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Good day and welcome to the Lenta Third Quarter 2020 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tim Post. Please go ahead, sir.
Thank you, Katie, and greetings from sunny St. Pete. Thank you all for taking the time to join us today for the Lenta 2020 Third Quarter Operational Results Conference Call. Today, you will hear from Vladimir Sorokin, our new CEO, who will briefly introduce himself and then give you an overview of his first 6 weeks at Lenta. And then Rud Pedersen, Lenta's CFO, will discuss third quarter market trends and Lenta's operational highlights before we open the call up to your questions. The prepared remarks will take about 15 minutes, and then we will take as much time as we need for your questions. With that, I will hand the floor over to Vladimir.
Thank you, Tim, and thank you to everyone who has joined our conference call. I'm delighted to speak to you today for the first time as the CEO of Lenta. I would like to take this opportunity to introduce myself, to say a few words about my first impression of Lenta and to share some thoughts about food retail. I have worked in the retail and FMCG sector for many years. Food retail is a segment I know the best, having served as the General Director of X5 Perekrestok Supermarkets and also as the Deputy CEO of Magnit. The Russian food retail sector is an extremely competitive marketplace. As a result, it has produced a number of world-class companies. The food retail market is a sector that represents new challenges every day, but also many new opportunities. So when I was approached to take up the leadership role here at Lenta, I was very excited. And I am grateful to the Board of Directors for their confidence in me. We will be setting some ambitious goals for Lenta, and I look forward to working with our great team to deliver this result. In the 6 weeks since I joined Lenta, I have been getting to know the company and my new colleagues better. Due to the COVID situation, unfortunately, I have not been able to travel as much as normal, but I have still managed to visit a few of our regional offices. And I have to admit, I have been very impressed by what I have seen and the people I have met. As you know, Lenta's cost trends, as the leading big-box retail in Russia, is based on deep understanding of the key factors that affect our customer choices every day. This includes having an attractive and relevant assortment, a commitment to high-quality standards and a culture of outstanding service. [ Plus ], we leverage big data and analytics to gain deep insight into customer preferences and habits. And a couple of words on online business. I believe that online food retail also represents [Technical Difficulty] of opportunity for Lenta if we, of course, done it smartly and efficiently. In fact, Lenta is uniquely positioned to potentially become one of the dominant players in Russian online food retail over the next couple of years. Our extensive store network in 88 cities and huge range of over 25,000 SKU means that we can launch online food retail without having to invest CapEx in dark stores. Our stores themselves can serve this role. I will discuss our model of online retailing in more detail in our new strategic plan. On this topic, I appreciate that the new strategic plan has been long awaited but understandably, our main focus since March has been on steering Lenta through unpredictable time period and making sure that our customers have safe and uninterrupted access to our stores. I strongly believe that there are a number of new strategic opportunities that Lenta could pursue over the next few years. For us, we are very much looking forward to sharing the details of new strategic plan with you all early next year. Finally, if you have been following our regulatory filing, you will have seen that I recently purchased Lenta GDRs on the open market. This investment is an indication of my strong belief in Lenta's future success and my personal commitment to the company and to all its stakeholders. Thank you once again for joining our call today, and I look forward to having more conversations with you in the future.With that, I will pass the floor to our CFO, Rud Pedersen.
