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Retail

Russia's X5 Group To Resume Growth Investments After Q2 Profit Jump

Russia's leading food retailer X5 Group plans to resume investments to grow and expand the business after reporting a 79.4% jump in second-quarter net profit to RUB 26.8 billion (€440 million).

The retailer, whose revenue rose 18.6% in the quarter to RUB 648.0 billion (€10.5 billion), said it would continue looking for M&A opportunities.

X5 said it anticipated margins stabilising at lower levels in the second half of the year, helped by strong profitability this quarter and as the group develops its private labels and diversifies its supplier base.

Western sanctions against Moscow over its actions in Ukraine have hit the Russian economy, particularly crippling its financial sector and imports, which have slowed markedly.

'The group is not subject to any sanctions or restrictions at the moment, but is likely to encounter challenges due to sanctions on (the) financial system and certain imports into Russia,' X5 said in its earnings report.

Price Investments

CEO Igor Shekhterman said X5 had made price investments into basic staples to offset inflation, which soared after Russia sent tens of thousands of troops into Ukraine on 24 February.

Last month the retailer said Russian shoppers were switching to cheaper food items because of a drop in real disposable income, with its discount chain Chizhik seeing significant growth in sales.

Shekhterman earmarked Chizhik as a particular target for development as X5 plans to speed up investments into future growth.

While many Russian businesses face the economic challenges of sanctions and other restrictions, there are opportunities for others.

X5 acquired 15 Prisma supermarkets from Finnish firm SOK Retail in June.

"We will continue to look for attractive inorganic growth opportunities arising in the market," the company said.

The company's Moscow-listed depositary receipts were 1.6% higher as of 07:25 GMT.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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