X5 Retail Group. Годовой отчет за 2022 год (на английском) - часть 4

Mnogo Lososya

STRATEGIC REPORT

DIGITAL BUSINESSES

MNOGO LOSOSYA

KEY 2022 HIGHLIGHTS

We also focused on improving the efﬁciency
of operations by reﬁning our supply chain,
exploring opportunities with third-party

logistics (3PL) providers for cooking and

delivery, cutting down on shrinkage, and
boosting labour productivity.

Mnogo Lososya ﬁne-tuned its marketing
strategy in 2022 to increase brand awareness
in the market.

4.1

RUB

BLN

GMV

+153% y-o-y

Dark kitchens in operation

incl. four franchisees

1.5

MLN

Delivery orders

+99% y-o-y

1,915

RUB

Average ticket for delivery

+17% y-o-y

Mnogo Lososya is a digital service encompassing a

nationwide network of dark kitchens and cafe points

serving ready-to-eat food. Mnogo Lososya joined the
X5 family in early 2021.

As at 31 December 2022, Mnogo Lososya operated 56
kitchens (including four franchisees) and 235 cafe points in
Perekrestok stores. Most of the dark kitchens (49) are
located in Moscow and produce more than 200 ready-to-eat

SKUs which can be ordered via the service’s own Mnogo

Lososya app or through delivery aggregators. Cafe points in
Perekrestok stores can be found in 11 cities and offer sushi,
pizza, doner, and much more.

Mnogo Lososya grew its business organically in 2022,

launching operations in nine new cities (in addition to existing

facilities in Moscow and St Petersburg). The service opened
over 160 cafe points in 2022.

Continue to expand with cafe points across

X5’s retail chains

Grow operations in Moscow to encompass

55–60 dark kitchens covering major delivery
destinations

Continue to drive brand awareness

Focus on developing own sales channel and

positive brand recognition in Moscow

PLANS FOR 2023

23,926

Pickup points

including 5,688 parcel lockers

5Post

STRATEGIC REPORT

DIGITAL BUSINESSES

5POST

KEY 2022 HIGHLIGHTS

2.7

RUB

BLN

Revenue

MLN

Parcels delivered

300

Commercial partners

Sorting facilities

Business

model

Parcel acceptance

for delivery from

marketplaces —
domestic/cross-border

Parcel delivery to hub

ﬁrst mile

Parcel sorting

at hub

Parcel delivery
to satellites

interbranch

transportation

Parcel sorting

at satellites

Parcel delivery
to X5 stores

last mile

Parcel pickup

by customers

cashier desk, lockers,

pickup points

In 2022, 5Post secured positive EBITDA and maintained

business volumes despite a downturn in parcels from
international vendors. Shipping volumes by vendors that
suspended their operations in Russia were successfully
replaced through cooperation with some new (e.g. Lamoda,

Avon, Gold Apple, etc.) and existing clients.

5Post is X5’s last-mile delivery service for Russian and

international e-commerce platforms, delivering goods
across a network of parcel lockers and pickup points

operated either by 5Post or by X5 retail staff at the
checkout area in Perekrestok and Pyaterochka stores.

Leveraging our vast nationwide retail infrastructure,

5Post has successfully scaled up a low-cost, high-
quality service that augments our core businesses by
driving store trafﬁc while also unlocking additional

revenue.

KEY COMPETITIVE ADVANTAGES

Nationwide network of conveniently located
pickup points

Leverages X5’s existing logistics operations
(distribution, logistics and stores)

Broad and loyal customer base

Multi-channel pickup options: directly from
stores, lockers or pickup points

High quality last-mile delivery

STRATEGIC REPORT

DIGITAL BUSINESSES

5POST

KEY PARTNERS IN 2022

KEYS TO SUCCESS: X5’S LOGISTICS PLATFORM FOR E-COMMERCE

5POST’S COMPETITIVE ADVANTAGES

E-commerce is a growing force in the overall retail
market, and 5Post offers a way for X5’s core
businesses to tap into that growth. Our last-mile
delivery service partners with top e-commerce
platforms to deliver parcels directly to our stores,
meaning we are able to better serve our customers
while also strengthening X5’s position as an active
player in the digital market.

We run a nationwide network with a presence in 58
regions. This scale of operations is comparable only
to the Russian postal service; but in larger cities, the
number of X5 distribution centres (DCs) and stores
offering 5Post parcel pickup actually exceeds the
density of the postal network.

