Last week’s shock announcement that X5 Retail Group CEO Andrey Gusev resigned caused the Russian retailer’s share price to tumble. X5 also booked a mixed set of second-quarter results that showed the retailer was only able to slow – but not reverse – declining like-for-like and customer traffic trends. Analysts in Moscow are split over its performance in the market and the outlook for the country’s largest retailer, but there is agreement the departure of Gusev will come as a blow.
Alexey Evstratenkov, Aton
“The 2Q12 figures were generally in line with consensus expectations and company guidance. However, the 1H12 results came in significantly below X5’s guidance for FY12. We think the company will have a tough time meeting its annual guidance if growth rates do not improve. Additionally, X5’s CEO Andrey Gusev stepped down on Friday. Supervisory board member Stephan DuCharme will temporarily serve as CEO. X5 completely changed its senior management team over the last year, which we believe limited its results as the new executives needed time to cohere and develop their strategy. The next CEO will also need time to get up to speed, which could mean further delays in improving X5’s financial performance. This development looks negative, as it may make it harder for the company to reach its goals in 2H12.“
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Ekaterina Andreyanova, BCS Investment Bank
“X5 Retail Group’s 2Q12 operating results underperformed Russian peers. Adding to the bad news, X5 CEO Andrey Gusev stepped down. The poor performance and change in top management, in our view, are part and parcel of the same issue: X5 operates under an ineffective business model – in our view, the management change suggests the business strategy will be revisited, which in turn casts doubt on whether the weak performance will be reversed any time soon.“
Natalya Kolupaeva, Raiffeisenbank ZAO
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“We don’t see X5’s 2Q12 results as disappointing – because the company has managed to deliver on its promises – to show positive trend in LFL consumer traffic and overall LFL sales in 2Q12. And we saw a decent improvement: 2Q12 LFL sales declined by just 1.1% versus a drop of almost 4% year-on-year in 1Q12, and traffic outflows slowed to -1.5% year-on-year versus -4.6% in 1Q12. This clearly shows that the company’s aggressive promotions (announced earlier) are working. We don’t think that the company’s results for the particular quarter was a true reason for the decision [for Gusev to stand down] – it’s a too short period of time even to extrapolate the results delivered. Mr. Gusev has been with the company since 2006 and the company continues to stick to the new strategy proclaimed during his term (actually since March 2011) – organic growth along with supplementary M&A deals. Moreover, in case the decision was made due to the results solely, why it was made in such urgent manner, with a lack of clarity to the market, in the absence of a successor? We are not sure about the true reason and was negatively surprised by this news.”
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By GlobalDataVitaly Baikin, JSC Gazprombank
“I believe Andrei Gusev’s resignation is linked to the company’s weak results in 3Q11-2Q. Note also that since Andrei Gusev’s appointment as CEO the stock has declined by some 50%. X5 underperforms peers in terms of sales growth and in terms of like-for-like performance… Of the four public retailers (ex. Seventh Continent, which now undergoing delisting procedures), X5 is the slowest growing company. Note also that it has posted the weakest LfL traffic numbers for 1H12 so far (Dixy has not yet published 1H12 numbers). X5 remains Russia’s largest retailer by sales. However, despite accelerated store openings at X5, the revenue gap with closest competitor Magnit is narrowing: from 50% in 1Q11 to 16% in 1Q12.“
Click here for more in-depth coverage from just-food of Gusev’s departure.
