22nd Jan 2008 07:21
X5 Retail Group N.V.22 January 2008 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM AUSTRALIA, CANADA OR JAPAN X5 RETAIL GROUP N.V. REPORTS 53% NET RETAIL SALES* GROWTH IN USD TERMS FOR FULL YEAR 2007 Amsterdam, 22 January 2008 - X5 Retail Group N.V., Russia's largest foodretailer in terms of revenue (LSE ticker: "FIVE"), published today its retailsales and expansion results for the fourth quarter and full year 2007. Q4 2007 Highlights FY 2007 Highlights• Q4 2007 net retail sales surged 57% • FY 2007 net retail sales surged 53% year-on-yearyear-on-year to USD 1,692 mln; to 5,284 mln; • In RUR terms Q4 2007 net retail sales grew by • In RUR terms FY 2007 net retail sales grew by 44%48% year-on-year to RUR 42,148 mln; year-on-year to RUR 135,156 mln; • Q4 2007 LFL sales growth totaled 26%; • FY 2007 LFL sales growth totaled 20%; • In Q4 2007 the Group added net 119 stores; • During FY 2007 the Group added net 249 stores • Net addition of selling space in Q4 2007 • Net addition of selling space in FY 2007 equaledequaled 69.0 thousand sq. m. 143,1 thousand sq. m. Lev Khasis, X5 Retail Group CEO, commented: "Our achievement of a vigorous increase in sales of 53% in dollar terms in 2007gives us a firm foundation for further growth of X5's market share and underpinsthe competitive position of the Company, which is stronger than ever. Goingforward we will continue to focus our efforts on enhancement of the Group'smarket leadership both through better performance of existing stores and throughexpansion into new regions of European Russia. This year we plan to accelerategaining exposure to the hypermarket format by opening six compact and two largesize hypermarkets. As a result, we expect to deliver a net sales increase inthe range of 36-38% excluding FX effect for the full year 2008." Antonio Melo, X5 Retail Group Chief Operating Officer, added: "Our decision to postpone several openings and concentrate on existing stores'operations has borne fruit. As a result, Q4 was the strongest in the year interms of sales growth. This outstanding performance was the result of severalfactors, including strong macro economic environment, increased pre-New Yearspending as well as innovative and successful promo campaigns and a significantinvestment in customer loyalty. Traffic numbers show that this approach waswelcomed by our clients, which more than compensates for some margin investment. For 2008 we will continue to focus on delivering balanced growth in traffic andbasket, especially in the hypermarket format, which we expect to be the leaderin LFL stores performance." * Net retail sales represent revenue from operations of X5 managed storesexcluding VAT. This number differs from total net sales that also includerevenue from franchisees and other revenue. The total net sales number will bereported along with the FY 2007 financial results. Numbers provided in this press-release are preliminary and unaudited. 2006 net retail sales are reported on pro-forma basis for Pyaterochka, butinclude only two months - November & December 2006 - of Merkado net retail salesin the amount of USD 16.5 mln. 2007 net retail sales include one month(December) of Korzinka operations in the amount of USD 20.0 mln. For yourreference, FY 2006 net retail sales of Merkado were USD 81.6 mln, FY 2007Korzinka net retail sales totaled USD 161.6 mln. Net Retail Sales Performance Net Retail Sales Dynamics % change % changeUSD mln Q4 2007 Q4 2006 y-o-y FY 2007 FY 2006 y-o-yHypermarkets 131.9 81.5 62% 392.7 244.9 60%Supermarkets 618.2 398.5 55% 1,944.7 1,254.5 55%Soft Discounters 941.8 594.6 58% 2,946.8 1,961.0 50%Total Net Retail Sales 1,691.9 1,074.6 57% 5,284.3 3,460.4 53%RUR mlnHypermarkets 3,292.4 2,163.1 52% 10,044.3 6,637.0 51%Supermarkets 15,395.3 10,543.2 46% 49,740.8 33,985.8 46%Soft Discounters 23,460.1 15,762.8 49% 75,370.9 53,185.2 42%Total Net Retail Sales 42,147.8 28,469.0 48% 135,156.0 93,808.0 44% Total net retail sales for the fourth quarter 2007 increased by 57% in USD terms(48% in RUR terms) to USD 1,692 