Fix Price Group Ltd. (MCX: FIXP) — international network of fixed price discounters, registered in Cyprus, but leading business in the countries of the former USSR both in the form of its own stores, as well as franchising. In the Russian fixed price retail market, the company occupies a position, close to monopoly.
About Fix Price
Global depositary receipts of the group of companies were listed on the Moscow Exchange at the end of February 2021 of the year, on Londonskaya - a little later. The GDR holding ticker FIXP, and they belong to the first level of listing - to liquid securities.
The peculiarity of the dynamics of the holding's GDR - despite the furor around the listing, GDRs began to fall already on the second day of their turnover on the stock exchange, and the fall continued. Its termination coincided with the publication of the company's results for the first half of the year 2021 years — although, according to some parameters, weaker, than in 2020 year. This publication gave confidence, that cheap goods stores will not lose their increased popularity due to the lack of real prospects to defeat the coronavirus and the economic crisis.
history of the company. The company was founded in 2007 in Khimki under the name of Best Price LLC by entrepreneurs Sergey Lomakin and Artem Khachatryan, who already had experience in the retail industry: before that, they sold the Kopeyka discount chain. The top manager of the company, Dmitry Kirsanov, also previously worked at Kopeyk.
The concept was created on the basis of successfully existing discounters in North American countries, in which all goods are sold at the same price - more often for one American or Canadian dollar. Sales at low prices made possible, including, by lowering purchase prices to record lows, for example, from Chinese suppliers. It always gave high margins, as well as non-perishable products, of which the retailer's food assortment consists, since suppliers are often willing to sell such products at reduced prices. As a result, the focus on the economical buyer made itself felt in the 2014 year, when the country came under sanctions: profit increased by more than 50%.
IN 2016 The chain switched to the "three prices" format. This, apparently, was caused by the steady depreciation of the ruble. In the future, the number of price categories increased, at the same time, the share of Russian food products increased against the background of the sanctions and counter-sanctions regime and the depreciation of the ruble.
Prudent in 2011 The company joined the production of its own brands. Almost all the time of the company's existence, there has been an increase in the number of stores in the regions - from 2010 Fix Price began to sell the franchise, while opening as own, and franchise stores in neighboring countries.
The intention to conduct an initial placement of securities appeared from a group of companies in 2018 year. The IPO was planned for 2019 year, and reasons, why did it take place only in 2021 year, unclear, Since financial indicators in 2019 And 2020 were positive.
Composition of the Fix Price Group of Companies. The parent company of the holding is Kolmaz Holdings Ltd. - offshore company, formed practically at the same time, when Best Price LLC was founded: in 2007 year. The remaining companies mainly control the geographical segmentation of the market.
Shareholders and key figures of Fix Price. The main shareholders of the company are its founders: Artem Khachatryan, which owns through Luncor Overseas S.A., and Sergei Lomakin, which owns through the companies LF Group DMCC and SBP Foundation. De facto, they are the majority shareholders of the group of companies.
The key figure in the management of the holding is the CEO Dmitry Kirsanov. Khachatryan and Lomakin rarely appear in public. Khachatryan and Lomakin Fix Price is not the only business.
The structure of the group of companies Fix Price Group Ltd.
| Country of registration | Activity profile | |
|---|---|---|
| Kolmaz Holdings Ltd. | Cyprus | holding company |
| Best Price LLC | Russia | Retail and wholesale operations |
| Best Price Export LLC | Russia | Wholesale operations |
| Best Price Kazakhstan LLP | Kazakhstan | Retail operations |
| LLC "Fix Price West" | Belarus | Retail operations |
| FIXPRICEASIA LLC | Uzbekistan | Retail operations |
Shareholder structure of the Fix Price Group Ltd.
| Sergey Lomakin | 35,4% |
| Artem Khachatryan | 35,7% |
| Top managers | 1,9% |
| Free-float | 27% |
35,4%
Geography of network distribution.
The main region of coverage is Russia. However, there is a decline, albeit a small one, its share of coverage in recent years.
The largest gain since 30 June 2020 on 30 June 2021 years showed Kazakhstan and Latvia, for the first half of the year 2021 of the year — Uzbekistan and Kazakhstan. This can be associated with a severe blow, that the coronavirus has inflicted and continues to inflict on the purchasing power of the population of these countries.
