and execution (incl. redesigns) Retail • Completely new approach to Large Formats including redesigns Operations • New promising ventures e.g. launch of Discounter, Magnit City, Kiosks • Significant improvement of category management
Slide 8: Strategy at a Glance
STRATEGY AT A GLANCE
Slide 9: What are the Major Global Trends?
What are the Major Global Trends? Coronavirus Good for Me and the World Technology vs Commodity Biggest global health related crisis Consumers change attitude Technology & data increasingly for over a century to consumption becoming a “new gold” • Lockdown in major countries • Transfer from demand o
Slide 10: Russian Environment
Russian Environment Macro-economic Consumer Retail Technology situation preferences dynamics development • GDP1 decline by (3.1%) in 2020 • Quality, fresh, local products, • Negative real food retail sales • New communication and 2021 forecast of +3.3% convenience, value pricing growth of (2.6%) in
Slide 11: Russian Grocery Market Evolved Significantly but Still Offers Additional Room for Modern Retail
Russian Grocery Market Evolved Significantly but Still Offers Additional Room for Modern Retail Market growth is slowing with Russian market offers The market has potential expected moderate rates further growth potential for further consolidation slightly above inflation Grocery retail, tn Rub Mode
Slide 12: Our Strategic Goal
How we get there — at a glance We will keep improving CVP as a key driver for material Our improvements of sales density and profitability supported by processes and ways of working enhancement Strategic Continuous focus on extracting efficiency to get higher profitability and cash generation Goal W
Slide 13: Our Strategy at a Glance
Our Strategy at a Glance Consumer first Most efficient & promising ways to market • Consumer centric decision making with enhanced Consumers • Smart expansion in core formats to catch loyalty (as the key data source) / personalization Growing LFL, best in NPS1 up market share, including M&A and net
Slide 14: We are Already on the Right Track with Our Strategic Priorities
We are Already on the Right Track with Our Strategic Priorities Selective examples +8 +5 53 +7 46 45 Consumers come first — 4Q’19 41 30 NPS1 positive dynamics 23 4Q’20 Convenience Supermarkets & Drogerie Superstores 19% 19% 14% 14% Caring for Employees — 2020 2019 12% 14% Positive staff turnover dyn
Slide 15: We Have a Clear Implementation Plan (1/2)
We Have a Clear Implementation Plan (1/2) STRATEGIC SHORT TERM MID & LONG TERM PILLAR within 1-2 years within 3-5 years Consumer • Updated CVP incl. new redesign concepts • Continuous evolution of CVP first • Store clustering • Advanced multi clustering • Start emotional and personalized loyalty • D
Slide 16: We Have a Clear Implementation Plan (2/2)
We Have a Clear Implementation Plan (2/2) STRATEGIC SHORT TERM MID & LONG TERM PILLAR within 1-2 years within 3-5 years Modern & • All functional strategies synchronized • Stable, reliable and efficient systems efficient platform • E2E process rethinking and optimization • Product mindset as a core
Slide 17: Market Dynamics and Consumer Evolution
MARKET DYNAMICS AND CONSUMER EVOLUTION
Slide 18: Russian Economic Environment
Russian Economic Environment We expect unemployment rate above 2019 level Real disposable income is forecasted to get into but improving in the upcoming periods positive territory in 2021 Unemployment rate, % Real and disposable income growth and real wages growth, YoY % 6.3% 6.1% 3.0% 6.2% 6.2% 4.6
Slide 19: Recovering Consumption Behavior Patterns
Recovering Consumption Behavior Patterns Consumers raise offline Food spending already increases …to continue further mobility after lockdown following wage recovery… Ivanovs’ visits to grocery stores per week Ivanovs’ daily spending, Rub Ivanovs’ expected changes in food spending, % 3.0 3.2 10% 3.0
Slide 20: Consumer Segments Evolution
Consumer Segments Evolution Consumers are becoming … and more demanding more price sensitive … to assortment & convenience Price sensitive Share of consumers, % Share of value, % Rank Factor Trend segments 1 Prices constantly Saving fans 23 +2pp 25 +1pp 26 growing with 31 Product increasing Goal-ori
Slide 21: Channel Split is Relatively Stable. Key Growth in E-com, Hard Discounters and Specialists
Channel Split is Relatively Stable. Key Growth in E-сom, Hard Discounters and Specialists Share of FMCG sales channels in Aug’2020 vs Aug’2019 consumer spending (%) based on last twelve months in value terms, % +5.6% Discounters1 +9.1 29.6 30.7 31.7 Hypermarkets/Cash&Carry (0.8) Traditional trade +2
