X5 Retail Group. Годовой отчет за 2022 год (на английском)

Overview

ABOUT THIS REPORT

X5 Group’s 2022 Annual Report complies with UK and
Russian Federation listing requirements, as well as the Dutch
Corporate Governance Code. This report looks at our
performance on a number of different aspects. It provides
an analysis of our financial and operating performance, states
our strategic goals and gives an overview of our ESG
performance and priorities, which are discussed in greater
detail in the 2022 Sustainability Report.

STRATEGIC REPORT

OVERVIEW

ABOUT THIS REPORT

Report boundary and scope

This report covers the period from 1 January 2022 to 31 December 2022 and looks
at X5 Group’s business model and strategy, market and consumer trends, operating
and financial performance, environmental, social and governance (ESG)
achievements, and the results of key business units.

Key business units include Pyaterochka proximity stores, Perekrestok supermarkets
and Chizhik hard discounter stores, as well as Krasny Yar and Slata, two chains in
which X5 acquired a 70% stake in 2022. Our key digital businesses include express
delivery and Vprok.ru, which operate under the X5 Digital business unit, as well as
5Post, Mnogo Lososya and Food.ru media platform. X5 Group’s consolidated
financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS). IFRS financial results in this report are presented
according to IFRS 16 as well as old pre-IFRS 16 standards. Significant events after
the reporting date are also covered in this report.

Alternative performance measures

Alternative performance measures (APMs) that are not defined or specified
under IFRS requirements are also used in this report. These APMs provide
important insights into our business performance. A glossary with
explanations of how each APM is calculated, why we use it and how it can be
reconciled to a statutory measure is provided on pages

73–76

Assurance

The Supervisory Board, with the support of the Audit and Risk Committee, is
responsible for X5 Group’s internal controls to provide reasonable assurance
against material misstatement and loss.

Materiality

The management of X5 Group determined the material issues to address in
this report based on its understanding of stakeholder interests, the
economic and competitive landscape in Russia, our business model, risks,
and opportunities. Significant financial matters and material non-financial
topics are all considered material issues.

The tools used to inform decisions about the material issues facing the
Company include internal analysis and reporting mechanisms, market
research, external polling and research, as well as feedback received directly
from key stakeholders. X5’s sustainability strategy, which was developed in
line with the United Nations Sustainable Development Goals (UN SDGs) and
was approved in 2019, was also used to select the Company’s material
issues.

Management believes that this report accurately covers how X5 Group
interacts with and creates value for its stakeholders.

Financial and non-financial information

X5 Group’s financial, operating and ESG performance is reviewed on a
regular basis by the Company’s management and Supervisory Board. Key
areas of the Company’s non-financial performance include innovation,
consumer safety, environmental impact, investments in local communities,
the provision of a safe and enriching workplace for our employees, business
conduct, and supplier relationships.

Supervisory Board approval

The Supervisory Board of X5 Group has confirmed it believes this report
provides a balanced overview of all material issues concerning the
Company’s performance for the reporting period, as well as an accurate
reflection of its updated strategic goals. The Supervisory Board approved the
2022 Annual Report for publication on 31 May 2023.

We show respect when we are
involved in discussions, solving
problems or providing feedback

We take into account the
interests, opinions and feelings
of our colleagues when making
decisions and when interacting
with one another

We help our colleagues, going
beyond the scope of our
responsibilities if necessary

Our approach, values and goals

STRATEGIC REPORT

OVERVIEW

OUR APPROACH, MISSION AND GOALS

Approach

Values

We are confident that X5 Group can create
value for a wide range of stakeholders by
continuing to grow as a profitable, sustainable
business. We believe that the key to success
lies in always putting the customer at the
centre of our decision-making, and in offering
high-quality modern food retail services both
online and offline.

We are the market leader by size, and we aim
to use this to drive positive change,
strengthening and adapting our offline food
retail formats, introducing innovative
technologies to power digital services, and
promoting good practices such as
implementing сompany-wide programmes to
support local communities, creating
sustainable packaging standards and
increasing the use of renewable energy.