mln, translating into a 53% (44% in RUR terms)increase year-on-year to USD 5,284 mln for the full year 2007. Impressiveretail sales surge was due to a very strong performance of soft discounters inthe regions and in Moscow, outstanding results demonstrated by supermarketsacross all formats and regions and improving performance of hypermarkets openedat the end of 2006. Gross Retail Sales Analysis* Like-For-Like** Stores Performance (please see Appendix I for detailed LFLperformance) Q4 2007 FY 2007 Total LFL, Traffic, Basket, % Total LFL, % Traffic, Basket, % % % %Hypermarkets 21 10 11 17 11 6Supermarkets 29 15 14 22 14 8Soft Discounters 24 5 19 19 6 13X5 Retail Group 26 8 18 20 9 11 Gross Retail Sales Dynamics Q4 2007 FY 2007 LFL, % Expansion, % Total change LFL, % Expansion, Total change %, excl. FX %, excl. FX %Hypermarkets 21 31 52 17 34 51Supermarkets 29 18 47 22 24 46Soft Discounters 24 25 49 19 23 42Total Gross retail sales 26 22 48 20 24 44FX Effect, % 9 9Total Change Y-O-Y, % 57 53 For the fourth quarter 2007, LFL sales surged 26% in RUR terms, composed of 8%growth in traffic and 18% growth in average basket. Expansion broughtadditional 22% in terms of growth. As a result, full year 2007 LFL salesincreased by 20% in RUR terms with traffic growing by 9% and basket - by 11%,while 24% came from expansion. Hypermarkets For the fourth quarter 2007, hypermarket sales surged 52%, excluding FX effect.This growth came as a result of a 21% increase in LFL sales and 31% added bynon-LFL stores. In the fourth quarter the Company ran several promotionalcampaigns that were aimed to boost traffic. In terms of expansion, three newstores were added during 2007, including one large store purchased as part ofKorzinka deal in December 2007 that currently operates under My ("We") brand. For the full year 2007, gross sales in the hypermarket format increased by 51%(LFL sales up 17%, new stores sales up 34%). * In this section all sales dynamics analysis is based on RUR-denominatedgross sales (including VAT, excluding FX). Net sales RUR growth rates mayimmaterially differ due to effective VAT rate. ** In line with international practice, LFL (like-for-like) performancerepresents growth in sales of LFL stores during the reporting period over thesame period a year ago. LFL stores are defined as stores that have operated forat least twelve full months preceding the reporting date. Their sales areincluded in LFL calculation starting from the first day of the month followingthe month of the store opening. LFL sales are calculated on the basis oftraffic and basket amounts of relevant stores in the period under review,therefore LFL sales are gross, i.e. include VAT. LFL sales are reported inRussian RUR unadjusted for inflation. Supermarkets For the fourth quarter 2007, supermarket sales grew by 47%, excluding FX effect,as a result of 29% surge in LFL sales and 18% coming from expansion. In October2008 we ran a very successful Festival of Low Prices promotional campaign acrossall regions, which was one of the factors that supported robust performance ofsupermarket format. As usual, there was very strong LFL growth in Moscow (up33%), which again proves our strong leadership in this format in the capital ofRussia. We are proud to report that supermarket traffic in Moscow postedimpressive growth of 18% in the fourth quarter. LFL sales were also very strongin St. Petersburg (23%), with regions demonstrating healthy 19% in terms of LFLgrowth. For the full year 2007, gross sales in the supermarket format increased by 46%(LFL sales up 22%, new stores sales up 24%). Soft Discounters In the fourth quarter 2007 soft discounter sales grew by 49%, excluding FXeffect, as a result of a 24% surge in LFL sales and 25% coming from expansion.The strongest LFL growth in the soft discounter format was reported in theregions (up 63%) due to continuing excellent performance of stores inChelyabinsk and Yekaterinburg. As competition in St. Petersburg continues tostrengthen, it is very challenging to keep positive traffic numbers, which wasreflected in our