Russian food retailer X5 has said declining profit in its fourth quarter was partly due to the aggressive expansion of its network of discount stores, as Russian consumers feel the pinch.
Shoppers have faced surging prices and falling incomes in the year since the Kremlin ordered tens of thousands of troops into Ukraine, hitting spending power and boosting demand for cut-price goods.
Hard Discounter
The active expansion of X5's Chizhik 'hard discounter' format is in response to customers increasingly seeking the best value offer for their money, CEO Igor Shekhterman said, pointing to sharply higher revenue for the format.
Revenue at Chizhik was nearly 12 times higher in 2022 as a whole at RUB 36 billion roubles (€440 million).
X5 said its focus is on growth of its Pyaterochka convenience stores and Chizhik format, planning more than 3,000 store openings in the next three years.
Fourth-quarter profit dropped 73.8% year on year to RUB 2.08 billion, but full-year profit was up 5.7% at RUB 42.19 billion.
Read More: Russia's X5 Group Targets Big Expansion Of Its Discount Format
Expansion Plans
The group's reduced profit margin was largely attributable to discounted prices and the aggressive expansion of the Chizhik network, it said, adding that the board would not recommend a dividend for 2022.
"While the company remains committed to its long-term goal of returning company profits to shareholders, the supervisory board believes it would be in the company’s best interest to temporarily deviate from its dividend policy as long as current uncertainties and regulatory conditions prevail," X5 said.
News by Reuters, additional reporting by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.
