RetailAnalysis
21 April 2017
Magnit, X5, and Lenta: Q1 results, 2017 plans

Three of the largest Russian retailers, X5, Magnit, and Lenta have released their Q1 2017 results. We look at the retailers’ performance and their expansion plans for the year ahead.

X5 maintains dynamic growth in 2017

X5 continues to enjoy a robust performance, with a 26.4% growth in net sales in Q1 2017. X5 sales were driven by a 7.3% like-for-like sales growth and the opening of 639 Pyaterochka stores. Like-for-like sales were kept up by a 4.6% growth in traffic, although average ticket spend slowed due to lower food inflation. Growth in traffic was partially supported by the refurbishment of Pyaterochka stores to the new store concept.

We expect X5 to maintain this path and achieve its planned goal of opening over 2,000 stores in 2017. This should help it achieve a net sales growth on par with 2016 growth of 28%.

Magnit show little like-for-like sales improvement

Magnit reported growth of 4.6%, driven by the convenience format, but a 4.8% in like-for-like sales. Further decline in like-for-like sales due to a larger bigger decline, 4.6%, in traffic performance when compared to 2016, and stagnant average ticket spend.

We expect the retailer to be on course for further growth, but with less store openings and slower net sales performance as reported in the Magnit guidance notes for 2017.

Lenta sees like-for-like declines, delays planned by store expansion

Lenta reported growth of 17.2%, driven by the addition of seven net stores, including market entry into Siberia with two new supermarket units. Like-for-like sales declined by 2% in Q1 due to a combination of lower food inflation and cannibalisation on shopper traffic from new stores.

Lenta signed leases to open 36 new supermarkets, but it was announced that the openings will move from H2 2017 to H2 2018. As a result, there will be a reduction in the 2017 investment programme. The retailer states that this will provide ‘more financial flexibility if small acquisition opportunities appear later this year or next year’. We expect slower store expansion for the remainder of 2017 and slower net sales growth in comparison to 2016, which stood at 21%.

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