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Good day and welcome to the Lenta First Half 2020 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Tim Post. Please go ahead.
Thank you, Olivia. Greetings from sunny St. Pete. Thank you all for taking the time to join us today for Lenta's first half 2020 auditor-reviewed consolidated IFRS financial results and our second quarter and first half 2020 operational results. My name is Tim Post, and I have Lenta's -- I am Lenta's new Head of Investor Relations. I look forward very much to speaking with and meeting many of you over the coming days, weeks and months. I would like to remind you that the company's results announcement made this morning is available on the Investor Relations website. On today's call, you will hear from Herman Tinga, Lenta's CEO, who will give you an overview of the company's operational performance during the first half; and Rud Pedersen, Lenta's CFO, who will then run through the financial highlights before we open the call to your questions. The prepared remarks will take about 20 minutes, and then we will have as much time as we need for your questions afterwards. With that, I will hand the floor over to Herman.
Thank you, Tim, and welcome, everybody. First, I would like to say thank you for joining us today and I hope you're all keeping safe and well during this difficult period. As you will have seen from our announcement this morning, we are pleased to report a strong performance during the first half of the year, with sales and profitability ahead of last year. Amongst other things, this encouraging performance has been supported by our highly effective marketing and customer communications, a shift in consumer behavior following the COVID-19 outbreak and our continued operational focus on cost control and driving efficiencies. We are pleased to report that during the first half of the year, Lenta achieved a 9.6% increase in retail sales. This was driven by a 12.6% increase in average ticket size, which was only partially offset by a 2.8% reduction in customer traffic. This sales performance, together with effective cost control and gross margin improvement, has resulted in an EBITDA margin of more than 10%. Before I discuss the key operational achievements for the first half of the year, I would like first to give an overview of the company's response to COVID-19. Pandemic created a truly unprecedented trading environment for Lenta over the recent months. I would like to begin by saying how proud I am of our organization, and indeed the Russian food industry as a whole has responded to this during this period. As announced in our quarter 1 results, Lenta was very quick to anticipate the potential impact of the emerging prices. As a result, we have put in place several measures to mitigate as many of the challenges as we could. Perhaps most importantly, we quickly established a business-wide COVID-19 response team of senior representatives from across Lenta. This team has been central to ensuring Lenta has been able to respond effectively to the challenges presented by the pandemic. In addition, as the Russian member of EMD, the leading European retail purchase alliance, we were able to gain important early insights into the actions taken by our peers in South Korea, Italy, Spain and France. We were able to use these lessons to ensure that our response was agile and effective as it could be. We have had 2 clear priorities during the COVID-19 crisis. First, we have been focused on ensuring the safety of our customers and colleagues. In early March, we were quick to leverage our sourcing capabilities and relationships to ensure we had enough personal protective equipment for our employees. This enabled us to protect employees and make customers feel safe throughout the crisis, whilst many other businesses struggled to source the required equipment. We also introduced several in-store measures to ensure that our customers have continued to feel safe when shopping at Lenta. These included increased sanitation and cleaning, clear social distancing protocols and designated shopping time for vulnerable customers. We were also one of first retailers in Russia to install protective screens between store staff and customers to increase their safety. Our second major priority was to manage our supply chain and maintain outstanding product availability for our customers. Our early reaction to the pandemic enables Lenta to move quickly and stock up on key items to ensure we could continue to meet rising customer demand. We are pleased to report that with the support of collaboration of our suppliers, we have been able to manage the rapid growth in demand during the lockdown period. This has been critical for consumers who have been reluctant to shopping more than online. It has been a key driver behind our ability to increase average ticket size and to ultimately grow our like-for-like sales. And in addition to these operational efforts, we are also proud of the way that Lenta stepped up to serve Russian communities during the pandemic. A few examples. Amongst numerous other initiatives, we have been proud to offer discounts to those working in medical professions as well as providing easier access and discounted prices for elderly and vulnerable customers. To acknowledge the hard work and commitment of our employees throughout this challenging period, we offered increased salaries for our frontline colleagues during March, April and May. We firmly believe that this was the