Slide 22: Constantly Evolving E-grocery Market
Constantly Evolving E-grocery Market E-grocery market size in Russia, bn Rub % of food retail market High growth rate Foodtech and e-grocery market demonstrates double digit 0.2% 0.3% 0.9% ~5.0% growth despite limited offering outside large cities E-grocery monthly sales raised up to 75% during COVI
Slide 23: Focus on Delivering the Best Proposition to Our Consumers
FOCUS ON DELIVERING THE BEST PROPOSITION TO OUR CONSUMERS
Slide 24: Magnit Umbrella Brand – Consumer Missions and Formats
Magnit Umbrella Brand – Consumer Missions and Formats Everything Core offline formats New promising ventures incl. pharmacies in grocery and drogerie stores that matters is close to you Near home Family Extra Cosmetic Apteka My price City GO Convenience Supermarket Superstore Drogerie Pharmacy Disco
Slide 25: Being Closer to Consumers by Tailored Approach in Assortment Management (1/2)
Being Closer to Consumers by Tailored Approach in Assortment Management (1/2) Rationalization of assortment to offer consumers what they want and simultaneously increase business efficiency Structured Unit-of-Needs methodology in Category Management Assortment harmonization Target categories update
Slide 26: Being Closer to Consumers by Tailored Approach in Assortment Management (2/2)
Being Closer to Consumers by Tailored Approach in Assortment Management (2/2) Smart store clustering to balance tailoring efforts and management complexity Key clusters based Additional clusters: on number and budget of habitants street retail, joint openings – Convenience and Drogerie Best in Local
Slide 27: Private Label, Own Production & Direct Import as Differentiation Pillars
Private Label, Own Production & Direct Import as Differentiation Pillars Private Label Own production Direct import Improve own brand portfolio to support to provide exclusive goods with better quality and price differentiating offering a range of consumer missions Further selective investments to e
Slide 28: Own Production — from Field / Site to Shelf
Own Production — from Field / Site to Shelf 28
Slide 29: Magnit Convenience CVP
Magnit Convenience CVP Positioning Missions Locations & Size Sales mix, % Everything you need for better today • Food for tonight Residential and business ~6,450 Store with all the goods that you need areas, shopping malls 48% 49% 3% avg. # of SKUs • Regular shopping here and now for people who sear
Slide 30: New Look & Feel Concept for Megapolis (1/3)
New Look & Feel Concept for Megapolis (1/3) New decorations – loft type ceiling, accent lighting, Café zone – with seating places, equipped with nice floor, stylish attention focusing signs professional coffee machine, own bakery and Wi-Fi 30
Slide 31: New Look & Feel Concept for Megapolis (2/3)
New Look & Feel Concept for Megapolis (2/3) Specially designed additional sales equipment New equipment for F&V and Fresh creating a pleasant with LED displays showing relevant content atmosphere and increasing display capacity 31
Slide 32: New Look & Feel Concept for Megapolis (3/3)
New Look & Feel Concept for Megapolis (3/3) Digital prices tags increasing quality and speed of Unique flipping cash-desks with monitors for both information update and giving additional opportunities cashier and consumer for self-service for communication with consumers 32
Slide 33: Magnit Supermarket CVP
Magnit Supermarket CVP Positioning Missions Locations & Size Sales mix, % Food Experience Matters in a full- • Regular shopping Residential and business ~13,900 feature supermarket with an areas, shopping malls 52% 43% 5% avg. # of SKUs • Food for tonight extended assortment, improved • Ready-to-eat
Slide 34: Magnit Superstore CVP
Magnit Superstore CVP Positioning Missions Locations & Size Sales mix, % Shopping as valuable in-store • Major stock-up Residential areas ~25,550 experience for all the family with and highways 43% 49% 8% avg. # of SKUs • Regular shopping extended assortment for all • Food for tonight consumer missi
Slide 35: New Look & Feel Redesign Concepts for Superstores (1/3)
New Look & Feel Redesign Concepts for Superstores (1/3) Easy Self-Service – convenient self-service cash Café zones – additional break-out areas for customers desks, saving time in queues, hand scanners and to enjoy delicious coffee and Magnit’s culinary during MobyScan App shopping trips 35
Slide 36: New Look & Feel Redesign Concepts for Superstores (2/3)
