*
This content was produced in Russia where the law
restricts
coverage of Russian military operations in Ukraine
(Recasts to include O'Key results)
By Olga Popova and Alexander Marrow
MOSCOW, April 18 (Reuters) - Discount store formats are
driving sales and profit growth at two of Russia's major
retailers, the companies said on Tuesday, following a trend in
which consumers battling inflation and economic decline have
switched to cheaper goods.
Shoppers have faced surging prices and falling incomes since the Kremlin ordered tens of thousands of troops into Ukraine in February 2022, hitting spending power and boosting demand for cut-price goods.
Russia's leading retailer X5 Group reported a 15.7% jump in net retail sales, excluding some e-commerce segments, to 689.2 billion roubles ($8.46 billion) in the first quarter, driven by double-digit growth at its cheaper store formats, Pyaterochka and Chizhik. Hard discounter format Chizhik saw a five-fold increase in net sales, while X5's proximity Pyaterochka stores posted a 12.2% increase. Premium supermarkets Perekrestok had a 5.1% rise.
X5 expects to accelerate Chizhik store openings in the coming quarters. It completely shut down its Karusel hypermarket format in early April.
Rival retailer O'Key Group posted a 16.2% rise in net profit for 2022 to 242 million roubles ($2.97 million). Revenue at its hypermarkets, which account for almost 80% of core earnings, fell 2.1% year-on-year, but jumped 53.1% at the company's Da! discounters.
"Overall, in 2022, the company successfully adjusted the hypermarkets' operations to accommodate the ongoing price inflation of raw materials, decreased foot traffic, and more cautious and rational purchasing habits of consumers," O'Key said in a statement.
Inflation is decelerating in Russia after soaring last
spring. X5 said food inflation had slowed to 7.2% in the first
quarter.
Both retailers reported online sales growth above 30%.
The Russian government expects the economy to grow 1.2% this
year, recovering from a 2.1% decline in 2022. Wage growth is
likely to be minimal, however, and with Moscow directing more
funds towards the military, a return to economic prosperity
remains distant.
($1 = 81.4500 roubles)
(Reporting by Olga Popova and Alexander Marrow; additional
reporting by Jake Cordell; Writing by Alexander Marrow; Editing
by Louise Heavens and Ed Osmond)