right thing to do to recognize their amazing efforts. Our store colleagues as well as other frontline workers in our warehouses and transportation network are truly outstanding throughout this challenging period. On behalf of the management team, I would like to take this opportunity to thank my colleagues across the business for their hard work and dedication. We feel sales is all about people business, and our colleagues truly are our greatest asset. There is no doubt that the pandemic has had a significant impact on our shopping behavior. Lenta has proven resilient and well positioned to serve this new customer behavior. Our like-for-like sales during the second quarter were up more than 10% year-on-year. This was driven by a significant 24% increase in average ticket as customers shifted towards bigger weekly shopping trips. This growth more than offset a traffic reduction of 11% as a result of lockdown restrictions on people's movement. With Lenta's broad offer, supply chain continuity, product mix across food and nonfood and the unique location of our hypermarkets in well-populated urban areas, we were ideally placed to serve this change in customer behavior towards bigger basket shopping. Our nonfood offer performed particularly well as nonessential shops were first forced to close. This also had a beneficial impact on our gross margin. Lenta's hypermarkets posted in the second quarter like-for-like retail sales growth of 10%, with an average ticket size up more than 23% and customer traffic down around 11%. We are pleased to report that our hypermarkets and shopping centers managed to deliver like-for-like sales growth despite the closure of other shops in these malls. Our supermarket format delivered a particularly strong performance in the second quarter as well, with like-for-like sales up 11.6%. This was driven by an almost 30% increase in average ticket size, which was partially offset by a 14% decrease in customer traffic. This strong second quarter performance contributed to a very pleasing 7.1% like-for-like sales increasing during the first half of the year. As well as outstanding product availability and customer choice, another key driver of our performance throughout the first half of the year has been our effective marketing investment. Even before COVID-19, our marketing activity helped to support 3.4% increase in traffic and a 4% increase in like-for-like sales during the first quarter. As soon as COVID-19 began to impact, we increased our targeted marketing communications with a focus on providing relevant offers to our most loyal customers. We also shifted our investments away from our home and radio channels and increased our presence on television, where we have been the #1 grocer in terms of share of voice over the recent months. I'm pleased to report that this marketing activity has resulted in excellent customer retention and contributed to increases in our share of wallet amongst Lenta's most loyal customer groups. Another major strategic highlight during the first half year has been the growth in our developing online offer. We continue to see online sales as a major and very exciting long-term opportunity for the company. We believe we have the unique opportunity to leverage our existing store infrastructure to serve a growing number of online customers in a highly efficient way. We are very pleased to report that an increase in online order volumes in the first half year was 450%. This resulted in an impressive increase in online sales of [ 324% ], albeit against a small prior-year base. This encouraging growth reflects Lenta's increased focus on the sales channel as well as increased demand for online shopping across our market as a whole. During the period, we continued to develop our express delivery service, Lentochka. The pilot project started at the end of 2019. We are very pleased with the performance so far, and we are now extending our reach across Moscow. And in addition, we launched this offering in St. Petersburg in recent weeks, and we aim to expand our coverage in the city over the coming weeks and months. Also introducing a Click and Collect service to increase customer convenience, and this is currently operational in 7 cities. Lenta also continue to develop partnerships with more than 20 delivery companies to fulfill online orders directly from Lenta's extensive store network. As a result of this expansion, during the first half year, we served online customers across 60 cities, which is up significantly from the just 15 cities in the prior year. We recently conducted an analyzer of our online performance in one major city, which shows that approximately 50% of our online customers were new to Lenta. Of the other 50%, around half of these were customers who have not shopped at Lenta for more than a year. Of the remaining customers, the vast majority were existing Lenta customers who are increasing their spend through our online channel. This has not only indicated to us that online channel can be an important driver of both customer acquisition and customer lifetime value, but it also showed that any sales cannibalization from our existing stores is very limited. So this data captures an increasing confidence that online will be a very important customer acquisition and profitable sales channel moving forward. So far, from my point, a brief overview of our operational performance during the first half. And with that, I would like to hand over to Rud to provide more detail on the financial results.
