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Retail

Russia's X5 Building Customer Contacts But Core Businesses Drive Growth

Russian food retailer X5's moves into online delivery, financial services and media are geared towards more contact with customers, CEO Igor Shekhterman told Reuters, but its stores remain the priority.

Shekhterman said X5 plans to grow by at least 10% a year in the next few years, with the bulk of that coming from its core businesses - the Pyaterochka and Perekrestok supermarkets, and its recently launched 'hard discounter' Chizhik.

Russia's leading food retailer, which reported a 55.9% year-on-year jump in third-quarter net profit, expects revenue in 2021 to exceed 2 trillion roubles ($28 billion), and is seeking to consolidate its place at the top, eyeing a grocery market share of 15% by 2023.

"The main growth will come from our core businesses," Shekhterman said in an interview ahead of X5's capital markets day of briefings for analysts and investors on Wednesday.

Rising Inflation And Low Incomes

X5 is planning to open up to 3,000 Chizhik stores over the next three years, one of several retailers tapping into demand for cheap prices amid rising inflation and low incomes.

The group's digital businesses, though growing explosively, contribute just 2% of revenue. "In spite of our triple-digit growth, we are investing far less in the digital businesses than our digital competitors," Shekhterman said.

On express delivery, strategy director Vladimir Salakhutdinov said X5 could cut delivery times faster but was keeping a focus on the economic model and was mainly interested in long-term success.

Strengthening Core Business

Other new business lines are primarily aimed at strengthening the core business and connecting more with consumers, said Shekhterman.

Media platform food.ru, filled with recipes and healthy eating tips, could become Russia's top online food resource in terms of traffic as early as next year, said Salakhutdinov.

X5 Bank, slated for launch this year, will likewise aim to drive traffic, keeping consumers with the company for longer when making purchases, and in turn reducing operating expenditure, Shekhterman said.

Competitors Magnit and Lenta made large acquisitions this year, but X5 is only in the market for smaller regional M&A deals, in part because it is restricted by Russia's anti-monopoly service.

News by Reuters, edited by ESM. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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