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Post: Ekaterina Lobacheva: Own brands are a response to the separation of Western brands

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Head of X5 Group (Pyaterochka, Perekrestok and Chizhik chains) Ekaterina Lobacheva

Ekaterina Lobacheva, Head of X5 Group (Pyaterochka, Perekrestok and Chizhik networks), after the excitement in March, Russians reduced consumption and began to buy less, but the average check remained the same – adjusted for increased inflation. In an interview with RIA Novosti on the sidelines of EEF-2022, he shared the company’s plans for this year and next, talked about whether a decision had been made to refuse registration of one of the largest Russian retailers in the Netherlands, and explained why. VAT needs to be abolished for food sharing to flourish. Interview by Anna Shavyrina.

– What are the company’s plans to expand to the Far East?

– We signed an agreement with Far East Development Corporation at the forum and planned to enter the Far East in the near future. We will open stores in four regions: Primorsky Krai, Khabarovsk and Trans-Baikal Territories and the Amur Region. In total, nearly 100 stores are planned to be opened in 2023. We are also planning the construction of a distribution center, without it there is no way. In general, we estimate the volume of investments in three years at about 10 billion rubles.

– In March, X5 announced that it has stopped opening new stores in Russia, has the situation changed now? What are the company’s overall expansion plans for this year and next year?

– Yes, we did indeed suspend programs for the development and rebuilding of stores in March, but for a fairly short period of time we returned to openings at the end of April. We plan to open more than 1,800 stores this year: about 1,400 Pyaterochkas and more than 400 Chizhikovs. In early August, we announced our decision to accelerate the development of Chizhik’s discount stores, increasing the number of openings to over 400 this year. Thus, by the end of the year, the network will be located in 11 regions and have about 500 fixed discounters.

We also have a very ambitious development plan for next year – to open at least 2,000 stores in various formats, we will assess the situation as we prepare next year’s budget.

– What are the plans for the development of private brands (PL) of X5 stores? What are the plans for the share of private brands in the store range this and next year? Do you plan to add new categories or abandon old categories if they are not effective for the network?

– The development of private brands remains our focus, we believe that their development is a response to the separation of various brands, and now this is especially demanded by the consumer. The largest representation of private brands will be in Chizhik: they plan to increase their brand’s share of turnover to 50% by the end of this year, now already more than 40%. In Perekrestok we currently own about 18% of STM, in Pyaterochka – about 25%.

– Are there any problems with consumables, some goods are missing? Are there categories that you urgently need to replace the reserved brand with your own brand or with new consumables?

– The X5 range is now stable, its range is full of all the positions our customers need, deliveries are regular. As a matter of fact, we did a very good job in March, by working more intensively both with the introduction of new private brands and with our direct imports, replacing various brands. We no longer have a problem with replenishing variety.

– Has Russian consumer behavior returned to last year’s level or pre-Covid era? How has the average check changed?

– We have observed a change in consumer behavior since March, when there was high demand, and in March-April, citizens bought goods for future use, due to the news that a particular brand would leave. Then we saw a downward trend in demand because goods purchased for future use still had to be consumed. And now we have reached a fairly stable consumption line for this period. Of course inflation cannot be ignored, and both the consumer basket and the check see these changes. The number of goods in a check has decreased slightly, but the average check itself remains the same, taking into account inflation, not globally.

– What are your plans for revenue growth, EBITDA margin before the end of this year?

– For 2022, the company adheres to the previously announced 7% EBITDA margin target. We do not disclose revenue and net profit forecasts until the end of the year.

– X5 recently announced the launch of a food sharing program. Are there any first results, what problems did you encounter?

– At the end of July, we launched food sharing in pilot mode in many stores in Moscow and Chelyabinsk, the performance is very good. On average, each pilot store collected more than 120 kilograms of bread per month and donated it to the needy. Moscow and St. We will start connecting Perekrestok supermarkets in St. Petersburg to the project.

Of course, there are also difficulties, the most important thing for us at the moment is to maintain a dialogue with government institutions on the abolition of VAT on goods that are transferred free of charge. VAT on bulk goods is a significant figure that significantly exceeds the cost of disposal. The issue of VAT abolition has come up frequently lately, and we believe such a solution would really help many companies to do systematic and larger volumes of food sharing.

– Company X5 registered in the Netherlands, is re-registration planned in Russia?

– We are all still registered in the Netherlands, but we continue to explore various options, although there are no concrete solutions.

– Russia condemned the double taxation avoidance treaty with the Netherlands. Has the company already experienced this?

– We did not have time to feel the negative impact on ourselves, the decision came into force in 2022.

We paid interim dividends until December 2021, they were not subject to this agreement. With the decision of the Supervisory Board, we did not make the final dividend payment for 2021 and we do not see any payment opportunities for 2022.

– What is the current status of the company’s global receipts for deposits (GDRs) “hanging” on the London Stock Exchange? What are your plans for solving this problem in the near future?

– In March, our GDRs, like the shares of many other Russian companies, were frozen on the London Stock Exchange by the decision of the stock exchange, they were not traded. We hope that the situation will change.

– Analysts and experts believed that the company would consider listing on the Hong Kong stock exchange. Are there such plans?

– We are evaluating and analyzing the available options and so far no solution. At nearly every step in the process of translating a listing, we encounter a number of technical challenges that are currently insurmountable.

Source: Ria

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