Thank you, Vladimir, and good day to everyone. I'd like to start by addressing the topic of COVID-19. Obviously, it's had a big impact on everyone's lives. Food retailers, in particularly, have had to make some major adjustments in order to continue to serve customers reliably and safely. We, at Lenta, are extremely proud that our employees have been able to adjust and adapt very quickly and very efficiently. Safety for our customers and our employees has been and will remain our first priority. As you might expect, COVID-19 has led to some significant changes in consumer behavior here in Russia. People have preferred to eat meals at home rather than out of home. In our view, this trend may continue for at least several more months, and it could potentially persist for some time after COVID-19 is over. More calories are consumed at home and, as a consequence, it has a positive impact on sales in our stores. Similar impact may arise from more people working from home and, hence, not eating at work. Our hypermarkets have been quite appealing to consumers as a one-stop shop with both food and nonfood products for sale under one roof. The large floor space of our hypermarket also reduces the number of closed social interactions and, hence, accommodates for safer shopping. In July, we still saw similar trading dynamics to those that we had seen in the second quarter lockdown months, and our sales during July reflect this reality. However, the extra appeal of hypermarkets as a one-stop shop decreased in August and September. This happened as customers, in general, appear to have taken a more relaxed approach to shopping. This fact can be seen in the sales figures for those 2 months. With COVID-19 cases unfortunately again on the rise, those consumer behaviors that we saw in the second quarter could return during the fourth quarter. Our October sales trend seems to indicate that our customers' behavior may be reverting back to that of Q2. While there's not a lot of visibility on the rest of the fourth quarter, we remain committed to operational excellence and to providing a safe place for our customers to shop and for our employees to go to work. With respect to consumer shopping trends, we've seen that some of our customers are trading up. This may be due to the fact that other consumer categories like travel, entertainment have not yet fully recovered. We see some consumers continuing to treat themselves by buying more expensive food items. At the same time, there are also a small number of our customers who are trying to save as much as possible and, therefore, we see them trade down. However, the impact of this trading down is less than that of trading up. As the 2 contrasting trends demonstrate, there is currently a lot of volatility and constantly changing consumer behaviors taking place. With all this uncertainty in the third quarter, we also observed lower-than-usual back-to-school demand with sales volume lower than in previous years. Some of our customers were trading down, and they bought school supplies in the lower P1 and P2 price segment. With respect to promo, there has recent been some questions among retail observers about promo levels as a percentage of sales and where the consumers had started to hunt more for promo. So far, we've not seen any data supporting this in Lenta. Traditionally, we have more promo offers and activities in the third quarter compared to the second, but the year-on-year share of promo in total sales has been flat. As might be expected, online shopping continues to be a popular choice among consumers during COVID. While growth rates may have slowed significantly after the lockdown of the second quarter ended, we continue to aggressively expand our online geography with the goal to eventually rolling out our online offer across our whole store network. Before we move on to the operational results, I'd like to say a few words about our response to COVID-19, specifically during the third quarter. We didn't introduce any new significant safety measures since our last investor call in July. Nevertheless, we continue to focus on strictly maintaining the strong measures that we had already put in place and implemented in the second quarter. We continue to observe all safety protocols in the interest of providing a safe place for our employees to work and for our customers to shop. Just as importantly, we take our role as a responsible corporate citizen very serious, and we have, therefore, continued to run a number of important social support initiatives. These include offering discounts to frontline medical workers, providing easier store access and discounted prices for our elderly customers and vulnerable customers. Now with respect to Lenta's third quarter operational results, they were weaker quarter-over-quarter, but this was to be expected as the second quarter lockdown ended. Nonetheless, our year-to-date operational results for the first 9 months of 2020 were quite solid compared to the first 9 months of 2019. Specifically, our total sales in the third quarter increased by 4% year-on-year due to a 4.6% growth in retail sales. Our hypermarkets grew by 4.2% while our supermarkets grew by 9.5%. Both results were due to higher average tickets despite lower traffic. As I mentioned, we continue to observe some trading up despite lower-than-normal shopping frequency. In the third quarter, we experienced an out-of-stock for some seasonal items due to an exceptionally strong demand in the second quarter when Lenta was the only nonfood operator, making some of our nonfood assortment available. Essentially, what we sold was a full year worth of seasonal inventory much quicker than we have ever done before. In the third quarter, like-for-like numbers experienced similar dynamics. Our hypermarket like-for-like sales were up 2.7%, thanks to average ticket growth of 8.8% that compensated for a 5.6% decrease in traffic. Our supermarket like-for-like sales increased by 5.6% as a result of a 12.3% average ticket growth offsetting a 5.9% traffic decline. As Vladimir mentioned, we