We have been able to grow the 5Post business with
relatively low investment, as we can build directly on
X5’s existing infrastructure while rapidly scaling up
our nationwide logistics network to support our e-
commerce platforms.

X5 is one of the most efﬁcient logistics operators in Russia by
cost per order thanks to efﬁcient business processes and our

ability to leverage X5’s existing logistics infrastructure

Efﬁciency

A nationwide network of convenient pickup points

Coverage

5Post pickup points are located within just 1 km (10-minute

walking distance) of over 70% of the Russian population

Accessibility

Рarcels can be collected in stores from lockers, pickup
points or checkouts

Convenience

STRATEGIC REPORT

DIGITAL BUSINESSES

5POST

OUR KEY GOALS AND INITIATIVES INCLUDE:

Plans for 2023

We plan to continue to
actively grow 5Post on the
back of X5’s existing
infrastructure.

Accelerate integrations
with new partners and
increase 5Post’s share
of deliveries with
existing clients

Develop new services
and expand our

footprint to new regions

Focus on business

efﬁciency and achieve
proﬁtability targets

Enter the C2C delivery
market

Further scale return and

drop-off services

Launch 5Post services in Siberia on the back of the Tolmachevo
DC (Novosibirsk) and start deliveries to Perekrestok supermarkets

in the Republic of Adygea (Adygea DC) and Samara (SLK DC)

Continue optimising
5Post’s warehouse and
transport infrastructure
processes

MLN

MAUs

MLN

1.5

users downloaded the

Food.ru mobile app

Food.ru

STRATEGIC REPORT

DIGITAL BUSINESSES

FOOD.RU

CONTENT

KEY 2022 HIGHLIGHTS

AUDIENCE

THS

recipes, including recipes with
step-by-step photos and/or videos

THS

user-submitted recipes

including 34,500 submitted in 2022

900

product placements built
into our recipes

THS

editorials and advice columns

including 2,500 added in 2022

1.3

THS

marketing integrations successfully
launched with Pyaterochka,
Perekrestok, Mnogo Lososya,
Vprok.ru, and X5 Club

Food.ru is a media platform to engage customers at
the early stages of their shopping journey by offering
online recipes, cooking workshops and advice on
topics like healthy eating. Food.ru offers information
to customers in the consideration and choice stages,
and by integrating with X5 services like express
delivery and Vprok.ru, it helps us guide customers

towards continuing their shopping journey with X5.

Food.ru is the cornerstone of our strategic goal to
build a food market business present across the
entire customer journey. By offering consumers a
dynamic, engaging media platform that is regularly
updated with a wide variety of food-related
content, we are able to deliver a seamless
customer experience throughout the journey.

Food.ru unlocks a direct communication channel

with the target audience, generating trafﬁc and

converting clicks to sales at X5’s core businesses.

MLN

MAUs

+36% y-o-y

Average time spent on the site

MEDIA

STRATEGIC REPORT

DIGITAL BUSINESSES

FOOD.RU

FOOD.RU: A 360° PLATFORM

FOOD.RU

A 360° PLATFORM

E-commerce

Product

functionality

Advertising

technology

Media

content

Content for users (recipes, articles and
master classes) with integrations and

product placement for X5’s retail chains

An e-commerce asset with full
functionality for ordering products from
X5’s (and partners’) e-grocery businesses;
a single entry point to all X5’s businesses

E-grocery functionality for users (order
products from a recipe, meal plans, a

calorie calculator, etc.)

Opportunities to use different marketing
channels to advertise X5’s and partners’
businesses on the Food.ru advertising

platform

Plans for 2023

We aim to keep growing the platform’s content
while further integrating Food.ru into our core
businesses in the year ahead.

Launch of a platform with food
bloggers for X5’s businesses

and suppliers

THS

Cumulative total of orders from

X5’s retail businesses

THS

New ordering customers

E-COMMERCE

Integration of Pyaterochka
into the Food.ru store and

direct orders from recipes

Logistics

and transport

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

LOGISTICS AND TRANSPORT

As at 31 December 2022, Pyaterochka’s logistics
operations encompassed 39 distribution centres
(DCs) serving 19,164 stores in 67 Russian regions.

2022 stretched Pyaterochka’s suppliers, as a number
of foreign brands exited the Russian market and
supply chains were disrupted. The company worked
closely with partners to develop a joint planning
process and expand its assortment. Product
availability was at 93.7% in 2022, peaking at 95% in
the December high season.

