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This announcement is not and does not form part of any offer or solicitation to purchase or subscribe for securities in the United States.  The securities referred to herein are not registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. PJSC Detsky mir does not intend to register any portion of the offering of any securities referred to herein in the United States or to conduct a public offering of the securities in the United States.

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16 January 2017. Moscow, Russia. Public Joint Stock Company "Detsky mir" (the "Company" and, together with its subsidiaries, the "Group" or "Detsky Mir"), Russia's largest specialised children's goods retailer, today announces its intention to conduct an initial public offering (the "Offering") of its ordinary shares (the "Shares").


  • The Offering comprises an offering of the Shares (i) outside the United States in reliance on Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and (ii) within the United States to certain qualified institutional buyers as defined in, and in reliance on, Rule 144A under the Securities Act.
  • The Offering is expected to consist exclusively of secondary shares. The selling shareholders are PJSFC Sistema ("Sistema"), the Russia-China Investment Fund ("RCIF") via its investment vehicles Floette Holdings Limited and Exarzo Holdings Limited, as well as certain members of the management teams of the Company and Sistema (collectively, the "Selling Shareholders").  
  • Sistema intends to maintain strategic control over the Company in the medium term, retaining majority ownership.
  • There will be a lock-up period of 365 days for the management of the Company and 180 days for other Selling Shareholders and the Company.
  • The Shares are admitted to trading and included in "Level 3" of the List of Securities Admitted to Trading on the Moscow Exchange under the symbol "DSKY". The Company has filed an application with the Moscow Exchange to migrate the Shares to "Level 1" following the Offering, subject to compliance with the applicable minimum free float requirement of 10%.
  • Credit Suisse, Goldman Sachs International and Morgan Stanley are acting as Joint Global Coordinators and Joint Bookrunners. Sberbank CIB and UBS Investment Bank are acting as Joint Bookrunners.


  • Undisputed market leader in Russia in a large, growing and resilient consumer market segment
  • Category-defining brand, highly popular customer proposition and longstanding presence in the market
  • Highly diversified product selection that attracts customer traffic and supports growth and resilience of sales and profitability
  • Rapidly growing e-commerce and omni-channel proposition underpin the Company's growth
  • Asset-light cash-generative business model providing strong returns on capital and enabling consistent dividend payments
  • Scalable supply chain and infrastructure platform
  • Strong management team with track record of delivering business growth  

Vladimir Chirakhov, CEO of the Company, said:

"Detsky Mir is Russia's undisputed leading specialised children's goods retailer, with more than three times the market share of its nearest competitor. In the last three years, we have opened over 270 new stores, and, based on preliminary results for 2016, have grown our revenue by an average of 30% each year, and EBITDA - at an even higher rate. We are confident that the Company will be able to deliver strong sustainable growth in the coming years.

Our growth strategy focuses on five key levers: opening new stores in cities across Russia; expanding our market-leading e-commerce platform; growing like-for-like revenues and gross profit per square metre; investment in our supply chain; and focusing on execution excellence to achieve superior operating margins and high returns on invested capital.

The sector has remained buoyant despite the economic headwinds that Russia has experienced. The children's goods market has grown at almost 8% a year on average since 2008 and has proven more resilient than almost any other segment of the retail sector. At the same time, we have demonstrated that our business can grow profitably across the economic cycle. Looking ahead, we remain focused on delivering growth to benefit current and future shareholders. Our diverse product offering and omni-channel sales strategy position Detsky Mir perfectly to capture opportunities wherever they arise."

Chris Baxter, Chairman of the Company's Board of Directors, said:

"We are delighted to announce our intention to bring Detsky Mir to the public market. The Group is ideally positioned to leverage its iconic brand, favourable demographics and proven strategy to deliver growth for a new generation of shareholders. We expect Detsky Mir to continue expanding its share of the children's goods market, potentially doubling its market share over the next few years. Detsky Mir is led by a highly experienced management team, and has strong and long-established corporate governance that was recently further enhanced with the establishment of Independent Non-Executive Director majorities and chairmanship on its Audit and Nomination & Remuneration Committees."

Mikhail Shamolin, President and CEO of Sistema, noted:

"Over the last several years Detsky Mir has leveraged its iconic brand to execute a strategy of building the undisputed leader in the Russian specialised children's goods market. Today Detsky Mir has a network of more than 500 stores in 178 cities across Russia and Kazakhstan, a rapidly growing e-commerce business, and a cash generative business model providing strong returns on capital and consistent dividend payments. The IPO will allow a new generation of shareholders to benefit from Detsky Mir's continued growth. Sistema firmly believes in the outlook for Detsky Mir and we will retain a majority interest in the company following the IPO."

