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X5 Retail Group Announces Record Growth for 2016

Russian Retail giant X5 Retail Group has announced a record revenue increase for the year 2016, outpacing market leader Magnit twofold. Full-year sales increased by 27.8% with like-for-like sales up 7.7%. The main growth driver was the company’s minimarket format Pyaterochka, whose net sales improved by 32.5% year-on-year. Meanwhile, EBITDA margin grew to 7.7%, which allowed net debt/EBITDA ratio to fall to an all-time low of 1.81x. With most of the store network refurbished to new standards, X5 believes it now has the financial leeway to focus on its strategic goal of doubling its market share by 2020.


Opinion

X5 Shows Appetite for Growth

X5 has taken the fast track on its race to gain market leadership. Expanding its store count by almost 30% the second year in a row is an impressive feat. Even more against the backdrop of a prolonged economic downturn and increased competition. X5 is well-known for its focused acquisitions of regional chains and tapping into franchise operations, which – in contrast to organic growth – always raises the questions of how it will affect the bottom line. Many retailers have set their focus on a fast-forward quantitative growth strategy, only to see themselves cash-strapped later, with Agrokor in the Balkans the most prominent example.

Delivering like-for-like growth well above food inflation allays those concerns and shows that Russian consumers fully accept the revitalised store concepts of X5’s Pyaterochka minimarkets. Posting growing net profit at the same time demonstrates that the commercial offer is sustainable with headroom to invest in future expansion, without endangering credit lines.

With nearly all of its stores now refurbished to the latest concepts and the completion of its organisational realignment towards a more banner-focused strategy, X5 now has the financial and management capacity to conquer Russia beyond the Ural Mountains. Future expansion is being facilitated by investment in new distribution centres and logistics and this prepares the way for head-on competition with main rival Magnit and regional top dogs such as Maria-Ra and Monetka. We are convinced that X5 is on the right track to grab market share at a pace well ahead of its peers.
Topics: X5 Retail Group