Thank you very much, Herman, and good day to everyone. As Herman mentioned, we've delivered a very strong performance in the first half with EBITDA and cash flow significantly ahead of last year. In particular, we made solid progress on our 3 priorities for 2020. Just to recap, we are, as number one, targeting to improve our sales performance to deliver strong like-for-like. Secondly, we focused on improved efficiency across our business. And thirdly, we want to lower our external debt and improve our leverage. With that in mind, let me walk you through the first half of 2020, and let me start by talking a little bit about our sales performance. As Herman discussed, we increased our total sales by 8.9% in the first half of 2020. This was mainly driven by a 9.6% increase in our retail sales partly offset by a 19.4% reduction in our home sales. Bear in mind, though, that wholesales only represent 1.6% of total sales. Hypermarket sales grew by 9.3%, while our supermarket sales grew by 12.6% as Lenta's reputation for price and quality, broad offer and convenient locations prove well positioned to serve changed customer behaviors. Looking at like-for-like sales. We saw significant growth of 10.1% in the second quarter. This supported a 7.1% increase in the first half 2020. This performance was achieved despite the reduction in customer traffic as Lenta became the one-stop-shop location for our loyal customers. Secondly, we have demonstrated a positive financial impact from the focus on efficiency. Our gross margin increased to 23.29% in the first half of 2020. That's an improvement of 77 basis points year-on-year. A key driver behind this has been lower shrinkage, which was down by 56 basis points, obviously helped by higher sales and inventory turns, but mainly the improvement came from better ways of working. We were also able to significantly reduce our SG&A cost relative to sales. With SG&A at 17.6% to sales in the first half of 2020, we are one of, if not the most, efficient operator in Russian food retail. While our cost-to-sales ratio benefited from improved operating leverage due to solid sales growth, we also maintained our focus on tight cost control throughout the period. Costs relating to our response to COVID-19 amounted to a little more than RUB 800 million. Mostly, it consisted of increased payment to store staff, procurement of PPE and store sanitation. However, net of COVID costs, our costs have remained flat year-on-year in absolute terms. Through efficiencies, we have generated an offset to both inflation and costs associated with new stores opened last year. Having said that, when it comes to efficiencies, we will never be satisfied. And as we continue to seek for opportunities, we will maintain our focus on efficiency going forward. And finally, we generated positive free cash flow in the first half of 2020, approximately RUB 1.5 billion. It came from increased EBITDA, lower CapEx and more efficient working capital. This builds on our success in 2019 when we achieved positive free cash flow for the first time in Lenta's history. Our CapEx in the first half of 2020 was down considerably year-on-year, reflecting a more prudent approach in light of COVID-19. Last year, we constructed 2 of 3 new distribution centers, while in the first half of 2020, we had only one under construction. We've also seen a phasing of stores that currently is under construction. This partly is driven by the construction sites being closed during the lockdown as well as delays in obtaining the required permissions and approval. Part of this CapEx will be phased into the second half of 2020. I'd like to reiterate that we continue to maintain our strict 20% return threshold for investment projects. A major highlight has been the important progress made on deleveraging. We achieved a significant reduction in Lenta's net debt-to-EBITDA ratio, which now stands at 1.9. I'd like to highlight that we have reduced our cost of capital through refinancing and renegotiating credit lines, not least in light of the reduction of the key rate by the Russian Central Bank. Our net interest expense represented RUB 3.4 billion in the first half of 2020 a 80 basis point decrease year-on-year from 2.35% as a percentage of sales in the first half of 2019 to 1.55% in the first half of 2020. As we own approximately 75% of our hypermarkets, this gives us a real competitive advantage. We are benefiting from our lower bank financing costs, reflecting lower interest rates and reduced debt. This contrasts other major players in the industry who typically rent their stores and may experience inflationary pressure on rents. I'll just finish with a short word on Lenta's redomiciliation. Last week, on July 22, at an Extraordinary General Meeting, our shareholders approved the proposed redomiciliation of the company from the Republic of Cyprus to the Russian Federation. This move benefits the company in a couple of different ways. A simplified and more reliable tax structure will help mitigate further taxation risk in Russia in connection with initiatives aimed at a stricter approach to base erosion and profit shifting by Russian legislators and authorities; a potential application of a 5% withholding tax rate on dividends to non-Russian shareholders; exemption of profits of controlled foreign companies and capital gains on sale of Russian and foreign subsidiaries; and finally, and subject to the court's decision on capital allocation, our redomiciliation provides a suitable holding structure to facilitate a potential payment of dividends in the future. And with that, I'll now hand back to Herman to discuss our prospects moving forward. Herman, over to you.
