X5 Retail Group N.V. Reports 61% Net Retail sales Growth in USD Terms for Q1 2008
11 Apr 2008
Amsterdam, 11 April 2008 - X5 Retail Group N.V., Russia's largest food retailer in terms of
revenue (LSE ticker: “FIVE”), published today its retail sales and expansion results for the first
quarter of 2008.
Q1 2008 Highlights
• 61% year-on-year growth in USD terms in net retail sales to USD 1,775.1 mln;
• 49% year-on-year growth in RUR terms in net retail sales to RUR 43,064 mln;
• 29% LFL sales growth in RUR terms;
• 62 stores added on net basis;
• 30.1 thousand square meters of net selling area added on net basis;
Lev Khasis, X5 Retail Group CEO, commented:
“We are pleased to report that strong sales growth momentum continued into the first quarter
of 2008, with LFL sales exceeding management expectations. Our market leadership, regional
diversification and multi-format strategy enabled us to take advantage of positive
macroeconomic performance and the rise in consumer spending. We believe that our strong
presence in each of the key three formats is crucial for the continuing success of the Company
and see further expansion in hypermarket segment as a strategic priority going forward.”
Antonio Melo, X5 Retail Group Chief Operating Officer, added:
“Sales growth of 61% that we recorded reflects our ability to digest and adapt to changing
consumer preferences. We are continually improving the value proposition we offer to the
market and consequently benefit from enhanced customer loyalty.
Thus, in response to consumer demand we are adding two new store concepts to our service
offering. We are launching a new supermarket concept under the Green Perekrestok brand in
order to widen our customer base and to tailor our products and services to the growing highend
consumer segment. We have also developed a new hypermarket concept that we intend to
roll out throughout regions of our operations under the Mercado Supercenter brand, building
on the successful experience of European retailers, while adapting to the needs and
expectations of Russian consumers.”
* Net retail sales represent revenue from operations of X5 managed stores excluding VAT. This number differs
from total net sales that also include revenue from franchisees and other revenue. The total net sales number
will be reported along with the Q1 2008 financial results.
Numbers provided in this press-release are preliminary and unaudited.
Q1 2007 exclude results of operations of Korzinka and Strana Gerkulesia, while Q1 2008 net retail sales
exclude results of operations of Kama Retail. For your reference, Korzinka and Strana Gerkulesia net sales
for Q1 2007 were USD 29.2 mln and USD 19.5 mln respectively.
Net Retail Sales Performance
|
Net Retail Sales Dynamics by Format |
|
USD mln |
Q1 2008 |
Q1 2007 |
% change y-o-y |
|
Hypermarkets |
128.7 |
76.7 |
68% |
|
Supermarkets |
638.6 |
407.5 |
57% |
|
Soft Discounters |
1,007.8 |
617.1 |
63% |
|
Total Net Retail Sales |
1,775.1 |
1,101.3 |
61% |
|
RUR mln |
|
|
|
|
Hypermarkets |
3,123.0 |
2,018.3 |
55% |
|
Supermarkets |
15,491.9 |
10,718.8 |
45% |
|
Soft Discounters |
24,449.1 |
16,233.4 |
51% |
|
Total Net Retail Sales |
43,064.0 |
28,970.4 |
49% |
Total net retail sales for the first quarter 2008 increased by 61% in USD terms (49% in RUR
terms) to USD 1,775 mln. All three formats contributed to an impressive sales surge, with soft
discounters and hypermarkets demonstrating particularly strong growth.
Gross Retail Sales Analysis*
|
Like-For-Like** Stores Performance (please see Appendix I for detailed LFL performance) |
|
Q1 2008 |
|
Total LFL,% Traffic,% Basket, % |
|
Hypermarkets |
29 |
15 |
13 |
|
Supermarkets |
34 |
17 |
17 |
|
Soft Discounters |
26 |
6 |
20 |
|
X5 Retail Group Total |
29 |
10 |
19 |
|
Gross Retail Sales Dynamics |
|
|
|
|
|
|
|
Total change %, |
|
Gross Retail Sales, RUR mln |
LFL, % |
Expansion, % |
excl. FX |
|
Hypermarkets |
29 |
26 |
55 |
|
Supermarkets |
34 |
10 |
45 |
|
Soft Discounters |
26 |
25 |
51 |
|
Total Gross retail sales |
29 |
20 |
49 |
|
FX Effect |
|
|
12 |
|
Total Change Y-O-Y, % |
|
|
61 |
|
|
|
|
|
* In this section all sales dynamics analysis is based on RUR-denominated gross sales (including VAT,
excluding FX). Net sales RUR growth rates may immaterially differ due to effective VAT rate.