New Look & Feel Redesign Concepts for Superstores (2/3) Digital wine sommelier offering ratings and tips to Themed areas in partnerships with major FMCG help consumers in choosing their perfect wine companies creating meaningful experience 36
Slide 37: New Look & Feel Redesign Concepts for Superstores (3/3)
New Look & Feel Redesign Concepts for Superstores (3/3) Irrigation equipment for fresh Wooden crates and racks for F&V LED digital displays creating new greens helps to extend shelf life both creating feeling of modern in-store communication channel and fresh look coupled with market and extending o
Slide 38: Magnit Cosmetic CVP
Magnit Cosmetic CVP Positioning Missions Locations & Size Sales mix, % To care means to love Regular shopping of Residential ~9,750 Store for women allowing to keep personal care and and business areas 67% 25% 7% avg. # of SKUs care about both herself and beloved household goods ones so they appreci
Slide 39: Magnit Pharmacy CVP
Magnit Pharmacy CVP Positioning Missions Locations & Size Sales mix, % Federal omni-channel pharmacy Occasional purchases of Areas inside all formats ~4,800 chain with optimal assortment at drugs and relevant goods base stores (no street retail) 82% 18% avg. # of SKUs affordable prices Medicine 322
Slide 40: New Promising Ventures
New Promising Ventures Magnit My Price Magnit City Magnit GO Positioning Positioning Positioning A low price no frills store for rational A small store with a café for large cities A kiosk offering ready-to-eat and consumers offering assortment offering ready-to-eat and on-the-go in the most high tr
Slide 41: OMNI / Digital Transformation
OMNI / DIGITAL TRANSFORMATION
Slide 42: Digital — Important Across All Steps of a Consumer Journey
Digital — Important Across All Steps of a Consumer Journey 2 In-store experience 1 • Informed navigation Pre-shopping • Selection of goods • Loyalty, general promo with mobile scanner / app 4 5 and CVM1 offers • Easier and faster check-out Payment Post-shopping with mobile payment • Interest clubs •
Slide 43: OMNI Retail is at the Core of Magnit's Future Ecosystem
OMNI Retail is at the Core of Magnit’s Future Ecosystem We aim to build an ecosystem of Magnit brand at the center with multi-format complimentary services around Magnit brand & omni-channel offering… and strong omni-channel core …and united Loyalty, Sign-on, Purchase history, etc. E-com roll-out du
Slide 44: Launch of E-commerce Across All Missions
Launch of E-commerce Across All Missions FROM STATUS 2 in Krasnodar – pilot Superstore Stock-up (2 hours+) 40 in 20 regions – scaling in 2021 Big ticket purchase Dark Store 1 in Moscow – to be opened in 2021 35 in Moscow – pilot Convenience 770 in 30 regions – scaling in 2021 2 in Moscow – pilot Min
Slide 45: Online Delivery Already Has Good Traction
Online Delivery Already Has Good Traction >8,600 2 avg. # of orders per day dark stores launched ~1,100 ₽ 86 avg. ticket for all services1 cities in 53 regions served >40,000 SKUs >50 % available across all services of e-com revenues outside of Moscow and St. Petersburg >1,200 >3.3 bn ₽ stores conne
Slide 46: Loyalty Program Covering ~70% of Revenue Already One Year after Roll-out Completion
Loyalty Program Covering ~70% of Revenue Already One Year after Roll-out Completion Ultimate Goal — increase Magnit’s share of consumer wallet Status: Short-term plans: • Up to 32 mn consumers with the loyalty • Increase value of the loyalty card with emotions: clubs, card make purchases every month
Slide 47: Magnit Pay with Promising Initial Traction to Support Our Ecosystem
Magnit Pay with Promising Initial Traction to Support Our Ecosystem Consumer benefits: Status: Short-term plans: • One virtual debit card for • Roll out with NFC card • Integrate QR code solution loyalty and payments with integrated with mobile ability to transfer in-app from / app in partnership wi
Slide 48: All Magnit Future Ecosystem Services within a Single Super App
All Magnit Future Ecosystem Services within a Single Super App Ecosystem Loyalty services Digital card Personal promo Magnit Pay Partnerships Magnit Mobile Promo In-store General promo experience Marketing Product scanner communications Mobile check-out Gamification Augmented reality E-com Express
Slide 49: Relaunched App Serving as a Foundation for Super App
Relaunched App Serving as a Foundation for Super App 1 General Modern tech stack and architecture for Expected 40%-60% MAU2 growth future expansion of new features, in December 2021 YoY upgraded UX/UI1 of the App Enhanced digital loyalty and marketing 1 2 Loyalty mechanics – loyalty basics and multi