Yes. Thank you, Rud. Yes, I will finish off by briefly discussing the outlook. Whilst we are very encouraged by Lenta's strong performance in the first half, we remain cautious about the significant macroeconomic uncertainties as we move into the second half of the year. It is difficult to predict how the COVID-19 situation will impact consumers' shopping behaviors in the longer term. However, we believe the strength of the Lenta customer proposition has been demonstrated by the company's ability across formats to serve customer needs during this period. In July, so far, we have seen moderate increases in customer traffic, although this has been partly offset by some softening in the average ticket size as customers began to increase their frequency of store visits following the period of lockdown. Moving forward, Lenta will continue to focus on developing its leading position in the hypermarket segment, where the company sees opportunities to further increase market share and enhance profitability through operational excellence. The performance of the group's supermarket has been very encouraging, reflecting the success of Lenta's turnaround efforts during the last 2 years. We continue to see further opportunities in this segment. And in addition, the company has achieved standout growth in its online segment. And we are excited by the opportunities to further develop this increasingly important sales channel. We continue to believe that there is a significant long-term growth opportunities for Lenta, and we look forward to providing a more comprehensive update of the company's strategy later this year. Thank you for listening to our overview of Lenta's second quarter and half year results. And with that, I return the call to Tim.
Thank you, Herman, and thank you, Rud. Operator, Olivia, we are now ready to take questions.
[Operator Instructions] Our first question comes from Elena Jouronova with JPMorgan Moscow.
First of all, congratulations with fantastic results. I have 3 questions, please. So firstly, I guess, a question to Herman at this stage. Is it possible to strip out the different effects on your like-for-like? So first and foremost, the on-shelf inflation, number of items in the basket versus mix effects to try and understand what was the main contributor to the average like-for-like basket increase.
Yes. Thank you, Elena, for the question. I don't have the exact data at hand at the moment. But let's say, maybe Rud can maybe add some information. But what we have seen is this decline in traffic, and we saw a higher basket. So we saw also basically the increase in varied numbers of items in a basket as well in hypermarkets as in supermarkets. And especially with the last one, we are quite happy because last year, we changed the assortment. We increased the offering of fresh in supermarkets and we increased the total choice and offer, and we see that now turning back in higher SKUs in basket. But I don't have the exact numbers at hand. So maybe Rud can help there, Elena.
Yes. I can complement that, Herman. In the first half of 2020, we actually experienced on-shelf deflation in Lenta. So inflation didn't help on our like-for-like growth in that respect. If we look at it from a category point of view, we experienced more or less the same growth across all categories, although we did see a slightly better performance in fresh.
That's clear. And are you basically seeing any trends in trading down or trading up? And also, if you could maybe give us the like-for-like sales growth breakdown for your food assortment versus nonfood because I'm guessing that nonfood must have contributed a big portion to your like-for-like sales increase.
Do you want me to take that?
Yes. Can you take that?
Sorry, go ahead.
Yes. You can answer the question, maybe more in detail. Let me only say something about nonfood, and then I can hand over to Rud for maybe data. Of course, where then most of the other retailers in nonfood were closed, we saw a big uplift in our nonfood sales, especially, let's say, in seasonal items, sporting goods, toys for children when they were at home. So this was a big increase in sales as well. So that's absolutely true. But we saw also good dynamics, in the beginning, a lot in dry food, with the stock-up effect of toilet paper, [indiscernible] and all these other items but later also in fresh a lot. Maybe you can complement that.
