Russia’s largest retailer X5 Group has seen its Q1 IFRS net result slashed 32.6% year on year to RUB 5.6 bn

The net result slump came despite a 19.9% year on year rise in Q1 net sales to RUB 351 bn, as Adjusted EBITDA was flat at RUB 22.2 bn for the quarter, with the company noting that the net sales reflected a 26% increase year on year in sales space, and like for like sales up only 0.5% year on year, and down 1.8% quarter on quarter in Q1 2018 due to ‘unfavourable weather conditions’ and promotional controls in ‘an intense promo environment and consumers’ high sensitivity to prices’.

Reuters reported that the company was saying it needed to freshen the look at the Pyaterochka chain in particular, which operated in the straightened low cost sector of the market with tough conditions for household incomes denting consumer spending, and making the sector very sensitive to promotional activity, which can hit the bottom line.

RBK highlighted the results as being the worst quarterly performance since 2014, and noted the immediate impact on X5 equities with the X5 GDRs down 3.3% in Moscow and more than 8% in London.  It referred to Uralsib’s Konstantin Below noting that the Q1 falls in EBITDA (down 4%) weighed on sentiment, coupled with the resignation of key executive Olga Naumova, who had overseen recent successes.  RBK also reported that that at the post release conference call with investors, Executive Director, Igor Shekhterman said the departure reflected difference in strategy.

In an interview with Vedomosti, Naumova referred to her decision as having been a long time in the making and reflected

‘Divergent views on principles and management approaches with the current management of X5 , as well as a lack of both strategic vision and support for real development projects and new projects for the business unit.’  

In the interview Naumova refused to comment on the suggestion she may be lured to X5 rival, Magnit

X5 operates the Pyaterochka and Perekrestok chains, along with the Karusel hypermarkets and Express convenience stores.  The company also noted it has opened the first Karusel under a new marketing concept in Sergiev Posad.