In 2022, specialised surveys revealed that suppliers
highly valued the reliability and customer-centricity of
the company’s supply chain management. In

particular, Pyaterochka ranked ﬁrst in a survey of

alcohol sector suppliers (SCM Alco Survey) and
fourth in a survey of fresh product suppliers.

Pyaterochka also took ﬁrst place in the Advantage

survey, with its collaborative planning, forecasting and
replenishment (CPFR) project rated the best solution
in the industry.

In 2022, Pyaterochka launched two new DCs in the
Moscow Region and Bryansk, as well as four 3PL sites
in Moscow, Izhevsk, Yekaterinburg, and Orenburg.

Expanding digitalisation

Process maturity

Continued to connect suppliers to the CPFR tool,

adding 10 new vendors in each category

Deployed a rolling order forecasting programme for

more than 2,000 PLUs

Increased direct imports from RVI (X5’s importing
legal entity), with turnover growth in potatoes
(+49%), drupes (+21%), pineapples (+61%), and
alcohol (+9%). Continued to scale the end-to-end
stock model and sales and operations planning
process in conjunction with RVI, helping to make
imported goods more affordable while managing
inventory across the supply chain. As a result, X5
became the number one alcohol importer in Russia.
Also, RVI closed two underperforming 3PL facilities

to improve operational efﬁciency. Kicked off a major

cross-format integrated business planning (IBP)
project together with RVI in the fruit and

vegetables category

Machine learning–based regular sales forecasting
was run before the start of the high season. The
solution had been rolled out across all regions of

operations

The roll-out of the JDA Distribution Centre and
Store Restocking project continued, supporting the
end-to-end movement of goods from DCs to

stores and the automation of restocking processes

Pyaterochka was selected as the winner in the Best
Mentor Team category at the Izotov Cup, a national

mentoring competition

The Supply Chain Management Division won the
top prize for three of its projects in the Idea

Challenge, X5’s corporate innovation competition

Pyaterochka continued to serve as a special
partner for the Strong Link: Student League
interuniversity competition, with the aim of

strengthening the company’s talent pipeline

The Supply Chain Management Division once again
participated in the annual Top 100 Dialog supplier
conference, where it shared its experience and
expertise at around a dozen specialised discussion

forums and conferences

Pyaterochka

Operational efficiency

In 2022, efficiency gains completely offset earlier capex in warehouse and
transport personnel. Pyaterochka was also able to get back on track with reducing
logistics costs.

Achieving
sustainability goals

KPIs for warehouse efficiency in terms of DC throughput and overall warehouse
performance remained at a consistently high level.

Storage and transport costs

% of sales

(excl. pickup, incl. recyclable materials),

2020

2.61%

2021

2.68%

2022

2.51%

2018

2.86%

2019

2.67%

−12.2%

Issued

, which describe further

improvements to workplace safety, recreational opportunities, working
shifts, communication with personnel, upskilling, training, and
professional development at Pyaterochka’s DCs. At the end of 2022,
90% of staff gave a positive rating to their working conditions, versus
80% in 2021

Labour Conditions Standards

Developed and introduced new guidelines on the collection of
recyclables, including daily monitoring and a motivation system. As a
result, 549 million tonnes of recyclables were collected in 2022, a 4%
increase versus 2021

Plans for 2023

Expand the IBP project into beverages and groceries

Further roll out the replenishment solution to facilitate ordering
stock from DC suppliers, and use sales forecasts to develop a
rolling order forecasting project with vendors

Launch six new DCs in Volgograd, Krasnodar, Samara, Orenburg,
Omsk, Yekaterinburg, as well as one 2PL DC in Khabarovsk

OWR,

boxes/hour

+11.6%

+14.3%

2018

2019

103

2020

108

2021

106

2022

112

DC throughput,

boxes/sqm

+5.0%

+2.4%

2018

6.0

8.3

2019

6.3

8.2

2020

6.5

8.3

2021

6.5

8.5

2022

6.3

8.5

Company average

3 best DCs

Company average

3 best DCs

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

LOGISTICS AND TRANSPORT

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

LOGISTICS AND TRANSPORT

Perekrestok’s logistics operations support the chain’s own supermarkets and Karusel hypermarkets. Throughout

2022, the company implemented changes to drive further gains in efﬁciency, quality and the digitisation of operations.

As at 31 December 2022, Perekrestok’s logistics encompassed eight DCs, which helped support the operations of

971 supermarkets and 12 Karusel hypermarkets across 47 regions of Russia.

