X5 Retail Group

Magnit sales up again

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Russian food retailer Magnit said last week its sales rose by 33 percent in April, year-on-year, to stand at 45.8 billion roubles ($1.5 billion), in line with growth in the previous month.

Magnit, which recently overtook rival X5 as Russia’s biggest grocery chain by revenue, said the April result brought sales for the first four months of the year to 177 billion roubles, an increase of 31 percent.

The company, also Russia’s biggest food retailer by store count, opened 92 stores in April, bringing its total to 7,167 as of April 30.

Magnit had said it plans to grow revenue by between 27 and 29 percent in rouble terms this year, compared with about 34 percent in 2012, backed by a $1.8 billion capital spending programme.

Source: www.freshplaza.com

Magnit overtakes X5

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Magnit overtook sales at its rival X5 Retail Group NV for the first time since the company opened stores 15 years ago.
X5, controlled by billionaire Mikhail Fridman’s Alfa Group, posted an 8.1 percent increase in first-quarter sales to 126 billion rubles ($4.1 billion), it said in a statement. Krasnodar-based Magnit said earlier this week that quarterly sales rose more than 30 percent to 131 billion ruble.
“I’m afraid to be found immodest, but for the first time over the last 15 years after opening of the first store we have become the leader in the food retail sector by sales,” Galitskiy said in a statement.
Since 2008 Magnit has tripled its store network to more than 7,000, building new outlets from scratch in Russia’s regions. In 2011, Magnit exceeded the market value of X5, which had expanded by acquiring rivals including Karousel an Kopeyka.
“In the last two years, X5 has been having problems in digesting its acquisitions and managing stores, which led to customer outflow,” Ivan Kushch, analyst at Moscow-based VTB Capital said by phone. “Magnit was set to overtake it by sales sometime this year.”
Magnit has risen 72 percent in the past 12 months, giving it a market value of $23.7 billion. X5 is worth $4.8 billion after falling 22 percent over the same period.

Source: www.freshplaza.com

10,000 new Magnit stores in 5 years

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Magnit, Russia’s largest food retailer by market value, plans to open almost 10,000 stores in the next five years, or more than five a day on average.
Magnit wants to double the number of convenience stores to 12,000 by the end of 2017, and to quadruple the number of hypermarkets to 500, the Krasnodar, southern Russia-based retailer said.
Magnit has doubled its store network in the last three years, while shares have risen more than 150 percent. Magnit has a market value of about $21 billion in London, exceeding French retailer Carrefour SA’s (CA) $19.5 billion.
Magnit’s long-term targets look aggressive and may require about $12.8 billion of capital spending during the next five years funded by a sale of new shares, Mikhail Terentiev, an analyst at Otkritie Capital, said.
The retailer plans to use cash flow and borrowing in equal proportions to fund growth. Capital spending will be as much as $1.8 billion this year.

Source: www.freshplaza.com

X5 to launch Perekrestok Express chain in Kyiv

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The Russian grocery retailer the X5 Retail Group is planning to launch a chain of convenience stores under the Perekrestok Express brand name in Ukraine. The first two stores are due to open in Kyiv in 2013 and will test the express format in the country. One of them is expected to become operational on a 200 m2 site at the end of April 2012. In addition, the company’s own store retailer is ready to develop a franchise chain. In terms of wider development plans in the country, the company intends to focus on Kyiv and the Kyiv Province.
X5 operates in Ukraine through its subsidiary the Iks 5 Retail Group. The group has been present on the country’s retail market since 2004 and currently has just 10 stores there, in comparison with more than 3,800 in Russia.

Source: www.russiaretail.com

130 new stores for Verny

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Verny, a grocery retail chain of soft discounters, will have approximately 130 new outlets in 2013. In Q4 2012 the company launched 33 stores in Moscow, the Moscow Province, St. Petersburg and the Leningrad Province. The first Verny store is due to open in Yekaterinburg in the summer of 2013. Further launches will take place in six regions in which the company has not previously operated. In addition, Verny is preparing to open two distribution centres in Moscow and St. Petersburg.
As Retail Update Russia reported on a previous occasion, the Verny brand is developed by the former managers of the X5 Retail Group, along with Andrey Rogachev, the founder of the Pyaterochka and Karusel grocery networks (both brands are now owned by X5). The first outlets began operations in October 2012.

Source: www.russiaretail.com

Flush full year at Russia’s Magnit

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Russian retailer Magnit is closing in on market leader X5, reporting a bullish full-year performance for 2012 with significantly higher figures across the board. A rash of store openings and higher margins underpinned the success, seeing EBITDA increase by 71.62 per cent and net revenue up 33.6 per cent to RUB 448 billion (roughly €11 billion).

Analysts have branded Magnit the best-performing grocer in Russia, as well as one of Europe’s most profitable, with market share reported to be around 5 per cent. The group expanded its store network by 1,575 outlets during the fiscal year, including 1,057 supermarkets and neighbourhood stores and 36 hypermarkets, bringing its total tally to 6,884 stores.

2012 net income increased by 103.15 per cent, coming in at RUB 24,994.79 million (roughly €621 million) with a 5.26 per cent rise in like-for-like sales.

Magnit’s 126 hypermarkets delivered a stronger performance than its supermarkets and neighbourhood store division with like-for-like growth of 11.43 per cent and 8 per cent, respectively.

CEO Sergey Galitskiy declared the group’s ambition to increase its market share, with a busy 2013 scheduled. “We are already thinking of 2013 and have set a challenging task for ourselves to open over 1,100 convenience stores, over 60 stores of the hypermarket and Magnit family format, and 250 cosmetics stores. We also hope that this year we will launch four distribution centers and buy at least 1,200 trucks,” he said.

