OREANDA-NEWS. June 02, 2010. X5 Retail Group N.V., Russia's largest retailer in terms of sales (LSE ticker: “FIVE”), announced its IFRS results for the first quarter ended 31 March 2010, reviewed by auditors.

Q1 2010 Highlights

• Net sales increased 20% year-on-year in RUR terms to RUR 76,003 mln or 36% in USD terms to USD 2,543 mln;

• Gross profit totaled USD 594 mln, for a gross margin of 23.4%;

• SG&A expenses before ESOP as percent of sales decreased by 60 bp year-on-year to 19.1%. Total SG&A increased by 50 bp year-on-year to 20.1% driven by ESOP cost of USD 25 mln;

• EBITDA amounted to USD 179 mln reflecting ESOP cost of USD 25 mln for an EBITDA margin of 7.0%. Net of ESOP, EBITDA margin amounted to 8.0%;

• X5 reported a net profit of USD 79 mln;

• The Company used available cash to reduce total debt by USD 133 mln;

• Due to significantly lower food inflation to date and in the official forecast rate for the year, X5 provides a more conservative 2010 revenue growth outlook in the low-20 percent range in nominal RUR terms. Actual top-line performance will depend on inflationary trends and the timing of a recovery in consumer spending.

X5 Retail Group CEO Lev Khasis commented:

“X5 achieved strong top-line growth against a backdrop of weak consumer spending and drastically lower food inflation. Discounters delivered industry-leading performance. We have introduced a streamlined operational structure for supermarkets and hypermarkets and are adding more affordable choices and loyalty program upgrades for our customers to drive higher basket and benefit from future economic recovery. Integration of Paterson resulted in temporary closings and inventory clearance sales during Q1. All acquired stores have been converted as of May, setting the stage for improved performance.

We expect consumer spending to begin to show improvement towards the end of the year. This, in combination with new store openings and post-integration contribution from Paterson, should enable X5 to deliver top-line growth in the low-20% range in a significantly lower than projected inflationary environment."

X5 Retail Group CFO Evgeny Kornilov added:

“Consistent execution of our “Close to the Customer” policy resulted in solid LFL sales growth of 7% compared to Q1 2009, the strongest quarter last year prior to the onset of trading down trends. We drove a 60 basis point improvement in X5’s key performance indicator for cost control, SG&A before ESOP as a percent of sales. We used our strong cash position this quarter to continue selective expansion of new stores while reducing total debt by net USD 133 million and further limiting currency exposure.

For the rest of 2010 we expect reduced levels of gross margin investment and improving EBITDA margin, driven by continuing efficiency improvement and cash generation, post-integration upside of converted Paterson stores and higher overall second half 2010 sales growth. We are well-positioned in terms of our upcoming loan refinancing later this year, with good access to RUR bank facilities more than sufficient for our funding needs.”