X5 Retail Group N.V. Reports 53% Net Retail Sales* Growth in USD Terms for Full Year 2007
22 Jan 2008
Amsterdam, 22 January 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 fourth quarter and full year 2007.
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Q4 2007 Highlights |
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FY 2007 Highlights |
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· Q4 2007 net retail sales surged 57% year-on-year to USD 1,692 mln;
· In RUR terms Q4 2007 net retail sales grew by 48% year-on-year to RUR 42,148 mln;
· Q4 2007 LFL sales growth totaled 26%;
· In Q4 2007 the Group added net 119 stores;
· Net addition of selling space in Q4 2007 equaled 69.0 thousand sq. m. |
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· FY 2007 net retail sales surged 53% year-on-year to 5,284 mln;
· In RUR terms FY 2007 net retail sales grew by 44% year-on-year to RUR 135,156 mln;
· FY 2007 LFL sales growth totaled 20%;
· During FY 2007 the Group added net 249 stores
· Net addition of selling space in FY 2007 equaled 143,1 thousand sq. m. |
Lev Khasis, X5 Retail Group CEO, commented:
“Our achievement of a vigorous increase in sales of 53% in dollar terms in 2007 gives us a firm foundation for further growth of X5’s market share and underpins the competitive position of the Company, which is stronger than ever. Going forward we will continue to focus our efforts on enhancement of the Group’s market leadership both through better performance of existing stores and through expansion into new regions of European Russia. This year we plan to accelerate gaining exposure to the hypermarket format by opening six compact and two large size hypermarkets. As a result, we expect to deliver a net sales increase in the range of 36-38% excluding FX effect for the full year 2008.”
Antonio Melo, X5 Retail Group Chief Operating Officer, added:
“Our decision to postpone several openings and concentrate on existing stores’ operations has borne fruit. As a result, Q4 was the strongest in the year in terms of sales growth. This outstanding performance was the result of several factors, including strong macro economic environment, increased pre-New Year spending as well as innovative and successful promo campaigns and a significant investment in customer loyalty. Traffic numbers show that this approach was welcomed by our clients, which more than compensates for some margin investment. For 2008 we will continue to focus on delivering balanced growth in traffic and basket, especially in the hypermarket format, which we expect to be the leader in LFL stores performance.”
* 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 FY 2007 financial results.
Numbers provided in this press-release are preliminary and unaudited.
2006 net retail sales are reported on pro-forma basis for Pyaterochka, but include only two months – November&December 2006 - of Merkado net retail sales in the amount of USD 16.5 mln. 2007 net retail sales include one month (December) of Korzinka operations in the amount of USD 20.0 mln. For your reference, FY 2006 net retail sales of Merkado were USD 81.6 mln, FY 2007 Korzinka net retail sales totaled USD 161.6 mln.
Net Retail Sales Performance
Net Retail Sales Dynamics
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% change |
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% change |
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USD mln |
Q4 2007 |
Q4 2006 |
y-o-y |
FY 2007 |
FY 2006 |
y-o-y |
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Hypermarkets |
131.9 |
81.5 |
62% |
392.7 |
244.9 |
60% |
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Supermarkets |
618.2 |
398.5 |
55% |
1,944.7 |
1,254.5 |
55% |
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Soft Discounters |
941.8 |
594.6 |
58% |
2,946.8 |
1,961.0 |
50% |
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Total Net Retail Sales |
1,691.9 |
1,074.6 |
57% |
5,284.3 |
3,460.4 |
53% |
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RUR mln |
|
|
|
|
|
|
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Hypermarkets |
3,292.4 |
2,163.1 |
52% |
10,044.3 |
6,637.0 |
51% |
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Supermarkets |
15,395.3 |
10,543.2 |
46% |
49,740.8 |
33,985.8 |
46% |
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Soft Discounters |
23,460.1 |
15,762.8 |
49% |
75,370.9 |
53,185.2 |
42% |
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Total Net Retail Sales |
42,147.8 |
28,469.0 |
48% |
135,156.0 |
93,808.0 |
44% |
Total net retail sales for the fourth quarter 2007 increased by 57% in USD terms (48% in RUR terms) to USD 1,692 mln, translating into a 53% (44% in RUR terms) increase year-on-year to USD 5,284 mln for the full year 2007. Impressive retail sales surge was due to a very strong performance of soft discounters in the regions and in Moscow, outstanding results demonstrated by supermarkets across all formats and regions and improving performance of hypermarkets opened at the end of 2006.