Our sustainability strategy is aligned with the
UN SDGs that we have identified as being
most relevant to our business: Zero Hunger,
Good Health and Well-being, Decent Work
and Economic Growth, as well as Responsible
Consumption and Production.

What does respect mean to us?
It means acceptance of different
opinions and the ability to establish
dialogue and cooperation even
when we disagree. It means mutual
support and gratitude for
assistance and effort.

This reflects a sincere desire to
help, the ability to put oneself in
the place of another person and
the willingness to ask what would
be better for them, what they
would like to receive. We look out
for one another, and that helps us
do our job right the first time.

When we speak openly and from
the heart. We talk about problems
and challenges honestly. We’re not
afraid to make mistakes; instead,
we learn from them. We protect our
reputation and that of the
Company.

When we see new opportunities
and new growth points in
everything we do. When we derive
satisfaction from bold, ambitious
goals.

Our values provide guidance in our professional life and give us a road map for our decision-making.
They help us to better understand one another, achieve success and derive satisfaction from working
together. All of X5’s business divisions share the same values.

Respect

Customer-centric
approach

Honesty and integrity

Desire for achievement

WHAT THIS MEANS
IN PRACTICE

We look for solutions that meet
the customer’s needs

In any situation, we put
ourselves in the position of the
customer

We build long-term
relationships with customers

We abide by our agreements

We give our co-workers
information in full

We have zero tolerance for
corruption

We set ambitious goals for
ourselves that require a
substantial effort to achieve

We take responsibility for our
actions and do not shift blame
onto others

We commend our co-workers
for their achievements and allow
them to make mistakes

1 Customers are not just patrons at our stores but also our co-workers.

The four core UN SDGs for X5 Group are Zero Hunger, Good Health and Well-being,
Decent Work and Economic Growth, and Responsible Consumption and Production.
On top of this, we have identified a number of secondary goals that our business
contributes to: Gender Equality, Affordable and Clean Energy, Reduced Inequalities,
Sustainable Cities and Communities, Climate Action, Life Below Water, and Life on Land.

With these focus areas in mind, the Supervisory Board has
approved a detailed set of targets for 2023, as well as a set
of ambitious “30×30” goals that we aim to reach by 2030.

Reduction in GHG emissions
(Scope1+Scope2) intensity per sqm
of selling space compared with 2019

Increase in the number of families
receiving Basket of Kindness
support per year

Employer in ranking of Russian
food retailers

Promotion of responsible
programmes and principles across
the supply chain

Expansion of healthy lifestyle
assortment

Share of renewable energy used in X5’s
operations

Reduction in ratio of waste generated
to retail sales compared with 2019

Organization of a safe, healthy
workplace for all employees

The larger boxes indicate our primary goals; the smaller boxes — our secondary goals

PLANET

COMMUNITIES

HEALTH

EMPLOYEES

Sustainability goals

STRATEGIC REPORT

OVERVIEW

OUR APPROACH, MISSION AND GOALS

2022 key

highlights

STRATEGIC REPORT

OVERVIEW

2022 KEY HIGHLIGHTS

We successfully weathered a turbulent market environment
in 2022 thanks to our outstanding performance doubling
down on the strengths of X5’s core business. X5 Group
continues to succeed – even as competition increases from
online and some niche players as well as new formats like
hard discounters.

2,202

Net new stores

10.8

Like-for-like sales

y-o-y

7.2

EBITDA margin

pre-IFRS 16

70.4

RUB

BLN

Digital business sales

+46.6% y-o-y

1.02

Net debt/EBITDA

pre-IFRS 16 as at 31 December 2022

35.9

MLN

Orders delivered by online businesses

+45.6%

2022 financial and operating highlights

2,605

RUB

BLN

Revenue

+18.2% y-o-y

1 Including express delivery, Vprok.ru and Mnogo Lososya.

STRATEGIC REPORT

OVERVIEW

2022 KEY HIGHLIGHTS

1 As at 31 December.

2022 operating and financial performance overview

Operational highlights

Financial highlights (pre-IFRS 16)

