X5 Retail Group - Capital Markets Day: Slower Expansion, Focus on ROIC
X5 Retail Group hosted a capital markets day yesterday. The company guided for 2,000 gross openings in 2019, with margins and ROIC maintained at least at 2018 levels. If leverage stays where it is now, dividends could match FCF. Pyaterochka aims to compete with specialists in Moscow and localize assortment in other regions, though few concrete examples were provided. Perekrestok remains the company's fastest growing format, as other drivers are emerging to replace the momentum from renovations. A successful prototype in hypermarkets was launched and is now being rolled out. The October performance reveals top-line growth having accelerated to 16% with 2% LFL sales growth. We came away with a positive impression from the event and reiterate our BUY recommendation on the stock.
X5 Retail Group is a holding company. The main activity of Co. is the development and operation of grocery retail stores. Co. operates a retail chain of soft-discount, supermarket and hypermarket stores under the brand names "Pyaterochka", "Perekrestok" and "Karusel" in major population centres in Russia, including but not limited to Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don, Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg and Kiev, Ukraine.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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