Slide 50: Next Generation of Data Capabilities to Power Digital Transformation
Next Generation of Data Capabilities to Power Digital Transformation The exponential growth of data… …requires a modern centralized data platform to enable data-driven decision making Projected Data Volumes1 (2018 as the base) Strong central data team with >200 FTE2, 500% centralization and streamli
Slide 51: We Already Started a Fundamental Re-Org of Core IT
We Already Started a Fundamental Re-Org of Core IT Detailed 12-month tech reorg plan and KPIs have been developed, team is assembled and ready to go Own digital & Product teams Modern IT Digital-ready Next gen robust tech in digital development architecture infrastructure capabilities process • Buil
Slide 52: Integration of Scalable Industrial Solutions
Integration of Scalable Industrial Solutions ERP / HCM F&R WMS TMS Enterprise Resource Planning / Forecast & Replenishment Warehouse Management Transportation Management Human Capital Management Best integrated solution (ERP) Leading solution in the market One of the best WMS Covers all sources of f
Slide 53: Employee First
CONSUMERS g 090 rm nes 2 eae EMPLOYEES INVESTORS
Slide 54: Magnit — One of the Largest Private Employers in Russia
Magnit — One of the Largest Private Employers in Russia 316,000 Headcount of Employees 33,751 254,195 Distribution 11,056 Regional In-store branches 12,189 Head Office Other formats Supermarkets & Superstores Drogerie Stores Convenience Stores 4,810 Production & other 2,667 27,281 42,768 181,479 As
Slide 55: Organizational Design Balancing Both Formats & Regions
Organizational Design Balancing Both Formats & Regions Key changes in org. design Head Quarter • Strategy & Expertise Regional • Budget Heads 1 Right balance of centralization / decentralization • Execution guidelines Operations & Commercial 2 Format heads in commercial & operations Format Managemen
Slide 56: High Engagement
High Engagement End of 2020 we launched first Employees’ feedback engagement & satisfaction survey showing exceptional results Basis for effective HR & corporate culture solutions 84% Share of Engaged employees — top result in the Russian food retail Engagement & Adherence survey matrix: Engaged Pro
Slide 57: HR Strategy
HR Strategy Defined High Standards to Tailor Proposition to Every Employee Become employer of choice 1 Lead labor market change 2 Acknowledge company talents 3 Evolution to HR Zero • Change leader in mass labor market • Prioritize talent development and • Embody automation and improve transformation
Slide 58: Commitment to ESG
CONSUMERS pi 090 rm oS EMPLOYEES INVESTORS
Slide 59: Become a Retailer with Purpose
Become a Retailer with Purpose Sustainability Strategic Framework Ambitions 1. 2. 3. 4. 5. Leader Positive 100% Best in class Employer #1 in environmental impact responsible corporate in industry impact reduction on the quality supple chain governance in the industry of life of all people in Russia
Slide 60: 2025 Sustainability Commitments
2025 Sustainability Commitments SUSTAINABLE HEALTH 1 ENVIRONMENT 2 SOURCING 3 EMPLOYEES 4 COMMUNITIES 5 & WELLNESS Healthy lifestyle 50% 100% 70% 10% Information about and Private labels and own Responsible sourcing Rate of employee Employee volunteers nutrition production packaging be for socially
Slide 61: Strategic Guidance
CONSUMERS es 090 ee rm i ee: EMPLOYEES INVESTORS
Slide 62: 2020 Strategic Priorities – We Deliver What We Promise
2020 Strategic Priorities – We Deliver What We Promise Strategic priorities Achievements 2020 vs 2019 Improvement of LFL sales growth / sales densities LFL sales growth of 7.4% in 2020 vs 0.4% in 2019 97 bps YoY EBITDA margin improvement on the back Margin regain of gross margin gains and strict cos
Slide 63: Key Strategic Guidance
Thought through strategic plan to execute to capture tremendous business Key improvement potential Strategic Clear CVP initiatives to enhance consumer perception and experience big time Guidance Clear potential to increase sales densities also by the way of speeding up value 2021-2025 accretive rede
Slide 64: Key Financial Guidance
Key Benefits from lucrative EBITDA margin steadily moving Financial to the direction of 8% within 2021-2025 leading to very Guidance attractive cash generation 2021-2025 Comfortable leverage of ~1.5x of Net Debt/EBITDA with a self-imposed ceiling of 2.0x CONSUMERS Improvement of working capital with