2022

2,596

2019

1,728

2018

1,525

2020

1,973

2021

2,194

Net retail sales,

RUB bln

14.2

CAGR 2018–2022

2022

21,323

2019

16,297

2018

14,431

2020

17,707

2021

19,121

Number of stores

10.3

CAGR 2018–2022

2022

9,107

2019

7,239

2018

6,464

2020

7,840

2021

8,410

Selling space,

ths sqm

9.0

CAGR 2018–2022

2022

35,855

2019

1,382

2018

409

2020

7,942

2021

24,633

Number of orders in online businesses,

2022

2,605

2019

1,734

2018

1,533

2020

1,978

2021

2,205

Revenue,

RUB bln

14.2

CAGR 2018–2022

2022

186.8

2019

122.6

2018

107.6

7.0%

7.1%

2020

145.1

2021

161.0

EBITDA,

RUB bln

ths

14.8

CAGR 2018–2022

2022

626.7

2019

425.8

2018

369.7

2020

487.2

2021

553.4

Gross profit,

RUB bln

14.1

CAGR 2018–2022

2022

52.2

2019

25.9

2018

28.6

2020

39.2

2021

48.5

Net profit,

RUB bln

16.2

CAGR 2018–2022

24.1%

24.6%

25.1%

24.1%

7.3%

7.2%

1.9%

1.5%

2.0%

2.2%

2.0%

Gross proﬁt

Gross proﬁt margin

Net proﬁt

Net proﬁt margin

EBITDA

EBITDA margin

STRATEGIC REPORT

OVERVIEW

BUSINESS MODEL

Suppliers

Corporate Centre

All throughout 2022, we continued to develop our
approach to planning and collaboration with our
suppliers, maintaining our product range and stock
levels, and boosting supply chain management

performance.

X5 Group’s Corporate Centre manages
shared business infrastructure like
Business Support, X5 Technologies and
Security functions. Overall strategic
guidance and sharing best practices are

also handled by the Corporate Centre.

Ofﬂine
businesses

5,184

Suppliers

Share of top 30

suppliers in revenue

19,164

Pyaterochka proximity
stores in 67 regions

517

Chizhik hard discounter
stores in 13 regions

971

Perekrestok supermarkets
in 46 regions

Karusel hypermarkets

X5’s retail chains are set up to tap our unique CVP in each of the market segments where we operate.
Pyaterochka proximity stores target customers who look for value, quality and convenience.
Perekrestok supermarkets offer a compelling shopping experience with a greater product range, high
level of customer service and ready-to-eat meals. Chizhik, as a hard discounter, is growing aggressively

and is winning over customers who are especially price sensitive.

Digital businesses

EXPRESS

DELIVERY

VPROK.RU

MNOGO

LOSOSYA

5POST

FOOD.RU MEDIA

PLATFORM

We continued to be one of the
leading players in the market in
2022 thanks to our broad and loyal
customer base and X5’s ability to
quickly roll out our tailored
technology solutions. The express
delivery service was available from
4,480 stores (3,672 Pyaterochka
stores and 808 Perekrestok
supermarkets) as well as 44 dark
stores covering 64 regions in 2022.

total orders

regions

dark stores

29 MLN

Vprok.ru is our online hypermarket
that offers customers looking to
stock up on groceries and FMCG
products delivery straight to their
doorstep, or in some cases to a
nearby 5Post pickup point. The
hypermarket offers customers
same-day or next-day delivery in its
core markets, with service to a
wider geography supported by

5Post.

Mnogo Lososya is a digital service
encompassing a network of dark
kitchens and cafe points serving

ready-to-eat food.

5Post is X5’s last-mile delivery
service for Russian and international
e-commerce platforms. The
business delivers goods to parcel
lockers and pickup points operated
either by 5Post or by X5 retail staff
directly at the checkout in
Perekrestok and Pyaterochka
stores. Thanks to our extensive
nationwide retail infrastructure,
5Post has been able to scale up a
low-cost, high-quality service that
augments our core businesses by

attracting more trafﬁc to stores

while also generating additional

revenue.