Source: www.freshplaza.com

X5 Retail Group buys Togliatti network “Mindal” (“Almond”)

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X5 Retail Group has announced this month the possible purchase of a regional network of grocery stores “Mindal” (“Almond”).

At the moment, the negotiations with the owner of Togliatti supermarkets are held, and the transaction for 600 million rubles can be concluded as early as in spring this year.

Currently, Togliatti is already included in the coverage of X5 Retail Group: the city has several discounters already – “Pyaterochka +” and two “Perekrestok” stores.

A few months earlier the trade press published information about purchase of  “Mindal” by retailer “Okay”, and named almost the same amount of transaction, 30 million USD. But last autumn, the network refused the purchase, citing the fact that “Mindal” has got only a hypermarket store, and this segment is not a priority for “Okay”.

Source: www.fruitnews.ru

All change at X5

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Russian retailer set to appoint new chief executive while announcing full-year revenue growth of 8.3 per cent for 2012

The X5 retail group has announced changes to its management, including the appointment of a new CEO, as well as revealing its results for the full-year of 2012.

Interim chief executive Stephen DuCharme has been nominated by the group to take the position permanently, X5 said, a move that is subject to X5 shareholder approval at the AGM to be held in April.

There are further changes at the top, the company noted, with chief financial officer Kieran Balfe replaced by Sergey Piven.

X5 said that, for 2012, revenue increased year-on-year by 8.3 per cent to R490.9bn (€12.2bn), down on the 32 per cent jump in revenue the group registered for 2011.

The slowdown came despite the addition of 800 new outlets in Russia throughout the year.

Source: www.fruitnet.com

Logistics key to retail expansion

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Thanks to relative political stability and strong oil and gas prices, Russia’s retail turnover more than quintupled from 2001 to 2011 and now exceeds US$600 billion annually. Data suggest that this sector is entering the steepest part of its growth curve. How will Russia’s retailers face the challenges of this critical period of expansion? Will foreign retailers manage to get a slice of this growing pie?

Russia’s enormous size and level of economic development mean that the retail market is currently divided among many players. While large retail chains dwarf the majority of competitors in market capitalization, their market share is relatively small. The X5 Retail Group, the largest food retailer, for example, controls only 5.6% of the market, and the top 10 food retailers comprise less than 20% of the market. This is in stark contrast to the developed markets of Western Europe, where leading food retailers hold a quarter of the market or more e.g., Tesco (30% market share) in the U.K. and Edeka (26% market share) in Germany.

This opportunity for consolidation is fueling a pitched battle among Russia’s retail chains to establish regional and national market share. Which chain prevails as top dog will depend on how well it can confront the logistical challenges of the country’s decaying infrastructure, responsibly manage expansion and successfully navigate an uncertain regulatory environment.

Russia’s road network stands at 610,000 miles, of which only 482,000 miles are paved. (In comparison, the U.S. has four million miles of roads, of which 2.7 million are paved.)

In addition, there is a lack of quality warehousing in the country. Colliers International reported that there are 81 million square feet of industrial space in all of Russia, while the Chicago market alone houses 537 million square feet, according to real estate service firm Newmark.

All the leaders in Russia’s retail sphere are rapidly modernizing their logistical operations. Retail chain Magnit is currently recognized as the cutting-edge logistics innovator. As a result, it is rapidly closing in on X5’s lead as Russia’s largest retailer in terms of revenues. Its profits more than doubled in the first half of 2012 compared to the previous year, while X5’s profits over the same period dropped 20.6%. X5 appears to be playing catch-up in logistics. During this period, its margins were hit by the high costs of opening a new distribution center and the set-up costs related to adopting a direct-import model.

Magnit’s main advantage over its competitors has been its effectiveness in bringing the supply chain completely in-house and cutting out the middle men who previously added costs and delays. Today, Magnit runs a fully independent supply chain, with over 3,900 of its own vehicles and a proprietary network of 15 distribution centers totaling close to 3.9 million square feet. It continues to expand this network, opening a new facility in late December 2012 to serve the Volga region and Ural region.

The Russian retail market is heavily saturated, and barriers to entry are high. The two foreign chains that have found success have one thing in common: They struck when the iron was hot. German retailer Metro and the French chain Auchan entered the Russian market in the early 2000s, before competitors became well-established. Of the top-10 leading food retailers, Metro and Auchan have been the only non-Russian firms to command a leading position in the retail sector.

Walmart is looking at a second attempt to access this market, having recently hired former X5 CEO Lev Khasis and appointing him senior vice president for international operations. Khasis was key in positioning X5 as the Russian market leader and grew the company to annual revenues of US$15 billion. He will likely be the strategic player for Walmart’s eventual entrance into the sector.

Source: www.freshplaza.com

Top Five

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The market share of the five largest companies in the food retail will grow from the current 18% to 30% in 2015, but the change of the leader is not expected, said Natalia Kolupaeva, Raiffeisen bank customer analyst.

“At the end of 2015 we will approach more or less the average Europe rate; the major players – top 5 companies – will get about 30% of the market. And these companies are already known today, the changes are not expected, besides the relocation of X5 Retail Group and “Magnit”, – she said during the telephone conference on the forecast for the development of the consumer market in Russia.

According to the analyst, other major companies – besides X5 Retail Group and “Magnit” – will be “Auchan”, Metro, and “Dixy”, which will continue their aggressive campaign to promote and expand their networks.

The limit of beer sales in retail outlets less than 50 square meters (from January 1, 2013) and the law in draft proposed by Public Health Department, according to which tobacco products will not be sold in small retail stores, will also favor the expansion of retail networks, excluding small stores from the food market.

However, according to the forecast, the annual growth rate of the food retail market will be reduced from 9% to 8% in the period from 2013 to 2016 as Raiffeisen bank analysts said.

Source: www.retailer.ru