X5 Retail Boosts 2014 Growth Target as Pyaterochka Sales Surge

X5 Retail Group NV, Russia’s second-largest food retailer, raised its full-year revenue growth target after an improved third-quarter performance from the Pyaterochka discount chain.

Sales will advance 17 percent to 19 percent, the company controlled by billionaire Mikhail Fridman and his partners said in a presentation today. That compares with previous guidance for 10 percent to 12 percent growth. The retailer also boosted its forecast for profit margins.

Pyaterochka, which accounts for about two-thirds of X5’s revenue, saw sales growth accelerate to 30 percent in the third quarter amid efforts by the chain to renovate stores and bolster its fresh-food offering. The improvement was achieved against a backdrop of a Russian government ban on imports of certain food items from the European Union and U.S.

X5 lost leadership of the Russian retail market last year to billionaire Sergey Galitskiy’s OAO Magnit, which unlike X5 has been expanding without acquisitions. This year, X5 has started a fightback, reflected in a rising share price.

The stock rose 4.2 percent to $18.20 in early London trading, extending this year’s gain to 8.5 percent.

X5 raised its target for 2014 earnings before interest, taxes, depreciation and amortization to a range of 7.2 percent to 7.5 percent. It had previously forecast up to 7.2 percent. The nine-month Ebitda margin widened to 7.2 percent of sales.

The retailer plans to boost selling space by 15 percent this year, up from a previously planned 10.5 percent. Capital spending will be 34 billion rubles, less than previous guidance of 40 billion rubles, according to the presentation.

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