Food.ru inspires and informs
customers as they discover and
plan their food shopping. With
recipes and advice, as well as
integration with X5 services like
Vprok.ru and express delivery,
Food.ru provides a seamless entry
point to X5’s omnichannel shopping

experience.

total orders

regions

dark stores

5.3 MLN

total orders

dark kitchens

cafe points

1.5 MLN

235

commercial partners

sorting facilities

Almost

pickup points,

including

parcel lockers

>300

24,000

5,700

MAUs

11 MLN

Supply chain

infrastructure

Efﬁcient and reliable logistics operations, including

optimal inventory levels throughout the supply chain,
are critical to delivering the quality products and
assortment that our customers expect across our

operations, both in ofﬂine and online. We are

improving operations with advanced route planning
technologies and driver awareness monitoring
systems, while also leveraging our extensive
infrastructure to build new businesses like 5Post, a

last-mile parcel delivery service.

Direct import hubs

4,386

Company-owned
trucks

Distribution centres to

support ofﬂine stores

Dark stores to support
digital businesses

STRATEGIC REPORT

OVERVIEW

OUR FORMATS

Pyaterochka

Pyaterochka operates conveniently-located proximity stores and is
Russia’s largest food retailer on a stand-alone basis, with 19,164 stores as
at 31 December 2022 and net retail sales of RUB 2.1 trillion for FY 2022.

The ﬁrst Pyaterochka was opened in 1999, and today it has stores

spanning 67 regions of Russia. The format’s main focus is on being
Russia’s trusted source for affordable and high-quality food. Pyaterochka
served on average 15.1 million customers every day in 2022 and was
named the most loved brand among grocery stores by consumers in
Russia.

Perekrestok

Perekrestok is the largest supermarket business in Russia, with 971 stores
as at 31 December 2022 and net retail sales of RUB 385 billion for FY 2022.

Perekrestok was also Russia’s ﬁrst supermarket chain, established in 1995.

Perekrestok offers customers a unique assortment and service and served

on average 1.8 million customers every day in 2022.

Chizhik

Chizhik is X5 Group’s new hard discounter format and operated 517 stores
as at 31 December 2022, with net retail sales of RUB 35.9 billion for FY
2022. The new “every day low price” (EDLP) concept focuses on a limited
assortment of essential goods. This customer engagement has helped
foster trust in the new low-price brands. Chizhik served on average 178

thousand customers every day in 2022.

1,085

THS

SQM

Selling space

–1.2% y-o-y

7,497

THS

SQM

Selling space

+6.4% y-o-y

152

THS

SQM

Selling space

7x growth y-o-y

385

RUB

BLN

Net retail sales

+10.5% y-o-y

14.8

Share of X5 Group’s net
retail sales

2,123

RUB

BLN

Net retail sales

+18.3% y-o-y

81.8

Share of X5 Group’s net
retail sales

971

Number of stores

–1.9% y-o-y

19,164

Number of stores

+6.6% y-o-y

517

Number of stores

7x growth y-o-y

1.4

Share of X5 Group’s net
retail sales

35.9

RUB

BLN

Net retail sales

12x growth y-o-y

STRATEGIC REPORT

OVERVIEW

OUR FORMATS

Digital

businesses

Our digital businesses continue to grow
at a rapid pace, making a vital
contribution to overall revenue, as well

as customer acquisition and retention.

Express delivery

Express delivery operations were launched in late 2019. The service
offers delivery from local Perekrestok and Pyaterochka stores or dark
stores within 40–60 minutes. Starting in 2022, the service has also
been available on express delivery service aggregators, and has
been available from 4,480 Perekrestok and Pyaterochka stores as
well as 44 dark stores in 64 regions across Russia. The service
handled a total of 29.1 million orders during FY 2022, with peak days

seeing up to 152 thousand orders, 1.3х growth year-on-year.

Vprok.ru

Vprok.ru is an online hypermarket that aims to tap into demand from
customers looking to stock up on groceries and FMCG from the
comfort of their own home. With three large dark stores as at
31 December 2022, Vprok.ru handled 5.4 million orders in FY 2022,

14.4% growth year-on-year.

