X5 Sales Up by 57% on Store Openings

X5 Retail Group, the country's largest supermarket company, said fourth-quarter sales rose 57 percent after it added stores and fewer people shopped at open markets.

Revenue climbed to $1.69 billion from $1.07 billion a year earlier, the company said Tuesday in a statement. Sales increased 26 percent in rubles at stores open at least a year, while the number of customers rose 8 percent and the average transaction value advanced 18 percent.

X5, the owner of Perekryostok supermarkets and Pyatyorochka discount grocery stores, is gaining shoppers as the economic growth fuels incomes, spurring more people to seek higher-quality food and stop shopping at open markets. Disposable income rose by 11 percent in November, the latest data from the State Statistics Service shows. The retailer said it expected sales to increase by as much as 38 percent in local currency this year.

X5 shares gained 40 percent last year after surging 79 percent in 2006.

Sales were fueled by "a strong macroeconomic environment, increased pre-New Year's spending, as well as innovative and successful promo campaigns and a significant investment in customer loyalty," chief operating officer Antonio Melo said.

Full-year revenue climbed 53 percent to $5.28 billion, beating the $5.15 billion median estimate of 18 analysts polled by Bloomberg. The sales figures reported Tuesday exclude royalty payments from franchises, which will be included in the full earnings report, X5 said. The retailer is scheduled to release the report Feb. 26, according to its web site.

Same-store sales climbed 20 percent for the year, and the average transaction gained 11 percent, X5 said. The number of customers rose 9 percent. The retailer plans to increase the amount of fresh foods in its stores by about 5 percent in the next two years to keep shoppers coming back, Melo said.

X5 increased its selling space by 69,000 square meters in the quarter and by 143,000 square meters, or 31 percent, in the year. That exceeded its goal of adding 140,000 square meters in 2007.

The retailer said Tuesday that it planned to add 140,000 to 160,000 square meters of space this year. It will open stores mainly in cities where it already has outlets and will enter two new regions in the country's center and south with discount grocers, chief financial officer Yevgeny Kornilov said.

Capital spending will reach $1.2 billion to $1.4 billion for the year, with about 40 percent to be spent on stores that will open after 2008. That excludes the purchase of the Karusel superstore chain planned for this year.

"Margin sustainability will be the key question for 2008," said Troika Dialog's Viktoria Grankina. "This will depend on their ability to continue improving supplier terms and manage rising operating cost inflation."

X5 raised prices by about 7.7 percent in 2007 and expects to stay below the country's inflation level next year, Kornilov said. The inflation rate rose to 11.9 percent in 2007, the highest in four years, the State Statistics Service said this month.