Gross Retail Sales Analysis*
Like-For-Like** Stores Performance (please see Appendix I for detailed LFL performance)
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Q4 2007 |
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FY 2007 |
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Total LFL, % |
Traffic, % |
Basket, % |
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Total LFL, % |
Traffic, % |
Basket, % |
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Hypermarkets |
21 |
10 |
11 |
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17 |
11 |
6 |
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Supermarkets |
29 |
15 |
14 |
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22 |
14 |
8 |
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Soft Discounters |
24 |
5 |
19 |
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19 |
6 |
13 |
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X5 Retail Group |
26 |
8 |
18 |
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20 |
9 |
11 |
Gross Retail Sales Dynamics
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Q4 2007 |
FY 2007 |
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LFL, % |
Expansion, % |
Total change %, excl. FX |
LFL, % |
Expansion,
% |
Total change %, excl. FX |
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Hypermarkets |
21 |
31 |
52 |
17 |
34 |
51 |
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Supermarkets |
29 |
18 |
47 |
22 |
24 |
46 |
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Soft Discounters |
24 |
25 |
49 |
19 |
23 |
42 |
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Total Gross retail sales |
26 |
22 |
48 |
20 |
24 |
44 |
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FX Effect, % |
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9 |
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9 |
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Total Change Y-O-Y, % |
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57 |
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53 |
For the fourth quarter 2007, LFL sales surged 26% in RUR terms, composed of 8% growth in traffic and 18% growth in average basket. Expansion brought additional 22% in terms of growth. As a result, full year 2007 LFL sales increased by 20% in RUR terms with traffic growing by 9% and basket – by 11%, while 24% came from expansion.
Hypermarkets
For the fourth quarter 2007, hypermarket sales surged 52%, excluding FX effect. This growth came as a result of a 21% increase in LFL sales and 31% added by non-LFL stores. In the fourth quarter the Company ran several promotional campaigns that were aimed to boost traffic. In terms of expansion, three new stores were added during 2007, including one large store purchased as part of Korzinka deal in December 2007 that currently operates under My (“We”) brand.
For the full year 2007, gross sales in the hypermarket format increased by 51% (LFL sales up 17%, new stores sales up 34%).
* 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.
** In line with international practice, LFL (like-for-like) performance represents growth in sales of LFL stores during the reporting period over the same period a year ago. LFL stores are defined as stores that have operated for at least twelve full months preceding the reporting date. Their sales are included in LFL calculation starting from the first day of the month following the month of the store opening. LFL sales are calculated on the basis of traffic and basket amounts of relevant stores in the period under review, therefore LFL sales are gross, i.e. include VAT. LFL sales are reported in Russian RUR unadjusted for inflation.
Supermarkets
For the fourth quarter 2007, supermarket sales grew by 47%, excluding FX effect, as a result of 29% surge in LFL sales and 18% coming from expansion. In October 2008 we ran a very successful Festival of Low Prices promotional campaign across all regions, which was one of the factors that supported robust performance of supermarket format. As usual, there was very strong LFL growth in Moscow (up 33%), which again proves our strong leadership in this format in the capital of Russia. We are proud to report that supermarket traffic in Moscow posted impressive growth of 18% in the fourth quarter. LFL sales were also very strong in St. Petersburg (23%), with regions demonstrating healthy 19% in terms of LFL growth.
For the full year 2007, gross sales in the supermarket format increased by 46% (LFL sales up 22%, new stores sales up 24%).
Soft Discounters
In the fourth quarter 2007 soft discounter sales grew by 49%, excluding FX effect, as a result of a 24% surge in LFL sales and 25% coming from expansion. The strongest LFL growth in the soft discounter format was reported in the regions (up 63%) due to continuing excellent performance of stores in Chelyabinsk and Yekaterinburg. As competition in St. Petersburg continues to strengthen, it is very challenging to keep positive traffic numbers, which was reflected in our St. Petersburg discounters LFL performance – total LFL growth was 13% and traffic was flat. At the same time, in Moscow soft discounters posted quite impressive growth numbers in terms of LFL – total LFL sales were up 33% (traffic increased by 7%, while average basket – by 26%).
For the full year 2007, gross sales in the soft discounter format increased by 42% (LFL sales up 19%, new stores sales up 23%).
Expansion
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As of |
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Net Added |
Net Added |
% change, |
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Selling Space, sq. m. |
31 Dec ‘06 |
30 Sep ‘07 |
31 Dec ‘07 |
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in Q4 2007 |
in 2007 |
FY ’07, y-o-y |
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Hypermarkets |
46,179 |
50,179 |
59,963 |
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9,784 |
13,784 |
30% |
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Supermarkets |
162,807 |
175,654 |
191,730 |
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16,076 |
28,923 |
18% |
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Soft Discounters |
257,150 |
314,443 |
357,517 |
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43,074 |
100,367 |
39% |
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Total Net Added |
466,136 |
540,276 |
609,210 |
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68,934 |
143,074 |
31% |
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# of Stores |
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Hypermarkets |
12 |
13 |
15 |
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2 |
3 |
25% |
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Supermarkets |
156 |
163 |
179 |
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16 |
23 |
15% |
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Soft Discounters |
451 |
573 |
674 |
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101 |
223 |
49% |
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Total Net Added |
619 |
749 |
868 |
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119 |
249 |
40% |
In Q4 2007, X5 Retail Group N.V. added net 119 stores, including 101 soft discounter,
16 supermarkets and 2 hypermarkets with a total net selling space of 69.0 thousand
sq. m.
