Oct. 10 (Bloomberg) -- X5 Retail Group NV, Russia's largest supermarket company, trimmed its forecast for full-year revenue growth and scaled back store expansion plans, saying that turmoil in financial markets may hurt consumer demand.

Annual sales will rise about 40 percent, the Moscow-based company said today, having on Aug. 29 forecast growth of more than that amount. X5 cut the sum it plans to spend on new stores and warehousing this year to $1 billion from $1.4 billion so it can reduce debt and pursue acquisitions. Third-quarter retail sales, which exclude franchisees, climbed 48 percent to $2.18 billion.

The financial crisis ``may in the end affect consumer confidence,'' X5 said, adding that it is ``ready to quickly respond to changes in consumption patterns.'' Russian economic growth may slip to 7.8 percent this year from 8.1 percent in 2007, according to the country's Economy Ministry, as accelerating inflation saps domestic demand and erodes gains in average wages.

``Considering the high rate of inflation, pressure on the purchasing capacity of shoppers may lead to consumers shifting towards cheaper products,'' said Tatyana Bobrovskaya, an analyst at BCS financial group in Moscow, who doesn't have a rating on X5 stock. ``That may hurt growth in the supermarket segment.''

X5 fell 90 cents, or 7.9 percent, to $10.50 in London trading. The shares have slid 69 percent since the end of last year, having more than doubled in the first two years after the company went public in May 2005.

Bank Loan

X5 said separately today that parent Alfa Group, controlled by billionaire Mikhail Fridman, won't cut its stake, responding to a Kommersant report that Alfa pledged almost all of its 47.2 percent holding as collateral for a $1 billion loan. Banks may seek additional collateral after X5's market value fell by 60 percent since it obtained the loan in April, the report said.

``The situation with the pledged shares is totally under control and we see no risks associated with potential loss or sales of these shares,'' Fridman said in a separate statement. ``Alfa Group is a long-term investor in X5, we see huge growth potential in this company, plan to further develop it and do not rule out further investment into it.''

X5 on March 27 said it borrowed $1.1 billion from a group of banks to refinance existing loans. The three-year loan carried an interest rate of 2.25 percentage points above the London interbank offered rate for the first year.

`Additional Collateral'

``Alfa Group would be able to provide additional collateral for X5 if needed,'' said BCS's Bobrovskaya. ``It's unlikely that the banks may get control over the shares.''

X5 said today it will add about 120,000 square meters of selling space in 2008, down from a previous plan to add as much as 160,000 square meters. The retailer will also expand its distribution centers by 60,000 square meters.

``We decided to defer certain projects in order to consolidate resources in the current liquidity-constrained environment, reduce short-term debt exposure and ensure that we are well positioned to capitalize from the ongoing decrease in real estate prices, lower construction costs and emergence in attractive merger and acquisition opportunities,'' X5 said.

Third-quarter sales included revenue from Carousel, the St. Petersburg-based chain of hypermarkets that was bought by X5 this year. Sales growth slowed from 60 percent in the second quarter, hurt by weaker revenue at Carousel, BCS's Bobrovskaya said.

Nine-month revenue climbed 56 percent to $6.48 billion, X5 said. That outpaced a 51 percent increase for nine-month sales at OAO Magnit, Russia's second-largest food retailer.

Sales at stores open at least a year rose 21 percent in ruble terms in the third quarter, while the amount of shoppers increased by 3 percent and an average transaction was 18 percent higher. Same-store sales may rise about 20 percent in 2008, including Carousel and excluding currency swings, X5 said today.

To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net.

Last Updated: October 10, 2008 11:00 EDT