5Post

5Post is a last-mile delivery service launched in 2019 that enables
e-commerce providers and other X5 digital businesses to deliver

goods to parcel lockers, tobacco sales desks and/or pickup points

located at X5 stores. As at 31 December 2022, 5Post

encompassed 23.9 thousand pickup points in 18.4 thousand
locations across 64 regions of Russia, delivering a total of

26 thousand orders during FY 2022.

Mnogo Lososya

Mnogo Lososya operates a network of dark kitchens and sushi

points at Perekrestok stores. It joined X5 Group in 2021. With
56 dark kitchens (including four franchisees) Mnogo Lososya
handled 1.5 million orders in FY 2022 and its total GMV (including
sushi points at Perekrestok stores) reached RUB 4.1 billion,
2.8x growth year-on-year.

X5’s position
in a changing market

We are the #1 player in the proximity and supermarket
segments – our two traditional formats – and X5 Group is the
absolute leader in Russia’s overall food market. We are also
one of the top players in e-grocery. In the hard discounter
segment, we are rapidly scaling up the operations of Chizhik,

which has shown promising results.

Player with a 13.2%
market share in FY 2022

Hard discounter format
revenue growth

46.6

Digital business
revenue growth

69.3

MLN

Active loyalty card
users

Russia’s food retail market

The Russian food market reached RUB 21.0 trillion in 2022.
Over the past two years, the fastest growth was seen in the
hard discounter, specialists and e-grocery segments,

where we are aggressively growing our business.

STRATEGIC REPORT

OVERVIEW

RUSSIA’S FOOD RETAIL MARKET

2020

28.9%

20.8%

2.7%

0.9%

12.6%

34.0%

2022

29.4%

17.4%

4.4%

3.0%

15.9%

29.8%

2021

28.5%

18.9%

3.3%

2.1%

14.1%

33.2%

RUB 16,587 bln

RUB 18,552 bln

RUB 21,032 bln

Proximity stores

Supermarkets

Hard discounters

E-grocery

Specialists

Other (e.g., hypermarkets, traditional trade)

Russian food retail market development

STRATEGIC REPORT

OVERVIEW

RUSSIA’S FOOD RETAIL MARKET

Food market trends in 2022

X5 vs Russian food retail in top-line growth

Consumer behaviour continued to evolve in 2022 as a decrease in
households’ real disposable income paved the way for more rational
food shopping and trading down. Price sensitivity rose noticeably and

triggered an inﬂux of new customers into the hard discounter segment.

At the same time, the ongoing digital transformation of the economy is
driving further rapid growth of online services and the e-grocery
business in particular. The share of online food sales continues to grow
apace across the retail industry and its major players.

Russian consumers are noticeably switching to private labels as several
global FMCG brands have cut or paused operations in Russia. The share
of ready-to-eat food is also growing, partially replacing customer
spending at HoReCa.

Consumers increasingly
seek value

Share of online purchases
continues to grow

Growing popularity of
hard discounters

Customers actively switch
to private labels as FMCG
brands leave the market

Increasing demand for
ready-to-eat products

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

10%

19%

28%

25%

13%

14%

11%

18%

20%

23%

21%

18%

10%

14%

12%

11%

15%

18%

21%

13%

X5 y-o-y revenue growth

Top 10

Market

Food CPI

Decreasing real incomes

Source: INFOLine, X5 data

STRATEGIC REPORT

OVERVIEW

RUSSIA’S FOOD RETAIL MARKET

% market share

Top 10 Russian food retailers,

2021

2022

X5 Group

12.6%

13.2%

Magnit

9.4%

10.6%

Mercury Retail Group

5.7%

5.6%

Lenta

2.3%

2.2%

Svetofor

1.5%

1.9%

Auchan

1.3%

1.2%

Vkusvill

1.0%

1.1%

O’KEY

1.0%

METRO

1.1%

1.0%

Monetka

0.8%

TOTAL TOP 10

36.7%

38.5%

2021

2022

SberMarket

13.7%

14.1%

Vkusvill

11.6%

12.8%

Samokat

10.5%

12.4%

X5 Group

12.7%

10.7%

Ozon

7.9%

9.3%

Wildberries

7.7%

9.2%

Yandex.Lavka

6.7%

6.1%

Lenta

2.4%

4.8%

Delivery Club

3.3%

4.7%

Azbuka Vkusa

0.8%

0.6%

TOTAL TOP 10

77.3%

84.6%

% market share

Top 10 Russian online food retailers,

In total, X5’s formats are present in what accounts
for over 50% of the market today.