For the full year 2007 net addition of stores totalled 249, of which 223 were in soft discount format, 23 supermarkets and 3 hypermarkets. The total net selling area added was 143.1 thousand sq.m. This takes into account 3.6 thousand sq.m. that were closed during the year
(8 soft discounters and 2 supermarkets) and includes stores acquired through tactical M&A transactions that are summarized below.
As a result, at 31 December 2007, X5 Retail Group N.V. operated 868 company-managed stores (consisting of 674 soft discounters, 179 supermarkets, 14 compact hypermarkets and one full-size hypermarket store), with the total net selling space of 609.2 thousand sq. m. (please see Attachments III and IV for detailed information on store opening progress).
Tactical M&A Transactions & Franchises Buy-Out Summary
During 2007 X5 Retail Group successfully completed two tactical M&A transactions and one franchise chain buy-out.
• In the beginning of 2007 the Company gained control over 40 soft discount stores in Chelyabinsk previously operated by a franchisee under Pyaterochka brand with the total net selling space of 13.8 thousand sq. m. It was the first step in implementation of the Group’s strategy of selective buy-out of certain franchises in strategically important regions.
• In December 2007 X5 Retail Group completed acquisition of 22 Korzinka stores operating in the Lipetsk region with the net selling space of 20.0 thousand sq. m.
15 of the purchased stores are being integrated into the Group's discounter format, six into the supermarket format and one store has been added to the hypermarket network.
• In December 2007 the Company also acquired a total of 29 discounter stores currently operating under Strana Gerkulesia brand (located in Moscow, the Moscow and Tver regions) with the total net selling space of 12.9 thousand sq.m, of which 26 are operational (11.7 thousand sq.m. in selling space) and three are scheduled for opening in Q1 2008 (1.2 thousand sq.m. in selling space). X5 also purchased an office building and construction in progress that potentially can be converted into selling space in the future.
These transactions enabled the Company to establish market leadership in two new regions, Urals and the Central region of Russia, as well as to strengthen its competitive positions in Moscow and the Moscow oblast. The Group has a successful track record of re-branding and integrating acquired stores into its multi-format network, ensuring quick improvement in the stores’ performance and extracting significant synergies from the integration.
Franchisee Store Operations
During 2007 the Group’s franchisee store network was expanded by net 61 stores. As of 31 December 2007, franchisees operated 688 stores across Russia and Kazakhstan in total, including 8 Perekrestok and 680 Pyaterochka stores. X5 Retail Group does not consolidate franchisee stores’ sales. The Group receives royalty payments from franchisees and reports them as other revenue.
Progress in Logistics Infrastructure Development
During 2007 X5 Retail Group added net five Distribution Centers (DCs) (one DC in Moscow was closed), increasing its storage capacity by 78.1 thousand sq.m. As a result, at the end of 2007 the Group had 10 DCs with the total storage area of 143.7 thousand sq.m., including four DCs in Moscow (total storage space of 88.0 thousand sq.m.),
3 DCs in St. Petersburg (total storage space of 37.2 thousand sq.m.), one DC in Nizhniy Novgorod (storage space of 13.5 thousand sq.m.), one DC in Chelyabinsk (2.5 thousand sq.m.) and one DC in Yekaterinburg (2.5 thousand sq.m.).
Outlook for 2008
• X5 Retail Group expects net sales growth in the range of 36-38% in RUR terms for the full year 2008;
• 2008 LFL stores’ sales expected to grow at above 10% with hypermarkets being clear leaders in LFL growth;
• In 2008 X5 plans to add 140-160 thousand sq.m. of selling space;
• Eight hypermarkets to be opened during 2008, including six compact and two large-size stores;
• In 2008 the Group plans to add around 40 thousand sq. m. of storage capacity on the net basis;
• 2008 CapEx estimated at USD 1,200-1,400 mln, out of which about 40% will be spent on the stores to be opened after 2008, including expansion of the landbank for future hypermarket construction.
Please note that 2008 outlook numbers do not take into account potential acquisition of Karusel hypermarket chain. However, these figures include contribution of tactical M&A transactions that are treated by the Company as organic development.
Note to Editors:
X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. The Company was created as a result of a merger between Pyaterochka (soft discounter chain) and Perekrestok (supermarket chain) on 18 May 2006.
As of 31 December 2007, the Group had 674 Company managed soft discount stores located in Moscow (309), St. Petersburg (244) and other Russian areas (121), 179 Company managed supermarkets across Central Russia and Ukraine, including 105 stores in Moscow (Moscow region and Yaroslavl region), and 15 Company managed hypermarkets.
As of 31 December 2007, X5’s franchisees operated 688 stores across Russia and Kazakhstan.
The Group’s net sales for the first nine months 2007 reached USD 3,618 million, an increase of 50% year-on-year. Gross profit for the period totaled USD 946 million, EBITDA amounted to USD 311 million.
Forward looking statements:
This announcement includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as” anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal” believe”, or other words of similar meaning.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Retail Group N.V.'s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.
Any forward-looking statements made by or on behalf of X5 Retail Group N.V. speak only as at the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail Group N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.
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