X5 Retail Group

Retail development in 2015

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Most leading retail companies have already announced their plans for the current year. Magnit presented the most ambitious program of the development. Initially, the retailer planned to open 1,100 convenience stores, 80 hypermarkets and Magnit Semejnij stores and 300-350 cosmetic stores, now they are planning to launch 1,200, 90 and 800 stores respectively.

Auchan plans to open 7-8 stores, investing 10 billion rubles into the development of business in Russia this year. Metro Cash & Carry is going to open the same amount of stores this year as they did the last year (in 2014 they opened seven stores). Neither Metro nor Auchan have not change the plan of developmet for the year.

Lenta is going to launch at least 10 hypermarkets during the first half of 2015 . This is more than in the first half of last year, when the company opened five hypermarkets and four supermarkets. Their plan to double the retail space in three years (from the end of 2013 to the end of 2016) remains in force.

Dixy did not report that their development plans would change this year. Last year, in November, Ilya Yakubson, Dixie president, spoke about the opening about 500 stores in 2015.

In the end of the last year, Tony Maher, head of Okey company, spoke of plans to open more than 12 hypermarkets and to launch new project – about 40 discounters “Da!” in 2015. The start was scheduled for the spring. For this projects the retailer was going to use debt funds in the amount of 8 billion rubles. Today, the retailer intends to continue developing, but at a pace that “would be sustainable for the business and does not require significant new credits at the current rates,” – as it was stated in the report on the results of 2014.

The only company who has not announced its development plans for the year is X5 Retail Group.

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X5 Retail Group’s revenue increased by 18.6%

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In 2014, one of the largest retailers in Russia, X5 Retail Group, increased its revenue by 18.6% up to 631.93$ billion rubles. In the fourth quarter of the last year, revenue growth was 20.8%. According to the company report, in October-December X5 retail networks “Pyaterochka”, “Karusel”, “Perekrestok”, “Express” and online retailer E5.RU gained 181.23 billion rubles.

“Pyaterochka” showed the highest revenue growth, it increased by a quarter – from 348.39 billion rubles up to 435.82 billion rubles. At the same time, in chains “Perekrestok” and “Karusel” the outflow of customers traffic could be seen.

The worst was the result of online retailer E5.RU – its revenue for the year fell by more than a third, from 1.431 billion rubles to 950 million rubles. And as X5 could not find a partner for this project or sell it, they had to close it in January 2015.

In 2014, the amount of an average receipt in X5 retail chains increased by 7.7% – from 317.6 rubles to 342.2 rubles. The number of purchases increased by 10.2% – up to 2.114 billion purchases.

Earlier, the retailer “Magnit” reported that in 2014 its ruble revenues increased by 31.61% and reached the level of 762.72 billion rubles.

X5 Retail Group operates several retail chains: discounter “Pyaterochka”, supermarkets  “Perekrestok”, hypermarkets “Karusel”, stores “Express” (“Perekrestok Express” and “Kopeika”).

On December 31, 2014 there were 5,483 stores, including 4,789 stores “Pyaterochka”, 403 supermarkets “Perekrestok”, 82 hypermarkets “Karusel” and 209 stores “Express”. In 2014, the number of discounters “Pyaterochka” increased by 907 stores (+ 23.4%), the number of supermarkets “Perekrestok” has increased by 13 stores (+ 3.3%) and the number of stores “Express” – by 20 stores (10,6%). In 2014, the X5 closed 46 stores “Pyaterochka”, 22 stores “Perekrestok”, two stores “Karusel” and 45 stores “Express”, the results of which were not  as good as it had been expected. Also, the company sold 12 supermarkets “Perekrestok” in Ukraine.

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X5 Retail Group quits online retail channel

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X5 Retail Group, the second biggest Russian food retailer, announced the cessation of active commercial operations at its E5.RU, the Company’s online retail channel, effective 1 January 2015.

The Company continues to evaluate the role technology and innovation will play in complementing the value propositions of the current “brick-and-mortar” food retail business as well as delivering better services and value to customers.

E5 will cease taking online orders as of 10 December 2014 while the Company will continue to honor any obligations the online retailer has to customers. E5.RU was launched by X5 in February 2012. The online retailer recorded net Russian Rouble sales of 502 million and 1,431 million in 2012 and 2013, respectively, or 0.1% and 0.2% of the Company’s total net retail sales for the respective periods.

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Russian retail chains showing growth

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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.

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X5 Retail Group launches new Perekrestok store concept

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X5 Retail Group has launched a new Perekrestok supermarket concept in Moscow and acquired a local chain in the Samara region.

New supermarket concept
After a successful relaunch of Pyaterochka discount store concept, X5 Retail Group has launched a new Perekrestok supermarket concept in Moscow. The store concept has a new outdoor design including an updated logo, improved store navigation and better use of sales area. The assortment has been expanded in product categories like bakery, fish, seafood and ready meals. X5 will develop the Perekrestok network in three subformats with sales area of 800, 1,000 and 1,500 square metres, located in shopping malls, residential areas and on high streets. The current network of 389 Perekrestok stores will be refurbished to the new concept in the next three to four years. 

