X5 Revenue Growth Accelerates Amid Slowdown in Russian Retail

X5 Retail Group NV (FIVE), Russia’s second-largest retailer, posted the strongest quarterly sales growth in two years as it closed the gap on competitors including OAO Magnit (MGNT) and O’Key Group SA. (OKEY)

Fourth-quarter sales rose 12 percent to 150 billion rubles ($4.4 billion), benefiting from an improved product assortment and promotional activity, the Moscow-based grocer said today in a statement. That compares with growth of 6.6 percent in the previous three months.

The increase in sales beat the 8 percent estimate of VTB Capital, sending the shares up as much as 7.1 percent.

“This is surprising given that Magnit, O’Key and M.video reported a slowdown in fourth-quarter sales, citing weakening consumer spending,” VTB Capital analyst Ivan Kushch said.

While X5’s accelerating sales bucked the trend, the overall growth rate is still the weakest of its main rivals, according to Kushch. “We need to see if the company’s turnaround is sustainable,” he said. “Fourth-quarter growth was largely driven by promotional price declines, which may have hurt profits.”

Magnit, Russia’s biggest retailer, said this month that revenue rose almost 23 percent from a year earlier in December, less than November’s 29 percent growth. O’Key also reported weaker growth, while electronics retailer M.video said same-store sales declined in the fourth quarter.

X5 Retail shares rose 4.8 percent to $18.50 at 8:24 a.m. in London, where the stock has its main listing.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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