Key 2022 highlights

Planning

Carried out a collaborative initiative with key
suppliers, allowing for the majority of the
programme’s participants to improve their

service level and reduce shrinkage

Inventories decreased by 1.1 days year-on-
year, a result of rolling out the inventory

replenishment digital solution

Improved forecast quality by 1.5%–2%,

which secured product availability amid

high volatility in demand throughout 2022

The Customer Service initiative was
launched to improve dialogue with
suppliers and transport companies, as well

as between retail team functions

Physical logistics

A new, high-performance DC with a total

warehousing area of 14,000 square metres

opened in Voronezh, supporting the

operations of 55 supermarkets in the area

Developed and implemented the route to
market (RTM) service model to improve

efﬁciency in logistics, increase product
availability and reduce shrinkage

Procurement quality for all DCs rose to
99.8%

Worked with vendors to develop and
implement a set of logistics solutions that

reduce the supply chain costs

The Working in a Safe Environment (WISE)
programme was launched, which resulted in
a 2.4x reduction in the injury rate across the

supply chain in 2022

Launched the Keep Me Cool programme at
DCs and in the transport division, aimed at
strict monitoring of temperatures for all

types of products

Launched a programme to improve

sanitation and pest control at DCs

Launched Freshmania, a programme to
boost the freshness of fresh and ultra-fresh

products

Plans for 2023

Launch a new DC in Nizhny Novgorod

Deploy new fruit and vegetable packaging technology at DCs

Implement neural network algorithms in forecasting processes to
unlock agile responses to shifting demand and secure a 2x

reduction of out-of-stock rates

Fully automate the AutoOrder tool

Launch X5’s proprietary warehouse management system (WMS) at
two pilot DCs

Implement the Lean DC programme

Launch the Supply Chain Academy for network management

Develop initiatives to improve labour safety and reduce injury rates
at DCs

Perekrestok

Launched a Business
Intelligence programme for
the supply chain, automated
smart reporting, a mobile
workplace for DCs, and a
number of other innovative

solutions

Kicked off the Talent Development Centre programme for middle
management and paid special attention to improving working

conditions at DCs

Launched qualiﬁcation

upgrade centres for
warehouse and transport

personnel

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

LOGISTICS AND TRANSPORT

In 2022, Chizhik’s logistics encompassed six DCs operating in Nizhny Novgorod, Voronezh, Ufa, Yekaterinburg,
and the Moscow Region (Litvinovo and Noginsk), providing deliveries to eight regional sales divisions.

In the reporting period, the Centre of Competence and operations teams were created, which enabled the

efﬁcient and rapid launch of six distribution centres ready to support network expansion and to ensure the

supply of products to 517 stores in 13 Russian regions.

Chizhik

Key 2022 highlights

Plans for 2023

Maintain Chizhik’s network growth in
existing and new regions and increase
DC and transport productivity in the
company’s current regions of
operations

Hire operational teams and launch new
DCs to supply goods for Chizhik stores

Make preparations for DCs slated for
launch in 2024

Improve the efﬁciency of DCs launched

in 2022–2023

Construction of new DCs
started to support network

expansion in 2023–2024

Launched six new DCs

Drafted procedures and
instructions to ensure project

scaling

Procured 500+ vehicles for
supplies to Chizhik stores in

2022–2023

Geared up for the launch of X5’s WMS, which looks to streamline

and automate DCs’ operations

Efﬁcient and reliable transport operations are key to multiple aspects

of the Company strategy, strengthening existing operations by
reducing costs and supporting the development of new businesses
which leverage existing transport capacity to offer services such as
last-mile delivery.

As at 31 December 2022, X5 Transport’s

ﬂeet comprised 4,386 trucks, which
handled about 80% of the Company

deliveries during the year.

X5 Transport

Plans for 2023

Further develop X5.Transport by
speeding up processes through
automation, expanding channels for

fulﬁlling orders with own and hired

vehicles, and deploying convenient

services for drivers

Increase efﬁciency and build expertise

in vehicle maintenance and repair, while
expanding the network of own repair
stations. Build automated accounting
and repair analysis systems for repair

costs

Further develop electronic document
management, digitalise the remaining
documentation, and create an
electronic waybill and electronic service

applications

Continue testing and adopting
alternative fuel vehicles and launch a
pilot project for the use of electric

trucks

Expand the Company’s delivery
footprint, including in the Far East of

Russia

Expand strategic partnerships with

major transport companies

Focus on ESG: reducing empty runs
and responsibly consuming resources

(water, energy and waste)