Acquisition in Central Russia
X5 Retail Group has improved its market position in the Samara region (Central Russia) through the acquisition of Agrotorg-Samara chain. Argortorg-Samara, X5’s former franchisee, operates 116 stores with estimated revenue of RUB3 billion in the first half of 2014.

Our view (IGD)
The rebranding of Perekrestok supermarket to a new concept was a smart move to differentiate itself from rivals especially in Moscow, where the competition is already strong. The expansion of fresh product ranges proved successful at X5’s new Pyaterochka discount concept and its success may be replicated at Perekrestoks.

The acquisition of Agortorg-Samara could suggest a move back to X5 Retail Group’s strategy of store expansion via M&A. In the last couple of years, X5 has developed its store networks through organic expansion only.

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Retail news

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X5 Retail Group announces the launch of the first three stores “Pyaterochka” in the Volgograd region. By the end of 2014, the retailer plans to launch ten more “Pyatorochka” in Volgograd.

X5 Retail Group launched a distribution center with an area of 30,200 sq. m in the Rostov region. It will cover stores in Volgograd, Rostov and Saratov regions, Krasnodar and Stavropol regions. As of 30 June 2014, the network “Pyaterochka” numbered 4,128 supermarkets.

Finnish Corporation SOK opened the 18th store Prisma in St. Petersburg. Sales area of the new supermarket is more than 2,000 sq. m. The investments in the project totaled € 5,000,000. In October, the company is going to open one more hypermarket in St. Petersburg.

French retailer Leroy Merlin, specializing in the sale of goods for the construction and repair, launched its second hypermarket in Novosibirsk. In the spring 2014 Vincent Jeanty, CEO of the network in Russia, said that over the next three years the company would increase the number of stores in Russia almost in three times – from 28 to 80.

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Russia’s X5 Retail Group posts 71 pct rise in Q2 net income

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Russian supermarket operator X5 Retail Group NV said on Thursday its second-quarter net profit rose 71 percent, year-on-year, to around 4 billion roubles ($111 million).

Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 24 percent to 11.4 billion roubles with an EBITDA margin at 7.3 percent compared with 6.9 percent a year ago, the company said in a statement.

(1 US dollar = 36.0290 Russian rouble)

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Perekrestok To Drastically Change Appearance

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The network of chain stores Perekrestok is getting a new look, as reported by Vedomosti, quoting Janusz Lella, the general director of the company.

Lella said, according to the publication, that the need to change the way the company appeals to consumers came about because of its low financial performance.

In the future, Perekrestok is looking at changing the use of its staff, changing its logo and revising its pricing policy.

“The supermarkets are changing their logo and color scheme, reorganizing their assortment, it will be newly organized as well as the retail space in the stores, in addition to a revised personnel policy,” he said.

During the first quarter of this year, the network reached a revenue of 28.7 billion rubles ( about $833 million ), and the group of companies reached 144 billion rubles ( about $4,18 billion ). Perekrestok’s growth performance was at 4.4 percent.

“We deliver suppliers more. The growth of the purchase amount is due to buying more goods, therefore sometimes even lowering prices gives rise to an average bill,” he said.

From January to March of this year, the average customer check at Perekrestok amounted to 433.8 rubles ( about $13 ).

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“Green” retailers

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Greenpeace made an annual rating called “Green supermarket” where Russian retailers are rated by the level of contribution in recycling problem solvation. First places were taken by “Auchan” and “Dixy”.

Experts were comparing and estimating 10 biggest supermarket networks – “Auchan”, “Dixy”, Х5 Retail Group, “Lenta”, “O’kay”, “Magnit”, “Holiday classic”, “Maria Ra”, “Sedmoy Continent” , and “Monyetka”. These retailers were estimated by 20 criteria such as receiving packaging for further recycling, reduction of packaging, a possibility of using own packaging for catchweight goods, a presence of goods with ecofriendly packaging.

“Auchan” took the first place due to the opening recycling centers in St. Petersburg and the possibility of buying catchweight goods. “Dixy” was also pointed out because of the presence of recycling centers in Moscow and the sale of original non-disposable bags.

“O’kay”, “Sedmoy Continent”, and “Monyetka” are turned to be at the end of the rating list.

“Unfortunately, even leaders of our list are far from being “green” retailers. However, most of them are changing their policy: refusing from free plastic bags, letting do weighting of fruit and vegetables without packaging, and even opening recycling centers. Directors of stores understand that such actions are attracting attention of new clients and making their stores more competitive on the market,” – Rashid Alimov, a coordinator of “Greenpeace Toxic Program”, said.

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X5 Retail Group Q1 retail sales up 13.9%

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X5 Retail Group N.V., a Russian food retailer, reported first-quarter retail sales of RUR 143.90 billion; an increase of 13.9% from RUR 126.30 billion, previous year. Like for like sales improved 6.3% during the quarter.

X5 Retail Group N.V. operates several retail formats: the chain of economy class stores under the Pyaterochka brand, the supermarket chain under the Perekrestok brand, the hypermarket chain under the Karusel brand, Express convenience stores under various brands and the online retail channel under the E5.RU brand. At 31 March 2014, X5 had 4,618 company-operated stores.

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