Russian Food Retail - Base Effect Set to Distort 1Q21 Trading Numbers

Reporting season for our sector's 1Q21 operating results will commence on April 16. We anticipate healthy Q-o-Q trends, with the y-o-y numbers distorted by base effects. The top-line deceleration seen this March mirrored the acceleration seen in March last year, so at first glance the operating results will appear muted in y-o-y terms, with full-quarter revenue growth coming in 3 pp below the average for 2m21. We think the m-o-m statistics should be healthy and therefore do not expect negative read-through for margins. We also foresee top-line growth accelerating in April and May for both companies. We would suggest buying into any weakness.> X5 Retail Group (reporting on April 16) saw revenue growth spike to 20% y-o-y in March last year, up 7.5 pp from the January 2020 figure. We attribute that spike to Covid-related bulk buying, which will not be repeated this year. We therefore project that revenue growth this March will be below the January level by a similar magnitude. The company has already said that revenue growth reached 11% at the start of the year, and we believe this was sustained into February. Hence we see around 3% top-line growth for March and 8% for the full quarter. > Last year's bulk buying began on March 13, so we think the first two weeks of this March will have been in line with January and February (with around 11% y-o-y growth) but that the second half of the month will have seen negative growth. We point out that this March saw a 17% m-o-m surge, so an optical top-line slowdown in the y-o-y figure should not read negatively for margins. We expect revenue growth to climb to 6-7% in April and 10-11% in May.> Similarly, Magnit (reporting April 29) saw revenue growth spike to 20.8% at the peak in March 2020 (up 8.9 pp from the January 2020 level). We should see a corresponding deceleration in March 2021. We project 11% y-o-y revenue growth in January 21, 7% in February and 2% in March, giving an average figure of 6.5-7.0% for 1Q21. The split in the March performance should be similar to X5. We forecast top-line growth accelerating to 7% y-o-y in April and 8% in May.