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. Last Updated: 07/27/2016

Bargain Hunters Boost X5 Sales 46%

Bargain hunters at X5 Retail Group's discount stores helped lift sales at Russia's top grocer by 46 percent in ruble terms to 63.09 billion rubles.

X5 operates stores throughout Russia with a wide range of formats, from tiny budget shops to hypermarkets.

Since the economic crisis hit in mid-2008, Russian consumers have scaled back spending, shifting to basic goods from premium brands and shopping increasingly in low-priced chains.

According to official data, Russia's consumer confidence fell to a 10-year low in the first quarter as people grew gloomier about the economy and own finances.

"Q1 2009 was the first quarter in which trading downtrends became clearly evident, especially in February and March," X5 said in a statement.

Like-for-like sales at Russia's largest grocer by sales rose by 13 percent growth in the period in ruble terms, X5 said adding that its budget Pyatyorochka stores saw 25 percent like-for-like growth in Moscow and 23 percent in Russia's provinces.

In St. Petersburg, Pyatyorochka's hometown, like-for-like sales were depressed, rising only 7 percent because of aggressive marketing by other budget retailers seeking to capitalize on the crisis.

Total like-for-like sales at all the company's soft discounters rose by 17 percent, ahead of 11 percent at hypermarkets and just 8 percent at supermarkets.

While an outflow of customers from supermarkets was noticed — with traffic down 3 percent — the number of customers at discounters rose by 6 percent and edged up by 1 percent at hypermarkets.
Basket, or the average receipt, rose across all formats by 10 percent to 11 percent.

"Our view on the results is positive. Strong performance of soft discounters helped to mitigate the negative impact from the outflow of customers from the supermarkets, underlining the benefits of the multiformat retailing model," Marat Ibragimov, analyst at Citigroup, wrote in a note.

"On the upturn of the economic cycle, supermarkets should show much better sales dynamics than low-cost discounters."

Major Moscow supermarket chain Sedmoi Kontinent saw an outflow of customers in the first three months of 2009 — it said on Wednesday that 3.6 percent less customers visited the old stores than a year ago.

X5 also said that in dollar terms, its net retail sales amounted to $1.86 billion, implying an increase of 5 percent in dollars, year on year.

Pro-forma sales, which include acquired Karusel's business in both the first quarter of 2009 and first quarter of 2008, rose 28 percent in rubles but fell 8 percent in dollars because of a weaker ruble.

The company also said it added 43 stores on net basis in the first quarter, of which 38 soft discounters, bringing its total to 1,144 as of March 31, 2009.