Kirill Dmitriev, CEO of the Russian Direct Investment Fund and Co-CEO of the Russia-China Investment Fund, said:

"Detsky Mir continues to build an amazing success story in children goods retail in Russia and Kazakhstan. Over the time that we have been a shareholder, the Group has been on an impressive growth trajectory, and we expect continued growth in the years to come. We believe Detsky Mir is ideally suited for the public equity markets, as it offers strong differentiation through a combination of both growth and returns for investors seeking high-quality exposure to the Russian children's goods market. We look forward to remaining a significant shareholder and benefitting along with the Company's new investors."

Bing Hu, President and Co-CEO of the Russia-China Investment Fund, said:

"Over the past few years, Detsky Mir has built up an excellent reputation among Russian customers and in the industry as a whole, and has delivered on a successful growth and profitability strategy. The Company has also executed a successful internal transformation programme led by a highly professional management team and with strong shareholder support. Now the Company is ready to increase its financial independence, in order to properly benefit from tailwinds in the industry and opportunities in international markets. The planned IPO is an important step in the expansion of the Company. RCIF is proud to be a shareholder of Detsky Mir and will continue to support the strategic initiatives of the Company."


Detsky Mir is the largest specialised children's goods retailer in Russia, with a diversified product portfolio comprising toys, products for newborns, fashion (apparel and footwear), large items, and other products. It is the market leader both in terms of size of store network and in terms of revenue in the highly fragmented market for children's goods in Russia. According to Ipsos Comcon, in 2015, Detsky Mir had an estimated share of 32% (24% in 2014) of the specialised children's goods retail market in Russia and 13% (10% in 2014) of the total market for children's goods in Russia (including hyper- and supermarkets). This compares to 9% of the specialised children's goods retail market and 4% of the total market of children's goods for its largest competitor, also according to Ipsos Comcon.

The Group strongly benefits from the "Detsky mir" brand, which dates back to the opening of the first "Detsky mir" branded store in central Moscow in 1947. Thereafter, all large children's stores or department stores in the Soviet Union selling children's goods were named "Detsky Mir", and the brand has been closely associated with the entire national children's goods retail industry. This superior brand recognition persists and is confirmed by the findings of a recent consumer survey by Ipsos Comcon, where 97% of respondents mentioned the brand when prompted.

As at 31 December 2016, Detsky Mir operated a network of 525 stores, comprising 468 stores in Russia and 12 stores in Kazakhstan operating under the "Detsky mir" brand and 45 ELC stores in Russia. ELC stores offer various educational and learning games and other toys for newborns and children up to 14 years old. Total selling space as at 31 December 2016 was approximately 596 thousand square metres. Headquartered and originated in Moscow, Detsky Mir has gradually expanded its footprint outside Moscow since 2003, and at present the network outside Moscow accounts for approximately 70% of the Group's revenue. Detsky Mir primarily seeks to operate in cities with populations in excess of 50,000 people. In Russia, the Company has a nationwide presence with stores located in 171 of over 300 cities with more than 50,000 inhabitants, based on Rosstat population data as at 31 December 2016. Detsky Mir has stores in all of Russia's 20 largest cities and in seven cities in Kazakhstan.

In addition to retail stores, Detsky Mir offers its product portfolio through its and websites. In 2011, the Company launched its online store, which has experienced significant growth since then. The Company's management believe that Detsky Mir's superior brand recognition and customer loyalty are particularly important in capturing market share in the fast developing online segment of the market. In 2015, Detsky Mir completed the roll-out of its "in-store pickup" service for goods ordered online throughout its retail network in Russia. The Group is continuously improving its online proposition by expanding the online product range and further integrating the online and offline platforms. In the nine months ended 30 September 2016, Detsky Mir recorded over 63 million visits to its online store, and the number of orders placed via the online store was over 1 million.

Detsky Mir has an established supply chain and IT platform that supports its nationwide retail chain and growth strategy. The Group operates two distribution centres located in the Moscow region: a wholly owned distribution centre in Bekasovo with approximately 70,000 square metres of usable area, and a leased distribution centre in Krekshino with approximately 20,000 square metres of usable area. To manage inventory in the most efficient manner, Detsky Mir uses customised warehouse management and automated stock replenishment systems based on the SAP platform. In line with its expansion strategy, in particular in the Urals and Siberian regions of Russia, Detsky Mir has made a preliminary decision to open a new distribution centre (either rented or owned) in the Urals in 2018.

