Message from the CEO

475A4325.jpg Dear investors,

Obuv Rossii is one of the few shoe retailers in Russia that has successfully implemented a diversification strategy, developing distinct brands positioned to targeted groups of regular customers. Our company is a leader in the mid-price shoe market and one of the top two shoe companies Russia, in no small part due to our successful implementation of this strategy over the past ten years. This strategy has passed the test of time: it helped us to pass successfully through the crisis of 2008-2009 as well as through the more recent market downturn. 

Russia’s economic recession in 2015 affected demand for shoes, however, by 2016 the market had stabilised and Obuv Rossii has thrived: 2016 revenue increased by 9% year-on-year to RUB 10 billion, and we delivered a net profit of RUB 1.2 bln. Obuv Rossii’s 2016 EBITDA margin was 25.5%. Our retail operations also showed qualitative growth during the year: like-for-like sales increased by 9.4% year-on-year, while retail sales of shoes grew by 10% year-on-year.

Obuv Rossii’s successful model consists of several business lines that collectively produce a synergetic effect. The core of our business is retail, which includes both traditional and online sales channels. Development of our financial services offering is a key element of our retail strategy: it makes it possible for us to build long-term relationships with customers and to increase our revenue and profit. We also have manufacturing operations, which enable us to develop and offer unique collections of footwear, to test and introduce new technologies and materials, to enter new markets, to minimise currency and import risks, and to reduce logistics costs.

Modern stores are not just shelves and products; they are multi-functional centres that offer a whole array of services for customers. The lines between retail formats are getting blurred and our retail outlets include shoe salons, collection points for online orders, and service centres where customers can apply for loans, pay for services, make instalment payments, buy insurance, etc. For us, these additional services represent a non-standard loyalty programme that enables Obuv Rossii to further develop long-lasting relations with its customers.  

The years ahead hold the promise of significant growth: according to Discovery Research Group forecasts, in 2017-2022 Russia’s shoe market is expected to grow at an average annual rate of 6-7% in volume terms and 9-11% in monetary terms. 

We have already established a successful track record in the capital markets, as the first and only Russian shoe retailer to issue bonds. This is an important part of our financial strategy, which helps to diversify our loan portfolio, increase the share of long-term liabilities and enhance the company's public image among investors. Since 2011, we have placed bonds for a total amount of RUB 6.2 billion. Most recently, we became the first issuer in Moscow Exchange’s Growth Sector – a new trading segment for small- and mid-cap issuers. We remain committed to working together our existing and future investors.

Looking forward, we are very well placed to continue our growth, and to improve our financial performance. Our strategic goal for the next five years is to significantly increase our market share and become the leader in the Russian footwear market by brand awareness, retail operations, profitability, retail IT infrastructure and level of omni-channel development.

Sincerely, 
Anton Titov  
Director of Obuv Rossii Group


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