continue to develop our online sales channel. We served online customers across more than 82 cities during the first 9 months of 2020, which resulted in more than RUB 3 billion worth of sales. We continued to add delivery as well as Click and Collect services to new cities across our store network. During the first 9 months of 2020, total online sales grew by 395%. In September, our online sales alone achieved an all-time monthly record of RUB 535 million, which is almost 6% higher than the previous best monthly result that we realized in May. Our own express delivery service that we call Lentochka now operate in 26 cities across Russia with more cities coming online every week. We have also set up partnerships with more than 20 delivery companies across than -- across more than 82 cities to fulfill online orders from our extensive store network. And in June, we launched a pilot for our new Click and Collect service in 2 cities. It is now operating in 13 cities, and we have plans to roll it out eventually across our entire store network. Let me finish by briefly discussing the fourth quarter outlook. We remain constantly vigilant due to the continuing uncertainty around external factors. The remainder of 2020 will be largely determined by COVID-19 dynamics, and we believe it will be characterized by a high degree of uncertainty. Depending on the severity of the COVID-19, we could see a partial return to the one-stop shop behavior that we experienced in the second quarter. We believe customers will limit both frequency of shopping trips and the number of stores that they visit in order to increase their safety.In addition to adjustments made in response to COVID-19, we will continue to focus on the fundamental customer value proposition that has made Lenta the leading big-box retailer in Russia. As a management team, we are very excited and energized by the arrival of Vladimir as our new CEO and the new strategic opportunities we believe will be the outcome of our strategic plan going forward. With that, I will return the call to Tim. Thank you very much.
Thank you, Vladimir, and thank you, Rud. Katie, we are now ready to take questions.
[Operator Instructions] Our first question comes from Alexey Philippov with JPMorgan.
Can you walk us through the online strategy? I understand that you would be able to present details later with a new updated strategy, but some color would be helpful at this stage. So who is it you're competing most right now in online? Is it express delivery players or those focused on stock up niche and like is there buy out in [indiscernible]? And do you launch online in cities where large players are already present or try to tap into regions where competition is weaker? And last one on this, do you plan to develop your own courier network or use third party logistics?
Let me answer your question. As I said, online is going to be a very important chapter in our strategy, but a few details. Today, we develop mainly fast delivery. So you can use our apps and make an order, and we will deliver to you in less than 2 hours. We launched it already in 40 different cities. And the last city this year, we opened it up in [indiscernible]. We are trying different locations like Moscow, St. Pete. Obviously, in the city population of 1 million, but we also now have our presence in cities with population 350 and so on. And it develops very nicely. To my surprise, my personal expectation was that online business in a great demand in Moscow and St. Pete. But in reality, we are more successful, let's say, in a smaller city than in Moscow due to the number of reasons. And the current number for the city we get is 3,000 orders a day, which is already quite a big number. And our check is above RUB 1,000. So we are progressing according to our business plan and slightly better. And another type of delivery which we are developing, what Rud mentioned, is Click and Collect. It's not as fast developing as online delivery, however, I think it plays a good role in a number of services which we create for our consumers, and we believe it's also a great opportunity for us to develop. Also, already now, we can say that delivery is more in demand than pickup, Click and Collect.
If I may add to that, the average ticket we have in online right now is between RUB 1,000 and RUB 2,000. And hence, our customers are more on top-up than on stock-up missions. We believe it's partly because most of our hypermarkets are located in residential areas. And hence, our customers when they do stock up, come and shop in our stores, and they then see our online offer as a convenient addition to the stocking up. And the reason why I mentioned that is because so far, what we have seen is that our online sales is incremental sales and not cannibalizing on our brick-and-mortar sales.
Another good thing that what we're observing in our online business, that is a good reason for us to call to our customer, our former customers who do not immediately enter at the moment. And we see that this brings the customer back. And we do not only have online sales to that customer, but we also have this customer visit our store physically and starting buying from us again, which is a good trend from our point of view.
In terms of cities, our ambition right now is ultimately to cover all cities in which Lenta is currently operating. As I mentioned earlier, we are covering 82 cities through our partners, more than 26 cities with Lentochka and currently 13 cities with Click and Collect. We are assessing the opportunities based on our ability to open up online sales. And with that, I mean, actually, from an operational point of view, to enter a city and not because we believe there is a certain sequence that we should implement it in -- across our store network.And I think then your final question was whether we would eventually set up our own courier network. We have not taken any decision in that respect. So far, in order for us to be able to roll out online fast and to have the required flexibility, we are using a third-party service supplier.