Key 2022 highlights

459 new trucks were procured to expand and refresh X5’s own ﬂeet

While many suppliers faced a shortage of vehicles for deliveries, X5
actively developed a pickup and commercial delivery service for

suppliers. This service expanded by about 60% versus 2021

The Company improved working conditions for drivers and other

employees:

X5 launched a road safety portal. Portal data indicates that
preventive measures are taken in a timely manner, including

additional driver training

The Company equipped more than 60% of its ﬂeet with the Antison

(anti-sleep) system, which brought down the accident rate by an

average of 30% for own trucks. Antison monitors the physical
condition of drivers behind the wheel as well as the road conditions

As part of ongoing efforts to optimise fuel consumption and reduce
emissions:

about 20% of X5’s own ﬂeet has been converted to gas–diesel
engines

speciﬁc greenhouse gas emissions per square metre of selling
space decreased by around 6%

the share of empty runs, taking into account the return of recyclable

materials and returnable packaging, decreased by more than 10%

The Company continued to develop X5.Transport, a single digital

platform that encompasses AI- and big data–enabled solutions

The Company signiﬁcantly increased the use of electronic document

management in its transport division. Electronic consignment
documents for internal shipments undertaken by the Company’s own

vehicles were used for more than 90% of the total number of trips

Direct

imports

Total share of direct imports,

% of cost of sales

2020

5.3%

2021

5.7%

2022

6.1%

Key achievements for direct imports in 2022

The overall increase in direct imports in 2022 stood
at 25% in rouble terms, mainly driven by growth in
spirits and beverages, fresh and ultra-fresh products,
as well as related goods and general merchandise

We continued to develop our own infrastructure
throughout 2022 by signing contracts with 3PL
warehouses to support growing volumes in
beverages, groceries and non-food supplies

We systematically identiﬁed alternative supplies to

replace the brands that exited the Russian market in
2022, and X5 managed to optimise most of its line-
haul supply routes despite geopolitical headwinds.

We became the ﬁrst and only direct import operator

in Russia to deliver a pallet ship full of citrus products
from Turkey to St Petersburg

As at the end of 2022, RVI was Russia’s number one
importer of spirits and canned pineapples by volume

Plans for 2023

Further increase the volume of direct
imports by 25% year-on-year driven by
growth in general merchandise, fruit and
vegetables, spirits/beverages, and dry
groceries

Improve the efﬁciency of operations by

boosting investment into own and 3PL

infrastructure

Explore markets open to trading with

Russia amid the changing supplier base

Develop sales and operations planning

(S&OP) process

Pulkovo

and 3PL facilities

Bogorodsk

Novorossiysk

Yekaterinburg

As at 2022-end, our Direct Imports business

unit operated four hubs:

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

DIRECT IMPORTS

X5 Technologies

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

X5 TECHNOLOGIES

KEY 2022 HIGHLIGHTS

New platforms enabled by our
proprietary solutions and partner
technologies have been
introduced

a loyalty programme, store and
checkout management and SAP BW

analytical reporting

MLN

Users have registered in X5 ID

identiﬁcation system

THS

Members

The number of users of X5 Group’s
analytical reporting tools has tripled

X5 Tech’s attractiveness growth

in the Top 50 IT Brands to Work For
ranking compiled by Habr and

ECOPSY Consulting

DAY

Average time for capacity allocation

With the rollout of the X5 Cloud
platform, the average time for capacity
allocation was cut from 21 days to less

than a day

X5 Tech’s key objective is to ensure business continuity by engineering
digital solutions for X5 Group businesses and partners. X5 Tech works to
help the Group’s businesses offer the best product assortment, quality,
prices, and service to customers. To achieve this, X5 designs and enhances
integrated digital solutions informed by extensive user experience research.
IT solutions for managing the Group’s internal processes lead to stronger
performance, including in its engagements with partners. X5 Tech also has
in place a standalone team that generates IT solutions to support basic
processes, accounting and regulatory compliance.

X5 Tech offers a full development cycle for business, from running
requirements analysis and building architecture, to commissioning

a ﬁnished solution and providing support post-delivery.

Products

SIGNIFICANT IMPROVEMENTS IN DATA QUALITY WERE

ACHIEVED ACROSS KEY AREAS OF FOCUS

Customers

FROM

X5 Technologies (X5 Tech) is the key digital partner
of X5 Group’s retail chains and businesses. X5 Tech
offers solutions that help millions of people
purchase their favourite food items – fresh and at the
best price – every day. IT X5 Technologies LLC is an
accredited IT company.

