RUSSIA: Retailer X5's Q3 loss lower than expected

By Dean Best | 29 November 2011

X5's Q3 losses were not as deep as feared

X5 Retail Group, Russia's largest retailer by sales, reported a US$2.1m third-quarter loss this morning (29 November) but the result was better than analysts had expected.

The company's loss for the three months to the end of September was lower than the $20m that analysts polled by Reuters had forecast.

Higher SG&A costs, including expenses from integrating local chain Kopeyka, which X5 acquired last year, an increase in finance charges and foreign exchange losses all weighed on the retailer's bottom line. X5 booked a $52.5m loss from the fluctuation of the rouble/dollar rate.

Operating profit dipped 4% to $116.1m, although X5 said its EBITDA was up 13% at $219.8m. However, its EBITDA margin stood at 6.1%, down from the 7.4% it reported last year, due to costs linked to the Kopeyka integration.

CEO Andrei Gusev said X5 had reported "solid margins" and pointed out the company had had the "peak quarter" for Kopeyka's "fast-tracked" integration.

"We incurred the majority of integration costs as well as costs related to inventory liquidation and promo activity in Kopeyka stores," Gusev said. "I am pleased to report we have now completed the integration of all acquired stores, and those converted to Pyaterochkas in the initial part of the year are now delivering solid double-digit sales growth."

Gusev noted X5 had doubled its capital expenditure in the first nine months of September compared to last year and added: "We remain on track to deliver on our organic expansion plans of 540 new store openings in 2011."

Third-quarter sales increased 39% to $3.62bn. Over the nine months to the end of September, net sales were up 47% at $11.94bn, driven by a 9% rise in like-for-like sales. In August, when X5 reported its half-year results, it said like-for-like sales had increased by 11% in the first six months of the year. However, last month, X5 lowered its forecast for annual sales due to "unstable economic conditions in Russia and worldwide".

Sectors: Emerging markets, Financials, Retail

Companies: X5 Retail Group

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