Yes. And in terms of CapEx, can we expect some acceleration on -- in CapEx on online? Or as with other retailers online, CapEx will be quite insignificant compared to the group level?
Yes. So far, it's been insignificant at group level because we are leveraging our store network through picking and packing and shipping from store. In that sense, in terms of our online strategy, we have no plans to invest into dark stores or similar, but we want to utilize the store network as a first step.
Basically, I would say our CapEx mainly is investment into the software. So to make it user-friendly and, let's say, based on the market in terms of customer experience. And we keep on discussing different options on our online business, and it looks like the model which you will play is a function of the number of orders you have. And we might come to the decision to have a dark store built separately for this kind of business. However, I think it will take some time to reach that level of orders per location, I would say. So we've got some estimations, what we mean on the sites -- not the site, the number of orders we have as to what it's worthwhile to invest into the dark store.Today, we are quite comfortable with our existing retail network, and we see that our stores fulfill this role themselves. And we are capable to satisfy customer demands from our stores. So we've got everything the customer needs. We've got more than 25,000 SKUs and a quite good coverage in most of the areas we have our stores to provide decent services.
Our next question comes from Kirill Panarin with Renaissance Capital.
Yes. A few questions from me, please. Firstly, a question to Vladimir. You shared your first impressions about Lenta. Could you also share your initial thoughts on what are the areas of relative weakness that you would like to focus on the most in the future?
Good question because basically, we are focused now on our strategy development. And we discuss different options and strategic opportunities where we see them, and we are in discussions with the shareholder and the Board of Directors. We share our view on this. And on top of that, we have some tactical projects to develop sales in current business. I mean for the -- I don't know what else to say.
It -- I would suggest that it's probably a little bit too early after 6 weeks to ask for a list of areas for improvement. I would suggest we allow Vladimir a little bit more time to get into all the corners of the business. Needless to say, he's already started to apply his extensive retail knowledge to support the business.
But my general impression about Lenta is okay, I would say. I mean I always had impression about Lenta than it was outside Lenta. And now I compare what I -- I thought about Lenta being inside. And in general, I believe that Lenta is the best hypers in Russia, and it was confirmed. So we have quite a good assortment, and we are best-in-class in terms of nonfood sales. However, why we need new strategy is because we are not satisfied with our current performance. And so there are some good reasons to explain why we are not satisfied because that's a general market trend that customer go to the convenience, they, let's say, leave big boxes. However, we believe that we can change this trend. And even being big boxer, we can become better.
All right. All right. That's great. A couple of more questions then, more short term, more on Q3. So firstly, on sales trends, you mentioned a number of factors that impacted growth in August and September. Any chance you could quantify roughly the impact of sort of one-offs, such as lack of inventory or lower back-to-school demand? How material was the impact on growth in Q3?
Yes. I would say across the nonfood seasonals running out of stock and the back-to-school, we are talking somewhere around the 1 percentage mark of sales in Q3.
Okay. Okay. That's clear. And last one from me on the margin trends. Given the slowdown in like-for-like and sales of this in Q3, can you give us a sense what profitability trends you saw during the quarter? Basically, did EBITDA margin continue to increase year-on-year or it stabilized or declined? Any color on that, please?
Well, we normally don't talk about our financials for the quarterly trading update. And hence, my comments would be relatively general that we saw a good performance in the first half continuing into the third quarter.
Our next question comes from Egor Makeev with Raiffeisen Bank.
So my first question, well, it was already partially answered. Still, could you give us maybe some more color on what will likely be in your new strategy in terms of targets or focus areas? And will dividend policy be a part of it?
Well, we cannot really disclose any specific elements in the strategy over and above what we already talked about with Lenta having a good base in our hypermarket business, giving us opportunities to grow the business, what we mentioned earlier in terms of online. And as for dividends, it's ultimately a decision of the Board of Directors and to be approved by the shareholders. And my guidance on that would be that that's something that the Board will discuss next year -- in the middle of next year when they've seen the results for 2020.