St. Petersburg discounters LFL performance - total LFL growthwas 13% and traffic was flat. At the same time, in Moscow soft discountersposted quite impressive growth numbers in terms of LFL - total LFL sales were up33% (traffic increased by 7%, while average basket - by 26%). For the full year 2007, gross sales in the soft discounter format increased by42% (LFL sales up 19%, new stores sales up 23%). Expansion As of Net Added Net Added % change,Selling Space, sq. m. 31 Dec '06 30 Sep '07 31 Dec '07 in Q4 2007 in 2007 FY '07, y-o-yHypermarkets 46,179 50,179 59,963 9,784 13,784 30%Supermarkets 162,807 175,654 191,730 16,076 28,923 18%Soft Discounters 257,150 314,443 357,517 43,074 100,367 39%Total Net Added 466,136 540,276 609,210 68,934 143,074 31%# of StoresHypermarkets 12 13 15 2 3 25%Supermarkets 156 163 179 16 23 15%Soft Discounters 451 573 674 101 223 49%Total Net Added 619 749 868 119 249 40% In Q4 2007, X5 Retail Group N.V. added net 119 stores, including 101 softdiscounter, 16 supermarkets and 2 hypermarkets with a total net selling space of69.0 thousand sq. m. For the full year 2007 net addition of stores totalled 249, of which 223 were insoft discount format, 23 supermarkets and 3 hypermarkets. The total net sellingarea added was 143,1 thousand sq.m. This takes into account 3.6 thousand sq.m.that were closed during the year (8 soft discounters and 2 supermarkets) andincludes stores acquired through tactical M&A transactions that are summarizedbelow. As a result, at 31 December 2007, X5 Retail Group N.V. operated 868company-managed stores (consisting of 674 soft discounters, 179 supermarkets, 14compact hypermarkets and one full-size hypermarket store), with the total netselling space of 609.2 thousand sq. m. (please see Attachments III and IV fordetailed information on store opening progress). Tactical M&A Transactions & Franchises Buy-Out Summary During 2007 X5 Retail Group successfully completed two tactical M&A transactionsand one franchise chain buy-out. • In the beginning of 2007 the Company gained control over 40 soft discount stores in Chelyabinsk previously operated by a franchisee under Pyaterochka brand with the total net selling space of 13.8 thousand sq. m. It was the first step in implementation of the Group's strategy of selective buy-out of certain franchises in strategically important regions. • In December 2007 X5 Retail Group completed acquisition of 22 Korzinka stores operating in the Lipetsk region with the net selling space of 20.0 thousand sq. m. 15 of the purchased stores are being integrated into the Group's discounter format, six into the supermarket format and one store has been added to the hypermarket network. • In December 2007 the Company also acquired a total of 29 discounter stores currently operating under Strana Gerkulesia brand (located in Moscow, the Moscow and Tver regions) with the total net selling space of 12.9 thousand sq.m, of which 26 are operational (11.7 thousand sq.m. in selling space) and three are scheduled for opening in Q1 2008 (1.2 thousand sq.m. in selling space). X5 also purchased an office building and construction in progress that potentially can be converted into selling space in the future. These transactions enabled the Company to establish market leadership in two newregions, Urals and the Central region of Russia, as well as to strengthen itscompetitive positions in Moscow and the Moscow oblast. The Group has asuccessful track record of re-branding and integrating acquired stores into itsmulti-format network, ensuring quick improvement in the stores' performance andextracting significant synergies from the integration. Franchisee Store Operations During 2007 the Group's franchisee store network was expanded by net 61 stores.As of 31 December 2007, franchisees operated 688 stores across Russia andKazakhstan in total, including 8 Perekrestok and 680 Pyaterochka stores. X5Retail Group does not consolidate franchisee stores' sales. The Group receivesroyalty payments from franchisees and reports them as other revenue. Progress in Logistics