Detsky Mir has adopted a dividend policy to pay at least 50% of annual net profit (calculated based on its full year IFRS accounts) in dividends, subject to the Group's need for financial resources for capital expenditures and its ability to meet its obligations as they fall due. The decision to pay a dividend must be approved by the Group's General Shareholders' Meeting following a recommendation by the Board of Directors.


2015 (IFRS)   9M 2015 (IFRS) 9M 2016 (IFRS)
Number of stores (end of period) 252 322 425   370 464
Selling space (thousand sq m, end of period) 320 390 491   435 533
Revenue (RUB million)
LFL growth1
Gross profit (RUB million)
Gross profit margin
Adj. EBITDA (RUB million)2
Adjusted EBITDA margin
Adj. net profit (RUB million)3 1,153 1,685 2,189   679 1,756
Adj. net debt (RUB million)4 5,062 2,806 10,618   10,840 11,498

Note on the financials: Historically, Detsky Mir's consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") were adopted with effect from 1 January 2014, and the 2015 Annual IFRS Financial Statements were the first set of consolidated financial statements prepared in accordance with IFRS (with the comparative consolidated financial information for 2014).
1 LfL growth in RUB terms. LfL growth calculated on the basis of the operations of Detsky Mir stores in Russia only. The Detsky Mir stores that are included in like-for-like comparisons are those stores that have been in operation for one full prior calendar year.
2 Adj. EBITDA is calculated as EBITDA, adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014, as well as additional share-based compensation expense and additional cash bonuses under the LTI program. EBITDA is calculated: (i) as a non-US GAAP measure for the years ended 31 December 2013 and 2014, as net profit before income tax expense, foreign exchange loss, gain on acquisition of controlling interest in associate, interest expense, interest income, depreciation and amortisation; and (ii) as a non-IFRS measure for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2015 and 2016, as profit for the period before income tax expense, foreign exchange loss, gain on acquisition of controlling interest in associate, finance expense, finance income, depreciation and amortisation.
3 Adj. net profit is calculated as net profit adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014 (together with related tax effects), impairment of goodwill in 2015, as well as additional bonus accruals under the LTI program (together with related tax effects).
4 Adj. net debt is calculated as total borrowings less cash and cash equivalents adjusted for amounts receivable under the loan issued to CJSC "DM-Finance" (Sistema's subsidiary) in 2013.

Full year 2016 preliminary trading update

According to the Group's preliminary estimates, it expects its revenue for the year ended 31 December 2016 to be within a range of approximately RUB79.2 billion to RUB79.8 billion, representing an increase of approximately 30% as compared to RUB60.5 billion for the year ended 31 December 2015. Based on these estimates, Detsky Mir expects its gross profit margin to have declined to approximately 34% in 2016 from 36.2% in 2015. According to the Group's preliminary estimates, in the year ended 31 December 2016, like-for-like revenue growth was approximately 10.8%, supported by like-for-like average ticket growth of approximately 6.2% and like-for-like number of tickets growth of approximately 4.4%. The Group expects its rent and utility costs, as a percentage of revenue, to decline to approximately 10% for the year ended 31 December 2016 from 11.7% for the year ended 31 December 2015. It expects payroll costs, as a percentage of revenue, to decline to approximately 9% for the year ended 31 December 2016 from 11.2% for the year ended 31 December 2015. The Group expects its Adjusted EBITDA margin for the year ended 31 December 2016 to be broadly in line with the year ended 31 December 2015.

Investor contacts

Alexey Voskoboinik
Head of Investor Relations
Office: +7-495-781-0808, ext. 2582
Mobile: +7-915-129-9905

Media contacts

Detsky Mir

Nadezhda Kiseleva
Head of PR
Office: +7-495-781-0808, ext. 2041
Mobile: +7-903-969-0086


Denis Denisov

Tom Blackwell

Peter Morley


Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Detsky Mir. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "wiII", "could," "may" or "might" the negative of such terms or other similar expressions. Detsky Mir wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Detsky Mir does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Detsky Mir, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries Detsky Mir operates in, as well as many other risks specifically related to Detsky Mir and its operations.