Russian retailer Domovoy approves three-year development program, aims to expand private label line

ST. PETERSBURG. July 7 (Interfax) - Start Management Company, the operator of the Domovoy chain of household goods and home improvement hypermarkets, has approved a three development program that includes plans to update its stores, the St. Petersburg-based company's CEO, Dmitry Milshtein said.

"The development program is intended for three years. We're taking this year to launch new and start modernizing existing stores. The process will be long, requiring major resources and working out some nuances. The progress of remodelling stores and the amount of investment depend on the nature of the work itself, as well as on many initial conditions," Milshtein said in an interview with Interfax.

"Thus, we will devote 2025 to a comprehensive overhaul. In 2026 we'll start to gain momentum typical for a stable retail company, and in 2027 we expect to reach a fundamentally new level of capitalization and operating and financial results," he said.

The average cost of updating one store is estimated at 11 million rubles, not including value-added tax. The modernization calls for moving away from the hypermarket format to two others: supermarkets with an area of up to 1,500 square meters and small convenience stores with an area of up to 400-500 square meters.

The overhaul will affect the concept, assortment and whole philosophy of customer service, Milshtein said. Specifically, Domovoy will focus on offering customers complete interior solutions rather than specific products. The assortment will be updated and reduced from 60,000 to 8,000-18,000 items, depending on the store format.

The retailer expects that comprehensive solutions could increase the chain's average ticket by 10% to about 1,200 rubles. Revenue is expected to grow by 30% by the end of 2025 with the change in assortment policy and increase in average ticket. Start Management reported revenue of 5.369 billion rubles to Russian Accounting Standards for 2024.

At the same time, from its previous concept the chain plans to preserve product variety for customers with different budgets, the policy of expanding the share of private label products and key product areas. The share of private label products at the chain was 10% in 2024, while direct imports made up 7%.

"In future, we plan to intensively increase the share of our own brands, since at this point we don't cover some product areas. In some categories, the share of local and imported private label goods could reach 80% in future, in others we consider even 15% a big success," Milshtein said.

He also said Domovoy intended to open around 10,000 square meters of retail space in 2025.

"We think the biggest changes will take place this year: we are ready to open about 10,000 square meters of new retail space. We want to begin intensive development in the third quarter of 2025. The number of stores will depend on existing supply on the commercial real estate market. These could be retail outlets of 500 square meters, as well as 1,000 or 1,500 square meters," Milshtein said.

He said most of the expansion would take place in the Moscow region. The company also sees prospects in southern Russia.

Smart Management Company acquired the Domovoy chain in 2011 from Adamant. The chain, which now has 37 stores in 16 Russian cities, including 14 in St. Petersburg, is controlled by Ilim Group and Start Development co-owner Zakhar Smushkin.