Russian retailers’ performance in challenging market

Date : 13 February 2019

Russia’s retail market in 2018 faced stagnant household incomes and food price inflation. This led shoppers to become more economical with their spending. As a result, retailers had to compete more for their share of spend in groceries, which has led to a slowing in real sales growth rates.

We look at the 2018 full year results and highlight how the leading Russian retailers managed in the face of the challenging macroeconomic conditions.

Source: IGD Research, YOY: year-on-year, LFL: like-for-like

Macroeconomic conditions main reason for X5’s slowdown

X5 continues to be one of the fastest growing networks in sales and store numbers, amongst Russia’s leading grocery retailers. However, its like-for-like growth slowed in 2018, which it put down to the lack of real growth in shoppers’ incomes, as they faced rising food price inflation toward the end of 2018. That said it maintained double-digit year-on-year sales growth as it opened more than 2,300 stores during the year.

Magnit’s transformation strategy shows some fruition in growth

The number two Russian retailer showed positive Q4 results, making it the first quarter in two years that it reported improving like-for-like sales. That also translated into improved full year results for 2018, which Olga Naumova, Magnit CEO, attributed to the investment in a new customer value proposition (CVP). As part of the strategy the retailer focused on category management, improved on-shelf availability and better store locations. Naumova stated that all new stores will be opened under the new CVP and will include improved layouts.

Lenta’s focus on ranging and marketing improves like-for-like growth

Lenta was the only leading retailer to report a better set of like-for-like sales in 2018 versus the previous year. It attributes this to the continued focus on the shopper, which has helped it grow average basket spend. The retailer said it continually revised its range to offer more relevant products and raise shopper awareness through effective and targeted marketing. This was done by tailoring its fresh assortment to suit regional demands, building supplier relationships to help it to extend and enhance its range, and actively engage with shoppers via its loyalty programme and in-store marketing.

Okey reports sales decline for first time in over 15 years

It reported a decline in sales, which at a total sales line was due to the disposal of its St Petersburg supermarkets to X5. This was accentuated by a 3.4% year-on-year sales drop at its hypermarket format. In 2019 it plans to focus on its discount format DA! and its new Okey compact hypermarket.

Dixy officially ceased to be a public company

The retailer had previously received permission, in December 2018, from the central bank to not disclose financial information. In 2019 it will focus on preparing for its merger with Bristol and Red & White, and a new strategy and structure for the new combined company.

Auchan Russia change in management

Following Auchan Russia’s second year of sales decline in 2018, Francois Remy, Auchan Russia CEO, took the executive decision to build a new team structure at the directorial level. Remy stated this was required “in order to improve efficiency”. He also stated that 2019 "will mark the re-launch of Auchan Retail Russia".

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