Infrastructure Development During 2007 X5 Retail Group added net five Distribution Centers (DCs) (one DC inMoscow was closed), increasing its storage capacity by 78.1 thousand sq.m. As aresult, at the end of 2007 the Group had 10 DCs with the total storage area of143.7 thousand sq.m., including four DCs in Moscow (total storage space of 88.0thousand sq.m.), 3 DCs in St. Petersburg (total storage space of 37.2 thousandsq.m.), one DC in Nizhniy Novgorod (storage space of 13.5 thousand sq.m.), oneDC in Chelyabinsk (2.5 thousand sq.m.) and one DC in Yekaterinburg (2.5 thousandsq.m.). Outlook for 2008 • X5 Retail Group expects net sales growth in the range of 36-38% in RUR terms for the full year 2008; • 2008 LFL stores' sales expected to grow at above 10% with hypermarkets being clear leaders in LFL growth; • In 2008 X5 plans to add 140-160 thousand sq.m. of selling space; • Eight hypermarkets to be opened during 2008, including six compact and two large-size stores; • In 2008 the Group plans to add around 40 thousand sq. m. of storage capacity on the net basis; • 2008 CapEx estimated at USD 1,200-1,400 mln, out of which about 40% will be spent on the stores to be opened after 2008, including expansion of the landbank for future hypermarket construction. Please note that 2008 outlook numbers do not take into account potentialacquisition of Karusel hypermarket chain. However, these figures includecontribution of tactical M&A transactions that are treated by the Company asorganic development. Appendices I. LFL Store Performance by Format and Region II. Average Ticket and Number of Customers III. Net Selling Space Addition by Format and Region IV. Net Store Addition by Format and Region V. Financial Calendar for 2008 Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. TheCompany was created as a result of a merger between Pyaterochka (soft discounterchain) and Perekrestok (supermarket chain) on 18 May 2006. As of 31 December 2007, the Group had 674 Company managed soft discount storeslocated in Moscow (309), St. Petersburg (244) and other Russian areas (121), 179Company managed supermarkets across Central Russia and Ukraine, including 105stores in Moscow (Moscow region and Yaroslavl region), and 15 Company managedhypermarkets. As of 31 December 2007, X5's franchisees operated 688 stores across Russia andKazakhstan. The Group's net sales for the first nine months 2007 reached USD 3,618 million,an increase of 50% year-on-year. Gross profit for the period totaled USD 946million, EBITDA amounted to USD 311 million. Forward looking statements: This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identifiedby the fact that they do not only relate to historical or current events.Forward-looking statements often use words such as" anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal" believe", or otherwords of similar meaning. By their nature, forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances, a number of which are beyond X5Retail Group N.V.'s control. As a result, actual future results may differmaterially from the plans, goals and expectations set out in theseforward-looking statements. Any forward-looking statements made by or on behalf of X5 Retail Group N.V.speak only as at the date of this announcement. Save as required by anyapplicable laws or regulations, X5 Retail Group N.V. undertakes no obligationpublicly to release the results of any revisions to any forward-lookingstatements in this document that may occur due to any change in its expectationsor to reflect events or circumstances after the date of this document. For further details please contact Anna Kareva Elena CherkalovaIR Director PR ManagerTel.: +7 (495) 980-2729, ext. 22 162 Tel: +7 (495) 950-5577e-mail: [email protected] e-mail: [email protected] Appendix I: LFL Store Performance by Format and Region* Q4 2007 FY 2007 Total LFL, Traffic, Basket, % Total LFL, % Traffic, Basket, % % % %Moscow & the Moscow Region**Hypermarkets 20 5 15 13 4 9Supermarkets 33 18 15 26 17 9Soft Discounters 33 7 26 26 10 16Total 32 11 21 25 12 