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15.04.2008
Credit-Rating: State`s regulation of retail markups not to affect development of Ukraine`s retail chains
Credit-Rating believes that the memorandum on markup restriction signed by the Ukraine`s Government and top-managers of the national leading retail chains will not have a significant impact on volumes and cash inflows of Ukraine`s biggest retailers. Pursuant to the document the highest markup for principal foodstuff items shall be 10% (with 20-50% earlier). The list of goods with the markup of 10% and lower includes 15 items, namely sugar, cereals, sunflower seed oil, eggs, basic dairy products, vegetables from national producers, bred and noodles. The memorandum also puts a ban on decrease in volume of these items in the chains` sales mix.
According to Mikhail Senkiv, Credit-Rating`s leading analyst, `the decrease of retail markups for the principal foodstuff items may be compensated with the rise in prices for other items, which are in a wide range in modern chains, and at the expense of additional incomes from renting, merchandising and advertising, accompanied by growing customer attractiveness enjoyed by the retail chains`.
Today the modern retail chains take a 30% share of Ukraine`s retail sector (over 50% in Kiev), with a 40% share taken by markets. According to the experts` estimates, the specific gravity of modern retail outlets will account for over 50-70% of the market in 2-3 years. In Credit-Rating`s view high pace of growth of Ukraine`s retail market`s will persist in the current year (it has added a. 30% in 2007), which is associated with high investment attractiveness for overseas retail operators.
Credit-Rating`s note:
Credit-Rating has assigned 57 ratings in retail and wholesale segments, with 70% of them being speculative-grade and 30% investment-grade ratings. The activities of the traders vary from FMCG to machine-building equipment.
For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