** Like-for-like calculations contained are comparisons of revenue (including VAT denominated in the local
currency) between two periods generated by the relevant stores. The stores that are included in like-for-like
comparisons are those that were in operation for at least a full month prior to the beginning of the more recent
period and for each month in that period. The like-for-like comparison for each store takes into account the
revenue generated by that store during the same months it was in operation in each period; the revenue of all
the relevant stores in the relevant months is then aggregated for each period and compared. Revenue is
included for each store only from the first day of the month following the month that store was opened or
acquired. For example, the like-for-like comparison of revenue between 2007 and 2006 would include the
revenue of a store that was opened or acquired on 15 October 2006, and the revenue to be compared would be the aggregate revenue generated by that store in November and December of each year.
For the first quarter 2008, LFL sales surged 29% in RUR terms, composed of 10% increase in
traffic and 19% increase in average basket, which underlines X5’s ability to capitalize on
growth in income per capita and consequent upgrade of spending pattern by Russian
consumers. Expansion brought additional 20% in terms of growth.
Hypermarkets
For the first quarter 2008, hypermarket sales surged 55%, excluding FX effect. This growth
came as a result of a 29% increase in LFL sales with 26% added by non-LFL stores. LFL sales
growth was very strong both in the regions and in Moscow on the back of growing consumer
spending and improved hypermarket value proposition helped by successful promotional
campaigns. Stronger performance of stores opened after 31 March 2007 and addition of a new
hypermarket in Voronezh in the first quarter this year contributed to strong results of non-LFL
stores.
Supermarkets
For the first quarter 2008, supermarket sales grew by 45%, excluding FX effect, as a result of
34% surge in LFL sales and 10% coming from expansion. Impressively strong LFL results are
mainly due to outperformance of supermarkets located in Moscow and St. Petersburg. We are
proud to report that supermarket traffic in Moscow and St. Petersburg posted impressive
growth of 20% and 19%, respectively, which once again underscores our leading positions in
these core markets.
Soft Discounters
In the first quarter 2008 soft discounter sales grew by 51%, excluding FX effect, as a result of a
26% surge in LFL sales and 25% coming from expansion. The strongest LFL growth in the
soft discounter format was demonstrated by regional stores (up 48%) due to continuing
excellent performance of stores in Urals. Despite the fact that St. Petersburg remains a very
competitive market, the Company’s soft discounters continued reporting positive traffic there
with total LFL reaching 15%.
Expansion
In the first quarter 2008, X5 Retail Group N.V. added net 62 stores, including 57 soft
discounters, four supermarkets and one compact hypermarket (in Voronezh) with a total net
selling space of 30.1 thousand sq. m. This takes into account 2.8 thousand sq.m. that were
closed during the quarter (five soft discounters and one supermarket) and includes 28 stores
purchased as a result Kama-Retail acquisition (9.3. thousand sq.m. in net selling space).
As a result, at 31 March 2008, X5 Retail Group N.V. operated 930 company-managed stores,
consisting of 731 soft discounters, 183 supermarkets, 15 compact hypermarkets and one fullsize
hypermarket store, with the total net selling space of 639.3 thousand sq. m. (please see
Appendices IV and V for detailed information on store opening progress).
Tactical M&A Transactions & Franchises Buy-Out Update
In the first quarter 2008 X5 Retail Group has started the integration and rebranding of Korzinka
and Strana Gerkulesia stores, which is expected to be completed in the second quarter for most
of the discounters and in the third quarter for all supermarkets. As we have announced on 5
March 2008, X5 plans to rebrand its full size hypermarket in Lipetsk purchased within the
Korzinka deal to Mercado Supercenter by 30 June 2008.
In April 2008 X5 Group acquired 100% of the business and assets of Kama Retail company - a
Pyaterochka franchisee in the Perm region. As a result, X5 bought out 28 soft discount stores
in Perm and the Perm region with a net selling area of 9.3 thousand sq.m. for a total
consideration of approximately USD 18 million, including debt. The total area of purchased
stores is 19.9 thousand sq.m, out of which 1.9* thousand sq.m. are wholly owned. This was the
second deal in the execution of the Group’s strategy of selective franchisee buy-out in
strategically important regions.
Franchisee Store Operations
During the first quarter 2008 the Group’s franchisee store network was expanded by net 23 soft
discounter stores. As of 31 March 2008, franchisees operated 711 stores across Russia and
Kazakhstan in total, including 8 Perekrestok and 703 Pyaterochka stores. X5 Retail Group
does not consolidate franchisee stores’ sales. The Group receives royalty payments from
franchisees and reports them as other revenue.
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