2019

2020

2021

2022

Traditional trade

Regional modern trade

Federal chains

16.9

2020

19.5

22.7

27.3

17.1

2021

22.4

39.7

20.4

2022

42.7

7.1

2.5

29.3

4.3

16.4

11.7

Delivery services

Express delivery

Online marketplaces

Other channels

Online hypermarkets

Source: INFOLine

Russian grocery retail market dynamics,

E-grocery market development,

RUB 155 bln

RUB 383 bln

RUB 625 bln

STRATEGIC REPORT

OVERVIEW

RUSSIA’S FOOD RETAIL MARKET

Trends in the economy and consumer behaviour

Russian macroeconomic indicators,

year-on-year comparison, %

Real GDP

(2.1)

10.5

(0.3)

(3.4)

(3.7)

(4.1)

3.5

5.6

5.0

4.0

RUB/USD exchange rate, weighted average for the period

68.1

74.2

74.3

62.3

59.4

66.0

84.7

73.6

72.6

73.5

CPI

13.8

6.0

5.6

12.2

14.4

16.9

11.5

6.7

8.3

6.8

Food inﬂation

14.9

7.3

7.4

11.2

15.6

19.5

13.5

8.4

10.8

8.1

Real wage growth

(1.2)

5.5

1.6

(1.1)

(1.9)

(5.4)

3.1

4.5

2.8

2.0

Real income growth

(1.4)

8.4

(3.3)

0.4

(2.5)

(2.2)

(1.6)

3.8

1.4

8.1

Nominal retail trade turnover

7.7

33.3

6.0

2.3

5.2

7.9

17.2

16.5

14.8

14.7

Unemployment rate

3.9

4.9

5.6

3.7

3.8

4.0

4.2

4.8

4.3

4.4

Nominal food retail trade turnover

13.4

16.6

4.9

8.0

13.2

17.1

16.6

11.8

13.8

12.1

2021

2022

Selected macroeconomic data

According to preliminary estimates, GDP fell 2.1% in 2022.

Average annual inﬂation rose from 6.7% to 13.8% over the
year, with food inﬂation up from 8.4% to 14.9%. Growth in

nominal wages remained unchanged from 2021 at about 12%.
Consumer activity slowed on the back of a decline in real
disposable income due to rising prices and weaker
consumer sentiment. Consumer lending decreased from
25% to 9.5%. The average annual RUB/USD exchange rate

was 68.5 in 2022, compared with 73.7 a year earlier.

The labour market remained strong throughout the year.
Unemployment steadily declined to 3.7% in 2022, driven by
decrease in workforce and growth in demand for labour in
most professions. The industries with the strongest demand
for workers have not changed compared to 2021:

construction, trade and transport. The ﬁnancial sector also

saw a labour shortage due to decreased labour force supply

on the market.

The fall in real disposable income had an impact on the food
retail market in 2022. Food retail trade turnover decreased by
2.5% in real terms, following a 1.4% drop in real disposable
income. Nominal market volumes increased by 13.4%. Rising
prices and falling real disposable incomes have strengthened
the trend towards rational consumption. The trend towards
cutting back has led to a shift in the format mix of food
chains. Consumer focus has switched from supermarkets
and hypermarkets to more affordable shopping at
convenience stores and hard discounters, with growth in the

latter segment up more than 50%.

The sharp rise in prices in the ﬁrst half of the year was a key

driver behind the fall in household income. The subsequent
strengthening of the exchange rate, the recovery of fruit and
vegetable production and a bumper grain harvest led to a

steady slowdown in food inﬂation.

Source: Rosstat, Bank of Russia

X5 Retail Group. Годовой отчет за 2022 год (на английском) - часть 1