Okay. That's clear. And my second question would be is there any particular reason why third quarter like-for-like traffic figures at supermarkets were a bit lower than at hypermarkets? Because I would expect the opposite given the changes in customer behavior that you have mentioned.
I'm not sure I understand. Our third quarter like-for-like for supermarkets was 5.6% and for hypermarkets was 2.7%. So supermarkets did deliver better like-for-like sales in Q3.
Yes. Yes. But I'm speaking about the like-for-like traffic figures, which were a bit lower at supermarkets. So minus 5.9% at supermarkets and minus 5.6% at hypermarkets in the third quarter. Sorry, just wondering if there was any particular reason.
Not as far as we have been able to see from the numbers and the customer insights we have had. So I don't have any specific details or answer to that question.
[Operator Instructions] Our next question comes from Max Nekrasov with Goldman Sachs.
Yes. I have a few questions, though some of them were already answered. First, do you see any changes in the competitive environment recently? And do you feel the need to be more aggressive in terms of price investments going forward? Then the question on your sales growth. So basically, after very strong July, there was some deceleration, and you mentioned that there was like one-off effects in August and September, which amounted to around 1% of growth. So does it mean that the normal level of growth, excluding like one-offs related to COVID, should be around like 2% for Lenta right now? And how do you plan to improve it? And then just once again, apologies if I missed it. But right now, what are the key priorities for the management team? Is it the strategy or something else maybe?
Okay. Let me start answering this question, and Rud will help me to add more details. Now for priority, priority I think remain the same. We want to make our stores safe for customers and for our employees. We have a relatively low percentage of own employee who were infected by COVID-19 at just 0.08 percentage points. And we're proud of it because it's a pretty low number. And we are going to continue taking measures to make sure that everybody who is in our store, either customer or employee, are protected. The next priority, of course, we want to grow, and we put all our efforts to solve this issue. Of course, as you know, trends are against us in general on the market and the convenience guys are enjoying the best performance. But as a big boxes and middle-size boxes, I think we are quite okay. But we still believe that there is an opportunity for us, and we are working on them.As far as the competition layout is concerned, then from my point of view, nothing has changed. We still -- you know all these big players, and we see that they performed quite strongly, which also good reason for us to adjust our value proposition to make sure we are also in a growing mode in -- let's say, these are similar ambitions. Of course, it's not -- it will not happen tomorrow and some adjustment is required to an organization. However, what we are doing now, we're identifying these opportunities, points of growth, let's say. And we do not plan on the price. So I'm answering your question about the more aggressive pricing. And as Rud mentioned, we see that the promo share this year is in parity with last year, and we continue -- we think we will continue in the same manner. Main adjustment which we plan to do mainly is going to be in assortment adjustment, a bit in pricing, of course, and making promo more efficient. And I believe for this stage, it's going to be good enough for us to deliver our budget results. And in other area, well, we're looking at inefficiency. And as any retail company, we want to spend less and to make more. That's our main focus areas.
Our next question comes from Alexey Krivoshapko with Prosperity.
Sorry for getting back to this question, but I guess once you give more information, you obviously have more questions. You obviously know those numbers, like you have some decline in customers from August -- from July to August quite considerable. I wonder what happened to kind of unique loyal customers. Is it so that kind of people just went to different formats or are they shopping less? What is your explanation? What actually has happened? Or was July just elevated because of people are locked and they have to kind of go to a particular store? How do you see this?
You see, we -- what we observed, Alexey, now is that we are not losing customers. We have less frequency of visit of them. And I think the main reason for that from my point of view is that in August, September, we had kind of relief after the COVID period. People started believing that the danger is behind. And they changed a bit their pattern, and they started visiting more retailers, and they also started enjoying restaurants, cafes, socializing. And if you look at -- if you look now in the October numbers, we think that the trend has changed back to the COVID behavior. And I can't tell you I think at this moment our current number in October. However, I will tell you about masks. Our sales of mask increased almost 10x. So this means that people are really scared, and they changed their behavior, and we see more and more customers in our stores wearing masks. And it's not just because they were obliged to do so, I think it's just because they already strongly believe it's a danger. And this is a way of their normal behavior. And I think, unfortunately, we are now back to the COVID situation and everybody realizes it and people understand, but it's not a joke, it's a new reality and you have to protect yourself. And I think Lenta is well-known or managed to build reputation, a reputation like a healthier store due to all measures which we took, and I hope we will enjoy in fourth quarter by a bigger number of visits.
