We attended X5’s Capital Markets Day in London to learn about its financial performance in the first nine months of 2018 and 2019 business strategy.
X5 sales performance continues to slow down…
The leading Russian retailer reported an 18.9% year-on-year sales growth to reach RUB927,482 m (€12,275 m). Its revenue growth slowed down for the third consecutive quarter, decreasing from 25.5% in Q4 2017 to 17.6% in Q3 2018. Throughout that period, like-for-like growth remained below 1% each quarter this year, while Pyaterochka drove this growth since it formed 79% of total retail sales.
…but still outgrows Magnit
The second largest retailer in Russia reported a 7.7% year-on-year growth in the first nine months of 2018 to reach RUB905,374 m (€12,132 m). The slower growth was partly due to less store openings than X5, as Magnit added 1,092 stores compared to 1,564 by its competitor. Also, Magnit’s like-for-like sales declined by 3.4% for the first nine months of 2018.
X5’s trading strategy across its three formats
X5 presented five key 2019 trading priorities for all three formats which will be: a new pricing and promotional model that adapts each store to fit regional shopper needs; reduction in share of promotions from total retail sales; expansion and/or improvement of private label ranges across all formats to help double their sales share; focus on fresh food offer to raise quality perception; and implementation of in-store technology that will upgrade stores to optimise in-store processes.
Pyaterochka will slow store expansion…
The discounter will slowdown store openings over the next five years. Acquisitions of smaller retailers will continue, especially in regions where X5 has low penetration.
…and reduce SKUs by 25%
Pyaterochka will reduce the number of SKU’s by 25% in 1,000 stores as a part of a new pilot project. It aims to create more space for the fruits and vegetables category which should increase the traffic. The retailer is also introducing a new pricing and promotional strategy which includes focus on selective promotions. This should improve on-shelf availability and reduce inventory cost.
Perekrestok will speed up store growth…
The supermarket chain will add more stores in regional cities where it has a low penetration. It will build on its value proposition with the addition of fresh, healthy eating, and ready-meals range. This will be supported with another factory to produce ready-to-eat food in the first half of 2019, and that will add over 800 SKUs.
…and focus on online
Perekrestok hopes to be the number one food online retailer by 2021. It plans to double the assortment to 50,000 and include the Karusel range, especially non-food. It will launch a Click and Collect service, express delivery, and the same day delivery next year. Two more ‘dark stores’ will be open to service Moscow city, Moscow region, and St Petersburg.
Karusel to roll out new concept in 2018
Following the launch of a new Karusel store concept earlier in 2018, the retailer will implement it across 10 stores by end of 2018 and continue in the process in 2019. The remodelled stores will include categories such as organic, healthy eating products, and areas dedicated to new categories such as home. The retailer will start a Click and Collect service across the network that same year. There are no ambitions to increase the number of stores for next year, but Karusel will re-locate branches to sites with bigger catchment areas.
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