Russia’s leading grocery retailers: sales slowdown in H1

Date : 06 August 2018

The leading retailers in Russia, such as X5 and Magnit, have reported weakened financial performance in the first half of 2018.

Source: IGD Research

Sharp drop in LFL sales growth at X5

X5’s sales grew by 19.8% to RUB731,198m (€9,961m) year-on-year, as the like-for-like sales growth slowed down from 6.9% to 0.8% in the same period. The decline was driven by the performance of Pyaterochka and impact of the weather in the first quarter of the year. However, the retailer posted better like-for-like growth of 1% in the second quarter of 2018 because of improved weather conditions and the expansion of fresh food assortment from local supply chains that helped generate additional traffic.

Magnit’s business transformation impacts like-for-like sales

Magnit reported year-on-year sales growth of 7.2% to RUB595,263m (€8,109m), an improvement from the 6.4% growth achieved during the same period in the previous year. However, like-for-like sales growth further declined to -4.5% in 2018 (compared to -3.1% in H1 2017). The retailer attributed the decline in year-on-year sales to food deflation that caused a lower basket spend, and the Easter holidays falling just before shoppers’ monthly salary payments. According to Magnit CEO, Olga Naumova, the slowdown in like-for-like sales was expected as the retailer continues to undergo a large-scale business transformation.

Ms. Naumova said, "We are doing fundamental work to become as close to customers as possible, in all positions, to meet their needs and interests. The decrease in the growth rate of revenue is quite natural for such changes".

Lenta outperforming its competitors

Lenta’s sales grew by 18.2% to RUB193,200m (€2,631m). Its like-for-like sales growth increased to 4.8%, in contrast to the negative like-for-like sales performance of 1.8% in H1 2017. This was attributed to an increase of new shoppers in the hypermarket format and a rise in frequency of visits to its supermarkets. Also, the retailer offered options for shoppers to trade up within a category, such as soft drinks, to encourage spend on higher price point products like 100% juice or nectar beverage. This helped increase basket spend and offset the impact of food price deflation.

Okey Group continues sales decline with supermarket disposal

Okey reported a year-on-year sales fall of 8.7% to reach RUB88,068m (€1,270m), a weak result when compared to the same period in 2017 when it grew by 2.7%. The retailer’s like-for-like sales growth continued to be negative at -2.5% in 2018, compared to -2.3% last year. The retailer attributed the decline in the year-on-year performance to the sale of its supermarkets in St Petersburg to X5. Excluding the supermarket disposal, Okey reported a 2.5% decline in year-on-year sales because of food deflation and strong competition in its key trading areas, such as St Petersburg and Moscow.

Metro reported a drop in sales and Dixy did not report

Metro’s total sales contracted by 9.6% in the first half to RUB112,603m (€1,534m), as the like-for-like sales growth fell by 8.8%. Metro is implementing a new pricing policy, under the concept ‘buy more, pay less’, to boost sales. The wholesaler offers bulk discounts to attract more independent traders, hotels, and restaurants. Dixy Group did not report its half-year results for 2018 as it delisted from the Moscow Stock Exchange at the end of 2017.

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