That's clear. And sorry but just would like to get back to that question which came up. Let's say, hopefully, when everything is over. And there is a vaccine or people are happy again, walking around, going to restaurants and stuff like that. Like in this kind of post-COVID normal world, which hopefully will occur at some point, I mean what like-for-like revenue growth would you be expecting from Lenta in absolute nominal rubles?
You see -- you know I think as good as me that to have very good like-for-like, you have to open new stores and you should have the good combination of the old stores and the newly-launched stores. But if we take this factor aside, then I think we still have a good chance to enjoy positive like-for-like. What this number is going to be exact, difficult to say for me at this stage. But I think it's -- our ambitions are going to be reflected in the strategy which we're going to present in the beginning of next year.
Our next question comes from Ksenia Bogdanova with Aton.
I would like to know, could you tell what expectations do you have about customer behavior change in case of second wave? Or would it be the same as during the first wave? Or do you anticipate some different trends?
Could you repeat that? Again, it was hard -- we broke up for a second there.
Okay. Could you tell what expectations do you have about customers' behavior change in case of second wave of COVID? Would it be the same as during first wave or you anticipate some different trends?
No. As Vladimir mentioned, what we're seeing in October is that customer behavior is reverting back towards the pattern we saw in Q2. So it seems like customers are again visiting fewer stores, and they may also be limiting their frequency and hence, bigger baskets than what we saw in Q3. If the current development with COVID-19 continues further into Q4, we would expect that customer behavior is migrating back towards what we saw in Q2.
But I think we are not going to observe -- I don't think we are going to observe exactly the same pattern because I believe we are not going to shut down restaurants, cafes and all these public places completely because it's very difficult for economy. Plus, I don't believe people will start banking again because they then prove this experience and -- or proven that retailers are capable to provide them with all what they need. So this, let's say, bank effect will also play less in fourth quarter. But for the rest, I agree with Rud. Most probably, they will again choose a smaller number of stores. And they will go to the stores they believe the most safety, and we will try -- they -- again, we'll try to find...
[indiscernible]
What's that? Please repeat.
I said thank you very much.
Thank you, too.
Thank you.
Our next question will come from Kirill Kuznetsov with The Sputnik Group.
My question is regarding the profitability and dividend plans of Lenta because, obviously, we see that Lenta is a great company. But still, in terms of sales growth, it lags behind other product retailers. But regarding the margins and the special profitability -- profits growth, it showed really great results in the first half of the year. So maybe you could give a brief indication if the trend on -- of profits growth might continue in the second half of the year and what are expectations on this? And the second question is given that the debt load of the company became quite low and the company was able to generate quite a lot of cash in the last 12 months, is it possible that the company will start paying dividends with the year ending -- with this year coming to an end?
Okay. Well, as mentioned before, without going into detail on our financial performance in Q3, I can confirm that year-on-year, we did see an improvement on -- in our margins. For the full second half, it will very much depend on how customers' behavior will develop in Q4 and equally how severe the increase in COVID-19 cases that we're currently experiencing will be and to what extent this will last. So it's very difficult to forecast on the second half. We are cautiously optimistic in the sense that we believe we have a very good offer to customers who want to shop less and to shop in safer -- in a safer environment, which we believe we can offer through our hypermarkets. In terms of the question on our leverage and potential dividend, as I mentioned, ultimately, it's a decision of the Board, and I believe the Board will discuss that once we've seen the result for 2020. Having said that, though, I believe that discussion with the Board will center around 2 things: one, which could be dividend; the other one is the investment required to realize our new strategic plan. And if the new strategic plan is requiring investment to support the accommodating growth, I would expect that the Board will discuss whether they want to finance that through increasing our leverage or through not paying a dividend. But as mentioned, it is a discussion and a decision of the Board of Directors and not of us as a management team.
