Page 136 - RusRPTNov20

October) and could mean upside to our FY20 expectations. We have a BUY rating for X5.
X5’s net retail revenues grew 15.4% y/y in 3Q20, surpassing our forecast of 14.8% y/y. This marked a significant acceleration from the 13.2% y/y recorded in 2Q20 that was mostly associated with stronger LfL performance.
Perekrestok led the way, reporting revenue growth of 18.7% y/y, and Pyaterochka disclosed revenue growth of 18.4% y/y, its fastest pace since 2018. The format continued to enjoy traffic gains from traditional retail stores and hypermarkets. Karusel’s top line plunged 44% y/y, reflecting the continued transformation of this segment and considerable traffic outflow.
LfL sales grew 6.9% y/y in 3Q20, its fastest growth rate since 1Q17. LfL sales continue to reflect the changes in consumer behaviour, with increased spending per visit offsetting the reduced frequency of visits. Furthermore, X5 noted trading up across all formats. We believe that the acceleration in food inflation also supported baskets. As a result, the growth in LfL sales reached a three-and-a-half year high of 6.9% y/y, as the 8.8% y/y growth in baskets more than offset the 1.8% y/y decline in traffic. Importantly, Pyaterochka managed to almost entirely stop the decline in LfL traffic in 3Q20 (-0.4% y/y), while Perekrestok saw LfL traffic fall 10.8% y/y.
Traffic density recovers thanks to Pyaterochka; absolute ticket grows well above inflation. The number of customer visits per square meter decreased 3.2% y/y in 3Q20. The decline was less significant for Pyaterochka (down 2.5% y/y) when compared to larger formats (down 17-22% y/y). Traffic losses were compensated for by average tickets, which grew 9.1% y/y in 3Q20, well above the food inflation of 4.3% y/y reported by Rosstat. This reflects higher spending per visit, as well as a higher price per item (trading up). As a result, the company’s average quarterly sales per square meter rose 4.8% y/y in 3Q20 after rising 2.1% y/y in 2Q20 thanks to Pyaterochka stores (up 6.2% y/y).
Smooth dynamics for monthly revenue throughout the quarter. X5 turned in revenue growths of 16.5% y/y in July, 14.8% y/y in August and 14.8% y/y in September. As such, July proved to be the second best month YtD after March, which was affected by massive stockpiling.
Space growth​. X5 added around 170,000 square meters in net selling space in 3Q20. By the end of the quarter, the retailer was operating 17,352 stores with a total net selling space of almost 7.7mn square
136 ​RUSSIA Country Report​ November 2020 www.intellinews.com