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Expert RA has assigned a ruBBB rating to Obuv Rossii according to the updated method
Novosibirsk, 31 December 2020: The Expert RA rating agency has confirmed a credit rating of the non-financial company Obuv Rossii is at the ruBBB level according to the updated method, the rating outlook is developing.
Obuv Rossii Group is a federal retail company, whose main office is in Novosibirsk. It has been established in 2003. The rating analysis has been performed according to the consolidated IFRS statements of the parent consolidating company PJSC OR.
Obuv Rossii operates stores of Westfalika, Peshekhod, Rossita, Emilia Estra and Lisette brands, develops S-tep, all.go and Snow Guard footwear and active life clothing brands, owns two footwear factories in the Novosibirsk region, develops own westfalika.ru marketplace and Продаем.рф online platform for suppliers. The retail chain has 840 outlets (175 franchised stores) in more than 330 cities and towns in Russia as of 31 December 2020, which is positively reflected in the assessment of asset concentration. The corresponding size of the chain, the high diversification of the range of goods and services and the absence of a hard-to-replace supplier allow assessing the concentration of business as a positive factor.
The agency conservatively evaluates the risk profile of the main industries in which the Group operates. According to the results of the last 4 quarters until 30 June 30 2020 (the «reporting date»), about 60% of EBITDA is accounted for by retail and wholesale of goods, and 40% — by issuing cash loans. The Group is actively developing a program for selling footwear by instalments and issuing cash loans only to its customers.
The Group's profitability is at a high level and averages about 24% in terms of EBITDA in the 2019-2021 horizon. The high margins of the Group have a positive impact on the rating, even taking into account the decrease in indicators for the 1st half of 2020 and forecasts for 2020. Consolidated revenue is expected to be in the amount of 10 billion rubles, which is almost 30% lower than in 2019; even though comparable like-for-like revenue for the first half of the year has increased by 0.2 pp, (excluding April due to store closings in quarantine measures), it will be in the negative area at the end of the year.
The forecasted liquidity of the Group is estimated at a high level, taking into account the negotiations held in 2020 with the creditor banks and the revision of the repayment schedules and updates of the limits. However, the rating is under pressure from a high level of debt and interest burden.
The corporate risks block supports the rating. The transparency, corporate governance system with respect for the rights of all stakeholders and the risk management quality are highly assessed. Four of the seven members of the Board of Directors are independent directors, which also has a positive effect on the rating. The company has internal audit and internal control departments, a risk analysis is performed with a risk map.
The Group's three-year strategic plans do not imply network expansion, the main task is to improve the efficiency of already operating outlets by increasing conversion and revenue per square meter. The Group has been actively diversifying its variety of stock since 2019. It goes beyond fashion retail, has modernized stores in 2020 and began to develop a universal retail format. The company operates its marketplace, both online and offline. As part of the strategy for integrating into the logistics infrastructure of the e-commerce market, the company is developing a project of partners' pickup points in its retail network, which allows attracting additional traffic to stores and monetizing it in the future. The Group is strengthening the service component of its business and is actively developing its financial services business, including cash loans. At the end of November 2020, the Group also announced a rebranding. Therefore, it will be positioned as a universal trading platform OR GROUP, the purpose of the rebranding is to move away from the company's association as a shoe retailer and expand opportunities for growth of key business indicators by entering new markets.
Information about the company:
OR GROUP (Obuv Rossii Group, Moscow Stock Exchange ticker — OBUV) is a federal retail company, the affiliate company of OR PJSC. The Group was established in 2003; the main office is located in Novosibirsk, it also has an office in Moscow. The Company manages 840 outlets (175 of them operate under a franchise) of Westfalika, Peshekhod, Rossita, Emilia Estra and Lisette brand, develops S-tep, all.go and Snow Guard footwear and active wear brands and owns two footwear factories in the Novosibirsk region.
In November 2017, Obuv Rossii has raised 5.9 billion rubles during an IPO on the Moscow Exchange, the issuer is PJSC OR.
In November 2020, the Group decide to launch rebranding project. The new name is OR GROUP. The company is changing its positioning: it goes beyond the fashion segment and becomes a universal retailer developing a modern trading platform and online marketplace.
According to the audited financial results of the Group under IFRS, revenue in 2019 has amounted to 13.7 billion rubles, net profit — 1.7 billion rubles, EBITDA — 3.6 billion rubles.
The Group's site: www.obuvrus.ru.
Telegram: https://t.me/obuvrossii.
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