Global ratings agency Fitch Ratings has said that Russian food retail chains continue to demonstrate healthy sales growth, despite the food import ban imposed in August against the EU, US and certain other countries.
Most Russian food retailers analysed by Fitch Ratings have managed to adapt to the food import sanction by substituting the imported categories with food from other countries, keeping the mix of food products on the shelves little changed.
Based on financial results by Russia’s three large public food retailers – Magnit, X5 Retail Group, O’Key Group – operating margins are unaffected for now as retailers have been able to pass on the increased costs of some products to customers without altering the product mix materially.
Increasing prices for some food categories (fish, dairy products, fruits and vegetables) as a result of the food import ban are likely to cause customers to seek out lower price substitutes and, in turn, lower sales of non-essentials. These trends are also likely to be reinforced by the overall subdued consumer sentiment in Russia, Fitch said.
The latest quarterly results show LFL revenue growth ranging from nine per cent year-on-year for Lenta Group to 17 per cent year-on-year for Magnit, driven by strong average ticket and traffic growth. Larger store formats, such as hypermarkets and supermarkets, posted slower sales growth in September 2014 compared with smaller formats, as they witnessed some customers trading down to cheaper products and, in some chains, low or even negative traffic growth, Fitch Ratings said.