Already in the middle 2020 The World Bank predicted, that the country's economy will shrink for the first time since the late nineties, followed by moderate, if not weak, recovery. The pandemic caused the deepest crisis in Kazakhstan since the collapse of the USSR, purchasing power decreased, and increased demand for cheap goods.
An even more severe crisis has occurred and is occurring in Uzbekistan, where, due to restrictions, there is an outflow of labor migrants from Russia, as well as internal unemployment. Latvia had a purchasing power crisis even before the pandemic, but during the pandemic, the price of food began to rise. All these factors increase the demand for cheap goods in these countries..
Kazakhstan showed huge growth, the reasons are clear enough. The negative growth in Belarus is connected, apparently, with government policy on coronavirus, when for a long time the authorities generally denied it due to their own sentiments, had nothing to do with the real situation in the country, while a significant part of the population believed this propaganda, despite the general destabilization of the political situation. Strong growth in Latvia can be justified by, that in the European Union, fears about the collapse of economies against the backdrop of a pandemic are quite strong.
Total number of Fix Price stores by country
| 2020 | Share in 2020 | 1п2020 | Fate in 1p2020 | 1п2021 | Fate in 1p2021 | Change for year | Change for 6 Months | |
|---|---|---|---|---|---|---|---|---|
| Russia | 3891 | 93,38% | 3589 | 95,12% | 4204 | 91,69% | 17,14% | 8,04% |
| Belarus | 152 | 3,65% | 116 | 3,07% | 180 | 3,93% | 55,17% | 18,42% |
| Kazakhstan | 89 | 2,14% | 52 | 1,38% | 138 | 3,01% | 165,38% | 55,06% |
| Uzbekistan | 15 | 0,36% | 0 | 0,00% | 38 | 0,83% | — | 153,33% |
| Latvia | 14 | 0,34% | 10 | 0,27% | 19 | 0,41% | 90,00% | 35,71% |
| Georgia | 4 | 0,10% | 4 | 0,11% | 4 | 0,09% | 0,00% | 0,00% |
| Kyrgyzstan | 2 | 0,05% | 2 | 0,05% | 2 | 0,04% | 0,00% | 0,00% |
| Total | 4167 | 100% | 3773 | 100% | 4585 | 100% | 21,52% | 10,03% |
Number of own Fix Price stores by country
| 2020 | Share in 2020 | 1п2020 | Fate in 1p2020 | 1п2021 | Fate in 1p2021 | Change for year | Change for 6 Months | |
|---|---|---|---|---|---|---|---|---|
| Russia | 3507 | 93,72% | 3251 | 96,67% | 3775 | 92,10% | 16,12% | 7,64% |
| Belarus | 143 | 3,82% | 67 | 1,99% | 171 | 4,17% | 155,22% | 19,58% |
| Kazakhstan | 77 | 2,06% | 45 | 1,34% | 115 | 2,81% | 155,56% | 49,35% |
| Uzbekistan | 15 | 0,40% | 0 | 0,00% | 38 | 0,93% | — | 153,33% |
| Total | 3742 | 100% | 3363 | 100% | 4099 | 100% | 21,89% | 9,54% |
Number of Fix Price franchise stores by country
| 2020 | Share in 2020 | 1п2020 | Fate in 1p2020 | 1п2021 | Fate in 1p2021 | Change for year | Change for 6 Months | |
|---|---|---|---|---|---|---|---|---|
| Kazakhstan | 12 | 2,82% | 7 | 1,71% | 23 | 4,73% | 228,57% | 91,67% |
| Latvia | 14 | 3,29% | 10 | 2,44% | 19 | 3,91% | 90,00% | 35,71% |
| Russia | 384 | 90,35% | 338 | 82,44% | 429 | 88,27% | 26,92% | 11,72% |
| Belarus | 9 | 2,12% | 49 | 11,95% | 9 | 1,85% | −81,63% | 0,00% |
| Georgia | 4 | 0,94% | 4 | 0,98% | 4 | 0,82% | 0,00% | 0,00% |
| Kyrgyzstan | 2 | 0,47% | 2 | 0,49% | 2 | 0,41% | 0,00% | 0,00% |
| Total | 425 | 100% | 410 | 100% | 486 | 100% | 18,54% | 14,35% |
How does Fix Price make money?
Products and services. Total in the assortment at the moment 5855 Goods, 80% assortment units costs less 100 rubles. Most non-food items are made in China, due to their low purchase cost, high business margins are achieved. Groceries make up just under a third of the assortment, they are all non-perishable, which also results in high margins..
