Retailer Detsky Mir posted a net loss of RUB 517 mln in 1Q 2022 compared to a profit of RUB 1.313 bln in 1Q 2021 (IAS 17 figures).

EBITDA decreased by 9.8% to RUB 2.553 billion. The profitability of this indicator amounted to 6.7% against 7.9% a year earlier, the retailer said in a statement.

Adjusted EBITDA declined 14.9% to 2.641 billion rubles, with adjusted EBITDA margin falling to 7% from 8.7% a year ago.

Detsky Mir (MCX:DSKY)’s adjusted pre-tax profit fell 44.9% to RUB 1.144 billion in January-March.

Gross profit rose 8.3% to 11.421 billion rubles. Gross margin amounted to 30.2% against 29.6% a year earlier.

Detsky Mir’s revenue in Q1 increased by 6.1% to 37.85 billion rubles.

The gross margin growth was due to an increase in the share of sales of own brands and direct imported goods, as well as effective pricing management, the retailer noted. Among the main drivers of the EBITDA decline were a decrease in traffic amid continued restrictions on store operations in January and February due to COVID-19, as well as a “market-wide decline in customer demand amid high economic uncertainty.” In addition, key operating cost inflation, which outpaced sales growth, put pressure on the figure.

In addition, in Q1, the company incurred a RUB 1.5 billion foreign exchange loss compared to a RUB 56 million loss a year earlier. The main reason for the foreign exchange loss was the revaluation of accounts payable to suppliers.

“In the first quarter, our main focus was to ensure smooth operations, maintain a wide and affordable range of products on store shelves and in online channels, and optimize operating costs. “We are doing our best to cope with the current challenges,” said Detsky Mir CEO Maria Davydova (her words quoted in the report).

Despite “challenging” macroeconomic conditions, Detsky Mir remains focused on further market consolidation, she added.

“Detsky Mir” – the largest in the Russian Federation specialized retailer in the market of children’s goods. In addition to Russia, the company is represented in Kazakhstan and Belarus. As of the end of March, the group had 1.125 thousand stores, including 851 Detsky Mir stores in Russia.