13 St. Petersburg & North-WestHypermarkets - - - - - -Supermarkets 23 15 8 19 14 5Soft Discounters 13 0 13 11 1 10Total 14 1 13 11 2 9 RegionsHypermarkets 21 13 8 21 15 6Supermarkets 19 10 9 9 6 3Soft Discounters 63 32 31 48 23 25Regions Total 27 18 9 18 13 5 X5 Retail GroupHypermarkets 21 10 11 17 11 6Supermarkets 29 15 14 22 14 8Soft Discounters 24 5 19 19 6 13X5 Retail Group Total 26 8 18 20 9 11 * Based on RUR-denominated gross sales (including VAT, excluding FX). Netsales RUR growth rates may immaterially differ due to effective VAT rate. In line with international practice, LFL (like-for-like) performancerepresents growth in sales of LFL stores during the reporting period over thesame period a year ago. LFL stores are defined as stores that have operated forat least twelve full months preceding the reporting date. Their sales areincluded in LFL calculation starting from the first day of the month followingthe month of the store opening. LFL sales are calculated on the basis oftraffic and basket amounts of relevant stores in the period under review,therefore LFL sales are gross, i.e. include VAT. LFL sales are reported inRussian RUR unadjusted for inflation. ** Includes the City of Moscow, Moscow and Yaroslavl regions. Appendix II: Average Ticket and Number of Customers Q4 2007 Q4 2006 % change, FY 2007 FY 2006 % change, y-o-y y-o-yX5 Average Ticket, USD 11.2 9.4 19% 10.0 8.8 13%Hypermarkets 18.6 15.9 17% 16.2 15.1 8%Supermarkets 13.7 11.6 18% 12.1 10.8 12%Soft Discounters 9.6 8.0 20% 8.5 7.5 14%X5 # of Customers, mln 171.6 130.1 32% 605.2 448.8 35%Hypermarkets 8.1 5.9 38% 27.7 18.6 49%Supermarkets 51.7 39.1 32% 182.9 132.2 38%Soft Discounters 111.8 85.1 31% 394.5 298.0 32% Appendix III: Net Selling Space Addition by Format and Region As of Net Added Net Added % change,Selling Space, sq. m. 31 Dec '06 30 Sep '07 31 Dec '07 in Q4 2007 in 2007 FY '07 y-o-yMoscow & the Moscow RegionHypermarkets 17,189 17,189 17,189 - - -Supermarkets 100,691 103,165 107,555 4,390 6,864 7%Soft Discounters 134,736 152,516 175,101 22,585 40,365 30%Total 252,616 272,870 299,845 26,975 47,229 19% St. Petersburg &North-WestHypermarkets - - - - - -Supermarkets 20,102 24,061 24,061 - 3,959 20%Soft Discounters 113,511 130,763 135,006 4,243 21,495 19%Total 133,613 154,824 159,067 4,243 25,454 19% RegionsHypermarkets 28,990 32,990 42,774 9,784 13,784 48%Supermarkets 42,014 48,428 60,114 11,686 18,100 43%Soft Discounters 8,903 31,164 47,410 16,246 38,507 433%Total 79,907 112,582 150,298 37,716 70,391 88% X5 Retail GroupHypermarkets 46,179 50,179 59,963 9,784 13,784 30%Supermarkets 162,807 175,654 191,730 16,076 28,923 18%Soft Discounters 257,150 314,443 357,517 43,074 100,367 39%X5 Retail Group Total 466,136 540,276 609,210 68,934 143,074 31% Appendix IV: Net Store Addition by Format and Region As of Net Added Net Added# of Stores 31 Dec '06 30 Sep '07 31 Dec '07 in Q4 2007 in 2007Moscow & the Moscow RegionHypermarkets 4 4 4 - -Supermarkets 101 101 105 4 4Soft Discounters 222 256 309 53 87Total 327 361 418 57 91 St. Petersburg & North-WestHypermarkets - - - - -Supermarkets 17 19 19 - 2Soft Discounters 204 234 244 10 40Total 221 253 263 10 42 RegionsHypermarkets 8 9 11 2 3Supermarkets 38 43 55 12 17Soft Discounters 25 83 121 38 96Total 71 135 187 52 116 X5 Retail GroupHypermarkets 12 13 15 2 3Supermarkets 156 163 179 16 23Soft Discounters 451 573 674 101 223X5 Retail Group Total 619 749 868 119 249 Appendix V: Financial Calendar for 2008 Date Event January 22, 2008 Q4 & FY 2007 Trading Update Release February 26, 2008, TBC Preliminary FY 2007 Financial Results Release April 10, 2008, TBC Q1 2008 Trading Update Release April 22, 2008, TBC Audited FY 2007 IFRS Results Release May 29, 2008, TBC Q1 2008 Unaudited Financial Results Release July 10, 2008, TBC Q2 & H1 2008 Trading Update Release September 23, 2008, TBC Q2 & H1 Audited IFRS Results Release October 9, 2008, TBC Q3 2008 Trading Update Release November 25, 2008, TBC Q3 2008 Unaudited Financial Results Release This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
X5 Retail