Page 106 - RusRPTMay20

store proximity and their basic offer, which is relevant during the social distancing measures. X5, as a market leader, has observed cooling since April, implying a 17% y/y traffic decline but 50% higher checks, indicating a preference to shop less frequently but to stock up more.
United Russia’s head at the State Duma has proposed limiting mark-ups in light of the inflation for certain goods, suggesting a 10% cap ​at each distribution lag on top of purchasing costs, or the cost of production (similar to the mechanism imposed for medical goods from 6 April). Subject to the implementation and final parameters, the initiative holds sizable downside risks for retailers and producers in Russia and has already received negative feedback from the Ministry of Production and Trade. Across the listed chains gross margins were in the range of 22%-24.6% in 2019, further translating into zero to 1.5% net margins. Sector profitability received negative pressure from the latest amendments to the retail law in 2017 that limited rebates at 5% and lowered days in accounts payable by 5-10 days for different categories. The direct limitations of mark-ups represents the most adverse downside risks to chains’ margins, in our view, with a vague impact on the sustainability of sales and relationships between retailers and producers. Chains are currently seeing declines of 10-95% in sales, subject to various formats, following clients stocking up, social distancing measures and pressure on consumption.
9.1.6​ Agriculture sector news
Up to 83% of Russia’s state grain stockpile will be sold on the domestic market, starting on April 13​, the Agriculture Ministry said on Thursday, according to Reuters. The ministry, which has 1.8 million tons of grain in its stockpile, had previously planned to sell 1 million tons from it. The government is aiming to increase supply for flour millers and bakers amid the coronavirus outbreak. Russia, the world’s largest wheat exporter, wants to ease the pressure for bakers and meat producers amid a weakening ruble. It has so far
106​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com