Yes. Certainly. If we look at it, for the half year, our nonfood grew in line with the overall like-for-like. So despite the fact that we've had the benefit of other nonfood stores being forced to close, when you look at it from a half year point of view, nonfood grew in line with total like-for-like. If you look at it for quarter 2, we experienced approximately twice the growth of our nonfood versus other categories. And as Herman mentioned, in specific categories where -- because we were able to keep our stores open, we benefited.
Yes. That's clear. And my final question is about your current thoughts on capital allocation. Now that your leverage is manageable 1.9x net debt-to-EBITDA, any thoughts on when you could potentially hear about Lenta starting to pay dividend?
Yes. Just realizing that I think I forgot to answer your question on trading up or trading down. We experienced that the customers who came to our store in both Q2 and the first half of the year actually trading up. So we didn't experience any trading down. In terms of capital allocation, I think we will continue to keep our focus on deleveraging. And likely, I would expect the Board to be ready to start discussing potential dividends on the back of 2020 results. So in the middle of next year.
We will next go to Ali Birkby with Citi.
Congratulations on your results. Two questions, if I may. So firstly, on your long-term online strategy. Can you please outline the different economics and profitability between your own express delivery service, Click and Collect and then also through your partnership network? And then secondly, in your outlook statement, you highlight the risks of the weaker Russian consumer into the second half. How do you expect to manage this challenge across your format and through your customer offer to ensure sustainability in your like-for-like growth?
All right. So if I understood the first question correct, it was about the -- what the difference in the 2 models, between online, working through partners and our Click and Collect. Obviously, one of the difference is that through Click and Collect, we don't have any costs associated with the last mile. So everything else being equal, we have a higher gross margin on Click and Collect than we will have on online where we are operating through partners. Albeit currently, if we look at it on the part of our business which is operating through partners, we are also making a profit for the simple reason that the incentive we give to our partners is not bigger than the margin that we are making on the sale. In terms of the second question on potentially weak customer demand in the second half, we believe it's one of the benefits of Lenta that through our broad offer, we cater both to entry point -- entry price points as well as slightly more expensive products. So the Russian consumer will have the opportunity to migrate towards lower price points even within the assortment that we have. We may need to adjust the relative share on shelf between higher price points and lower price points. And this is part of the considerations we have as we monitor development in the second half.
We will move to our next question coming from Anna Bezhanishvili with Aton.
Congrats on great results. So my question is, could you please provide some updates on like-for-like dynamics following the easing of lockdown restrictions? What trends do you see now? And what is the size of traffic recovery?
Let me answer that question about July, what we see in July, that actually we see positive dynamics in traffic. So actually, now it's a plus where the previous 3 months, we saw a minus in traffic as we reported. But we see an easing in the average invoice. It's a little bit less higher than it was before. But still, on the total, we are in double-digit like-for-like sales.
We will next go to our question from Alexey Krivoshapko with Prosperity.
I would like to ask you, if possible, about the gross margin expansion, which we saw in first half. Is it possible to [indiscernible] further risk, if that's possible.
It's not the [indiscernible] really disclosed on 56 basis points out of the 77 basis points that we saw in the first half is driven by shrinkage. I don't think we are prepared to give more detail.
Okay. That is fine. I guess another question is on operating leverage. Can you tell us about what was the wage increase inflation or deflation, which a regular Lenta employees have in first half?
I'm not quite sure I understand what you mean in terms of salary?
Well, in terms of salaries -- yes, salary indexation.
Okay. We -- in the first half, we've not done or implemented any broad salary indexation across the organization. We have a tradition of doing salary indexation in the second half of the year. And between those salary indexations, we basically do it on a case-by-case basis.
Okay. And I guess my last question is on funding costs. If you were to basically borrow today or this week or this month, what would be your kind of incremental spot cost of debt?
Very good question. I think we would be somewhere close to the 6% mark.
Clear. And sorry, final clarification question, like on the losses of shrinkage level. Basically, what you've seen in first half 2020, is it the long-term target level? Or are you still a little bit above that level?
I think we still have opportunities in shrinkage. And certainly, I think it's one of the areas we continuously will be seeking improvements on, equal to any other area of opportunity across our business.
Okay. That was clear. Congratulations with the strong results.
Thank you, Alexey.