Revenue structure. The share of retail and wholesale sales remains stable at the retailer. Retail sales growth was significantly higher, than from wholesale, how in 2020 year, and in the first half of the year 2021 of the year.
Wholesale sales at pick-up points in Russia are carried out in all constituent entities of the Federation, except for Chukotka Autonomous Okrug.
Revenue structure of the group of companies, million rubles
| 2019 | Share in 2019 | 2020 | Share in 2020 | The change | |
|---|---|---|---|---|---|
| Retail sales | 123,194 | 86,22% | 166,025 | 87,35% | 34,77% |
| Wholesale | 19,686 | 13,78% | 25,034 | 13,17% | 27,17% |
| Total | 142,88 | 100% | 190,059 | 100% | 33,02% |
Revenue structure of the group of companies for half a year, million rubles
| 1п2019 | Fate in 1p2019 | 1п2020 | Fate in 1p2020 | 1п2021 | Fate in 1p2021 | Change in 1H2021-1H2020 | |
|---|---|---|---|---|---|---|---|
| Retail sales | 55 482 | 86,57% | 71 506 | 86,29% | 93 026 | 87,66% | 30,10% |
| Wholesale | 8606 | 13,43% | 11 363 | 13,71% | 13 090 | 12,34% | 15,20% |
| Total | 64 088 | 100% | 82 869 | 100% | 106 116 | 100% | 28,05% |
Financial performance of Fix Price.
By reducing the purchasing power of the population, caused by the pandemic and the economic crisis, in 2020 The Company's operating performance was stable and there was a record increase in the average ticket. The decrease in traffic can be attributed to the overall decrease in store attendance in quarantine mode. Online sales in the Fix Price network are not developed, what can be considered the weak side of the group of companies.
At the same time, in 2020 The growth of financial indicators stalled slightly - this can be attributed to an increase in transportation costs and the cost of supplies from China, was in lockdown.
In the first half of the year 2021 year, there was a slight decrease in the growth of indicators - possibly, shoppers have moved to higher-end stores on a wave of optimism about the prospects for an easing pandemic crisis.
There is a significant increase in the number of stores, franchised, - just during the expansion to the CIS countries. In the first half of the year alone, their number increased by 18,54%. Coverage has grown in Russia itself: Fix Price stores are present in almost all regions, except for Chukotka and Magadan region, in the first half of the year, their number increased by 47.
Retail space for the first half of the year 2021 years also increased, at the same time, the growth in the area of franchised stores exceeds the growth in the area of own stores.
Operating indicators of the group of companies
| 2018 | 2019 | 2020 | |
|---|---|---|---|
| Revenue | 18,60% | 15,40% | 15,80% |
| Average check | 7,10% | 7,30% | 17,80% |
| Traffic | 10,70% | 7,60% | −1,70% |
Dynamics of financial indicators of a group of companies, million rubles
| 2018 | 2019 | The change | 2020 | The change | |
|---|---|---|---|---|---|
| EBITDA | 14 194 | 27 150 | 91,28% | 36 788 | 35,50% |
| Gross profit | 33 886 | 45 961 | 35,63% | 61 515 | 33,84% |
| Net profit | 9128 | 13 173 | 44,31% | 17 575 | 33,42% |
| Revenue | 108 724 | 142 880 | 31,42% | 190 059 | 33,02% |
| Gross margin | 31,20% | 32,20% | 3,21% | 32,40% | 0,62% |
Operating indicators in half-years
| 1п2019 | 1п2020 | 1п2021 | |
|---|---|---|---|
| Operating revenue | 18,6% | 13,3% | 11,9% |
| Traffic | 10,3% | −4,5% | 9% |
| Average check | 7,5% | 18,7% | 2,6% |
The dynamics of changes in the number of stores in recent years
| 2020 | Share in 2020 | 1п2020 | Fate in 1p2020 | 1п2021 | Fate in 1p2021 | Change for year | Change for 6 Months | |
|---|---|---|---|---|---|---|---|---|
| Stores managed by the company | 3742 | 89,80% | 3363 | 89,13% | 4099 | 89,40% | 21,89% | 9,54% |
| Franchise Stores | 425 | 10,20% | 410 | 10,87% | 486 | 10,60% | 18,54% | 14,35% |
| Total | 4167 | 100% | 3773 | 100% | 4585 | 100% | 21,52% | 10,03% |
Dynamics of changes in store area, м²
| 1п2020 | Fate in 1p2020 | 2020 | Share in 2020 | Change for 6 Months | 1п2021 | Fate in 1p2021 | Change for year | |
|---|---|---|---|---|---|---|---|---|
| Stores managed by the company | 712 317 | 88,85% | 797 352 | 89,64% | 10,05% | 877 518 | 89,19% | 23,19% |
| Franchise Stores | 89 393 | 11,15% | 92 174 | 10,36% | 15,43% | 106 401 | 10,81% | 19,03% |
| Total | 801 710 | 100% | 889 526 | 100% | 10,61% | 983 919 | 100% | 22,73% |
Plans
The group of companies continues to adapt to the pandemic situation, which is not going to stop. In the plans, first of all, expansion of the product range against the backdrop of a continuing decline in the purchasing power of the population.
