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Russia's X5 To See Benefit From Increased Food Demand, Online Growth

Published on Oct 12 2020 11:59 AM in Retail tagged: Featured Post / Lenta / Russia / Magnit / X5 Retail Group

Russia's X5 To See Benefit From Increased Food Demand, Online Growth

Russia's X5 Retail Group is expected to see like-for-like sales increase by around 6% in the third quarter, a leading retail analyst has said, on the back of increased demand for food due to the closure of the HoReCa channel, as well as online growth.

X5 publishes its third quarter results on Thursday 15 October, and Artur Galimov, senior analyst with Sova Capital, said that it is likely to see revenue grow by around 14.8% in the period.

Sales Space

Its performance is also likely to be boosted by an increase in selling space (around 9%) and rising food inflation, which stood at 4.3% in the third quarter, compared to 3.6% in the second.

Margins are expected to 'level off' after an 'abnormally high' Q2, Galimov added, although they should show some gains year-on-year.

'Our 3Q20 forecasts suggest some upside to our and the market’s FY20 projections,' Galimov wrote in a briefing note. 'As such, we believe that the market should take the results positively.

'Furthermore, we believe there could be an encouraging update on October sales trends that could be supportive of the stock. The Capital Markets Day (scheduled for 27 October) should be more focused on the company’s mid-term strategy and online sales, as well as on its digital business, which X5 expects to be generating a significant share of its revenue five to 10 years from now.'

Rival Retailers

Rival retailer Magnit, meanwhile, has its results scheduled for 29 October, with Galimov expecting revenue growth of 11.3% following a 13.7% increase in October, largely due to a slower pace of new store openings.

Like-for-like growth for Magnit is likely to stand at around 6% in the quarter, compared to 7.2% in the second quarter.

Lastly, Lenta, which releases its third quarter results on 21 October, is likely to see an easing in its sales momentum after an 'abnormally strong' second quarter.

Galimov said that he expects Lenta's core retail revenues to grow by around 8% year-on-year, mostly driven by growth in like-for-like sales (+6%), amidst a 'pause' in new selling space.

'We expect the results to have a neutral effect on the stock, although any comments from management on the company’s new strategy during the conference call could be important,' Galimov said.

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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