Next, we will move to [ Kasina Bagdenova ] with [ APM ].
First of all, congratulations on your terrific results. And I'd like to ask one question. Could you give some more insights on the strategy update, in particular, which are the main focuses of the strategy? And maybe you also can give some details on how you're going to develop your online business.
Yes. Thank you for the question. Yes, we can actually not update you on all the details of the strategy as we will come back to that. But let me just say a few things. First of all, if I look at the discussions we have with our main shareholder, Severgroup and Mr. Mordashov, it is very clear that there's a high ambition to take Lenta forward in retail in Russia. So we will come up with some big plans. Also as Lenta management, we also, of course, are confident with the current performance, that we have a great platform not only in the infrastructure of the company, but also with a very solid, healthy financial base to grow further. These plans are now being formulated in detail. We're still working on scenarios. But I can tell you that online is part of our future plan.
Next, we will go to Kirill Panarin with Renaissance Capital.
Two questions from me, please. Firstly, can you quantify any one-off impact on your gross margin in the first half? In particular, I'm thinking about maybe your pricing strategy was different during the lockdown and you were less aggressive with promotional activity. Then I think you also mentioned that nonfood performed very well during the second quarter and that shrinkage was helped by good demand. So could you quantify what would be the gross margin dynamics, excluding this one-off effect, please?
Yes. I think for the first half, nonfood performed in line with the overall category. So looking at the first half, there's little impact from the nonfood on our gross margin. In terms of shrinkage, there is an ongoing effort to continue to improve and certainly to keep the current level that we target on ourselves in terms of making the efficiency that we've achieved that are sustainable. And then I cannot remember the last element you were asking, so if you could a clarify that again.
Yes. Your pricing strategy and promotional activity.
In terms of our pricing strategy, April and May were similar to the first quarter, higher than comparable period for 2019. Only in June that we see an easing of pro forma pressure. Changing -- for the second quarter, our overall [indiscernible] was slightly higher than same period last year.
Okay. That's great. And just one more question on SG&A dynamics. I think it was pretty impressive, flat year-on-year in the first half. Do you think this trend can be sustained into the second half? And where do you see more scope for further optimization in your cost base? That's it.
I think we may find a little bit of a pressure on our cost base in the second half simply because of the economic situation, albeit target will still be to continue to see the improvements we made become more sustainable. I believe we have opportunities like any other good company across all lines in our P&L. In the first half, we delivered as per our plans on shrinkage. And for other lines in our business, we are looking across store operations, supply chain, head office, consumables, et cetera, ultimately targeting to continue to improve our efficiency.
Okay. Great. Congratulations on strong results.
Thank you.
Thank you.
We will take our next question from Marat Ibragimov with Gazprombank.
My congratulations to your fantastic results. If you look at the supermarket versus hypermarket performance, in second quarter, hypermarkets accelerated top line growth, retail sales. How would you expect -- because normally, we would expect that hypermarkets has reallocated at some distance from residential areas, we should underperform to supermarkets, which is are, in fact, proximity stores. Can you please comment on this, why hypermarkets accelerated in second quarter?
Yes. Let me answer that question. Thank you. Yes, let's say, hypermarkets -- there are different type of hypermarkets. Typically, about Lenta is that we have urban hypermarkets, as we call it internal. So they are in catchment areas where people live. So you don't need to get into a car and drive, let's say, 0.5 hour to get there. And another element is, I think, the relevant offer we have. So it's not about having the largest offer in, let's say, 15,000 square meter stores. We have averaged 5,000 square meter. And we spend a lot of time with our teams, let's say, looking at customer data, what they exactly need as an offer. And we invested a lot in our offering in fresh and categories that is very hard to copy by some other retail. So I think the mix of those elements make the result at the moment of the hypermarket.
Okay. And next question, you partly gained traffic. I guess this is both new customers and also those who didn't visit Lenta for somewhere. In general, whom are you winning your customers from? Or are these independent stand-alone stores? Or are there midsized retailers who are losing to you their traffic?
Are you referring to online with your question?
Was the question about online? Or was it about...