Given this plan, can be predicted, that Fix Price will pay more attention to products while reducing the share of non-food products. Given the uncertainty of the prospects for the victory of medicine over the coronavirus and, respectively, uncertainty about the economic crisis, can be considered a positive moment. Maybe, such a strategy will lead to an increase in store traffic, because during a crisis, it is cheap goods and, first of all, products that are in demand.
The group of companies announced plans to increase the number of stores in the country to 15 thousand, without announcing a deadline, for which this indicator will be reached. For comparison: in the United States there are about 35 thousand fixed-price stores. Truth, an amendment should be made, that there is more population, than in Russia, - respectively, and a larger consumer market.
In an indirect form, the top management of the company declares, that the potential of the Russian market will be reached in 10-15 years, what can be considered a signal rather for long-term investors, than for medium-term and especially short-term.
Risks of Fix Price
Fix Price is practically a monopolist in the Russian market of fixed price stores, but competition cannot be completely ruled out.. In this case, it comes from another segment - hard discounters., the number of which in Russia is increasing. These shops, more like a warehouse, saving on everything, offer even lower prices, how Fix Price.
Naturally, under conditions of total austerity, hard discounters will flourish. If by September 2020 years worked in Russia 139 600 hard discounters, then due to uncertainty and a pandemic, their number will only increase.
At the same time, hard discounters have significantly lower operating costs., than fixed price stores: if the former are more like a hangar with goods, laid out in containers, with A4 price tags, then the latter are still full-fledged stores. Moreover, Russian retail giants are also entering the hard discount market, such as X5 Retail Group, launched a chain of stores "Chizhik".
Risk, typical for absolutely all discounters, and for Russian retail in general, — restriction of the influx of migrants in connection with the coronavirus. Even on the eve of the initial public offering, the company was forced to state, that he prefers to cooperate with foreign workers, because you can save on cheap labor.
Political risks include a possible further deterioration of Russia's relations with Western countries. Fix Price - offshore company, on which the sanctions will have an immediate effect. The deterioration of relations is fraught not only with a general difficulty in the company's business, but also by a reduction in the number of franchise stores opened in Latvia and Georgia - countries, with close ties to the US and Western Europe.
Fix Price Results
What worries you, that the company's shares began to fall on the stock exchange immediately after the initial offering and only relatively recently showed signs of recovery. In all probability, the matter is in the evaluation of the company according to the upper limit: shares were too expensive compared to its multiples.
The second factor is the main structure of demand for the company's shares. Most of it was provided by investors from the US and Britain, where in the first half of the year there was a decline in the stock market despite good macroeconomic indicators.
In addition, at the beginning of the year, there was some optimism in society about the results of the fight against coronavirus., as a result, investors could switch from stocks of "poor shops" to stocks of companies, growth-oriented. However, now this optimism has been replaced by pessimism.: there is a fourth wave of coronavirus.
Due to the constant emergence of new strains of coronavirus, the timing of the end of the economic crisis and the restoration of the purchasing power of the population is unclear., therefore discounters will be more popular.
Can be predicted, that in the second half of the year 2021 of the year the financial performance of the Fix Price chain of stores will be better, than in the first half, when the population had some hope for reducing the crisis. However, investors, even despite technical signs of a recovery in the dynamics of the company's shares, pay attention to the competitive environment: growth in the opening of new hard discounters can be considered the main risk factor for the group of companies.
In a situation with the prospects for continued growth in the shares of the Fix Price chain of stores, the catchphrase “the worse, all the better", which at different times was used by the Blancs, Dostoevsky, Chernyshevsky, Lenin, Trotsky, Mao, and in general all and sundry.
