X5 Retail Group is on course to post double-digit topline growth this year, a leading industry analyst has said, after the Russian retailer reported a 10.6% increase in sales in the second quarter of its financial year.
Artur Galimov of Sova Capital noted that following a dip in March and April, growth in monthly sales "gathered pace" in May and June.
"The sales results broadly matched our and consensus forecasts, and they should bode well for 2Q21 margins, although we certainly expect lower levels YoY due to higher promo and no lockdown-related rent discounts for certain premises, among other factors," Galimov said in a briefing note.
"Going forward, the retailer will have to cope with higher comps, as revenue growth in 3Q20 accelerated to 16.1% YoY, with July 2020 being the second strongest month after March 2020 (+16.5% YoY)."
Digital Revenues Increase
Revenue from X5's digital businesses increased by 105.7% in the quarter, the group said, to RUB 10.6 billion, with the share of digital business' revenue reaching 2% of total group sales.
Sales at the group's Pyaterochka and Perekrestok banners increased by 9.9% y-o-y and 17.4% y-o-y, respectively, driven by selling space expansion and like-for-like sales growth.
X5 added a 336 net new stores in the second quarter, while in addition, 368 proximity stores and eight supermarkets were refurbished to a new trading concept. It also recently launched a new media platform, focusing on food content.
It indicated a return to more normalised sales patterns in the period, with shoppers making more frequent visits to stores, and with reduced basket sizes compared to last year.
Commenting on the remainder of the year for X5, Galimov added, "We believe the retailer should be able to meet its FY21 target of double-digit revenue growth, as the comparison base should ease after July and a number of COVID-19-related tailwinds are continuing to support food sales (e.g. limited international tourism during this summer and pressure on the HoReCa segment)."