No. Off-line, off-line. Off-line is also gaining in terms of like-for-like, I mean.
Yes. Yes. Let's say, we have some use case data for that. What we see in the migration reports is that we win customers actually from many other hypermarkets in the market. So more people are choosing for Lenta instead of other big-box retailers. And we also see that we win from, let's say, less bigger retail chains in the regions specifically. So that's basically what we see.
Okay. On your online business, you developed your own delivery services, but I didn't hear that you cooperated with Utkonos, which one could have expected you to deal with because it's also part of Severgroup. So you're...
Do you want me to answer that question?
Yes.
So what we did at the moment, we agreed with Utkonos that we work for the moment on synergies in back office. So we do share, let's say, buying synergies. We do share technology. So for example, for our experiment that we started, and that's now rolled out, Lentochka that we started in Moscow, we use the technology of Utkonos. So we work closely together. But we see that there's a different shopping needs in the market which we addressed differently. So for the moment, we have a separate Lenta offer with a Lenta assortment, and Utkonos have their own offer. And we will find out in the future how that works, how it works. And for the moment, we decide to work separate on separate customer proposition.
If I may add to that, Herman. I think an important difference as well is the type of delivering or shopping relations that we cover. In Lenta, we typically cover same-day delivery or delivery within from 0.5 hour to 4 hours; whereas Utkonos is focused on same-day delivery if you place order before noon or otherwise, next-day delivery. And we typically deliver to catchment areas very close to where our stores are located, and hence, enabling a much faster delivery of orders through couriers that are not driving around in delivery vans. And as such, it's not -- there's not an easy and obvious benefit from combining our online operations.
Yes. To this question on this Lenta cooperation with Utkonos, have you managed to achieve some synergy from merger with Utkonos from calculation, not only technical database but also from combining your procurement services? Have you managed to reduce your supply -- your procurement costs, thanks to merger with Utkonos?
Yes. We're not merged with Utkonos, by the way. But we have, let's say, colloquial collaboration, which is possible as soon as the shareholder owns more than 50% of both companies. We actually did a whole exercise on joint buying. And at the moment, mainly Utkonos is benefiting from, let's say, the Lenta trading terms. So as you will understand, our size is so big that we don't benefit from the trading terms at Lenta, but Utkonos does benefit from Lenta trading terms.
We will go through our next question from Henrik Herbst with Morgan Stanley.
Yes. I just wanted to follow up on 2 things you mentioned. I think, firstly, the comment about seeing trading up, if you could maybe please explain what you think is driving that? If you think it's the market's phenomenon or if it's more just Lenta-related? And then I didn't really hear what you said on July trading. I think you said July trading was pretty strong as well, but if you could just sort of clarify I guess, in particular, whether it's accelerating versus the like-for-like trends you're seeing in June.
All right. Let me start by the trend of the -- we did see customers both in the first half and the second half trading up. I think there are a couple of key drivers behind that. Albeit, as I mentioned in June, we saw our promo shares slightly below last year. It was still higher in April and in May, and as such, grew the cooperation we had with suppliers. We've been able to make very good offers to customers, ultimately, giving them access at times to more expensive products on promotion. I think that's one element. And this we've seen throughout the Q1 as well. The second element, I believe, is as HoReCa was closed down, many people or many customers likely spent that part of their household budget on pampering themselves. So when they came to our stores, they probably bought products that were slightly more expensive than they would normally have because they're spending the money on pampering themselves at home rather than going out to dine with family and friends. In terms of July, what we've seen in July is traffic returning back towards same level as last year. While at the same time, we have seen the growth of the average baskets ease overall and in combination, delivering like-for-like sales growth in line with what we've seen in the second quarter.
That concludes today's question-and-answer session. Mr. Post, at this time, I will turn the conference back to you for any additional or closing remarks.
Thank you, operator. On behalf of all of us here at Lenta, we would like to thank you for dialing in today to this conference call and for your questions. If anyone should have any additional questions, please do not hesitate to contact me via e-mail or mobile telephone. Thank you all and goodbye.
Thank you.
Thanks a lot. Bye.
This concludes today's conference. All participants may now disconnect.