And the preference of the management team is currently to increase investment in terms of new strategy, right?
It's obvious we're discussing strategy, and this strategy is about growth. I mean otherwise, what's the point in development -- still developing market? And of course, then you talk about growth, basically, you talk about improving performance of the existing stores and opening the new ones. To open -- I mean for both, you need money. And it's not the management decision the source of all this money. It's a discussion, discussion with the Board of Directors. And I mean a decision can be taken in both directions. But most likely, a decision is going to be like we use our own money to invest in our growth, and I think it's quite natural. However, again, that's a part of our discussion in -- a strategic one, and we will -- I think we will have to answer on this question in the beginning of the year. We all understand that the dividend is in a good feel. And we have a discussion about this, but the final decision is not taken. And I believe it's going to be -- maybe it's not going to be the part of the strategy, but it's going to be part of the documents which we have to announce the market explaining what we're going to do in this area as well.
We are in discussions internally regarding dates for this Strategy Day, Capital Markets Day, and we hope to have more information given to you shortly on specifics of timing and dates of that.
I see. And regarding the margins improvement, I understand that it's hard to give precise estimates, but maybe it is possible to just say if there are substantial like during the first half or you see some smaller margins improvement than in the first half of the year?
The margin improvements that we have in Q3 is not at the same level as what we saw in the first half.
It's smaller, right?
Right.
[Operator Instructions] Our next question comes from Marat Ibragimov with Gazprombank.
The question on like-for-like performance by format third quarter versus second quarter. If you look at the dynamics, we will see that both hypermarkets and supermarkets decelerated quite substantially by more than 7 percentage points hypermarkets and by 6 percentage points supermarket. So apparently, you said that you didn't lose your consumers to your customers, but it looks still you lost some of the food budgets. So from what you're saying, they went to HoReCa, they went to entertainment and spending their budgets there. But given your...
Sorry, Marat, we lost you. We couldn't hear what you were saying.
Can you hear me?
Yes. Now we can.
So a lot of customers used to [Audio Gap] at Lenta in the quarter, what's...
You keep dropping out, Marat. Unfortunately, we can not...
That's the first part of the question.
Marat, this is the operator. Your line go out on us. [Operator Instructions] We do have him back online. One moment, please.
Thank you, Katie.
Marat, your line is back open.
Yes. Can I ask the question?
Yes, sir, we can hear you clear now. Please go ahead.
Tim, can I ask the question?
Yes, of course. We're listening to you, Marat.
Yes. Sorry for the line. The question is, since you lost some of the food budgets of your customers you're spending in Lenta in second quarter and -- do you have plans to bring them back? I mean you have -- again, what's your -- the customer profile? What do they like, et cetera, contract details? You guys can attract these customers back to your stores and can improve.
Yes. If I understand correctly, and apologies but you keep dropping out. Your question was whether we have plans in place to try and bring the customers back, which we seemingly lost between the quarter 2 like-for-like and the quarter 3.
Yes. Exactly.
Okay. We have plans in place for Q4 to continue to support our like-for-like. What we see is, as you rightfully mentioned, that with the reopening of HoReCa and entertainment, that it seems like a share of the customer wallet that in Q2 was spent in food retailers are now being spent outside of food retailer. That part will likely be more difficult to regain unless we again see that HoReCa and entertainment will be closing again. But for the others, we have a program in place for Q4 to support our like-for-like sales. It includes a relaunch of our loyalty program in the second part of Q4. We have interesting activities to build on our customer loyalty for November. And we also believe that part of what we see in our sales numbers month-to-date in October is a reflection of some of the steps that we've taken in terms of how we are trying to personalize the communication with our customers. Did that answer your question, Marat? We may have lost him again.
Go ahead, Katie.
At this time, I am showing no further questions in the queue. I would like to turn it back over to management for closing remarks.
On behalf of Vladimir and Rud, I'd like to thank you all for listening and for your questions. As always, if you have any follow-ups, please feel free to reach out to us directly, and we look forward to speaking with you again after the close of the year in Q1. Thanks very much. Bye-bye.
Thanks a lot, everyone.
Thank you very much. Bye.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.