At present, its team is focused on generating proprietary,

vendor-agnostic solutions and products. The company’s

core expertise is in developing software, databases, data
assets, and products driven by big data while also
enhancing our own IT team.

X5 Tech: Digital solutions

for people and business

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

X5 TECHNOLOGIES

One of our key objectives for 2022 was to ensure
business continuity by maintaining the stable operation of
existing technologies and launching import substitution
and proprietary technology projects. The Company has
created software solutions and services to ensure the
continuity of its critical processes around reporting,
customer analytics, employee activities, and much more.

In May 2022, X5 Group launched a proprietary cloud
platform. The private-cloud platform, known as Salt, was
enabled by open source and proprietary solutions. This
cloud platform reduces the total cost of ownership for our
IT infrastructure while cutting time-to-market for digital
projects and reducing their carbon footprint by leveraging

green energy-efﬁcient technologies at state-of-the-art

data centres operated by X5 and Selectel.

Salt is much more than a collection of infrastructure and
platform management services: it also offers a set of
automated processes that allow digital projects to quickly
launch in the cloud with all the necessary security
settings. Salt relies on a new approach to data security,
which ensures a high level of data protection without

sacriﬁcing convenience and efﬁciency for the user. Certain

components of the platform are provided to X5’s internal
customers as a service, including data centre as a service
for data storage and processing, offering up to 99.9%
availability.

By launching Salt and hosting its cloud at our partners’
high-tech data centres, X5 is building a new approach to
infrastructure operation.

We have launched an integration platform and developed
high-load services that are used in more than

60 products/projects.

In June 2022, X5 Group launched a new processing
system for its loyalty programme based on home-grown
technologies. By late 2022, over 19,500 stores had
migrated to the new processing system while the number
of active loyalty programme members hit 70 million.

The new loyalty programme processing system was
launched by X5’s technology team on a platform
developed by a Russian company. The platform offers new
opportunities to enhance the customer experience,
including by introducing uniform customer authorisation
standards that remove data overlaps and a proprietary
crisis-monitoring system with instant alerts. The new
processing system relies on X5’s infrastructure, which
ensures the loyalty programme operates seamlessly and
protects customer data effectively.

In late 2022, we developed a personal analytics service
based on X5 ID for loyalty programme members, enabling
customers to analyse their spending at Pyaterochka and
Perekrestok retail chains for the whole year.

The product is X5’s proprietary solution, with
unprecedented analytics depth for the Russian grocery

market. For the ﬁrst time, X5’s retail chain customers have

access to an individual breakdown of their annual

spending, as well as statistics on speciﬁc items: for

example, items that were purchased most often or how
many kilos of bananas the customer bought during a
certain period. The product’s page also offers information
on bonus points earned during the year and how they can
be used. The service also helps customers track their
spending, savings on promotions and the value they got
from bonus points.

In 2023, X5 Technologies will continue overseeing the
smooth operation of X5 Group’s businesses by rolling out
and enhancing digital solutions and innovations.

Innovations

STRATEGIC REPORT

RETAIL INFRASTRUCTURE

INNOVATIONS

Despite all the challenges of 2022, X5 Group has maintained
its focus on consistently embedding new innovations to
enhance its business performance. We have continued
strengthening our innovation-driven culture, rolling out
advances – whether off-the-shelf products available in the
market or proprietary ideas and solutions generated by X5
businesses and teams.

Between 2019 and 2022, the introduction and scaling of
innovations delivered RUB 8.6 billion in incremental EBITDA
for the Company.

In 2022, we paid particular attention to protecting intellectual
property rights to X5’s proprietary solutions. As a result, in
2022, the Company obtained over 20 patents for inventions
and utility models, both in Russia and abroad, maintaining its
competitive edge.

Import substitution and support for Russia-made solutions
were a key priority in 2022. For innovations, this involved us
exploring new approaches to replacing process equipment
to maintain our business process continuity. Over 1,800
technological equipment units were analysed between
March and August 2022. For the majority of our equipment,
we also found alternative technologies by Russian and Asian
manufacturers, testing and incorporating them into our
standards. Our existing innovation policy and fast-track
process enabled us to resolve these issues in the shortest
possible time.

External innovations remain an important source in X5’s drive for new ideas and
technology. Scouting areas are selected in partnership with X5’s retail chains,
business units and their various functions. Over 2022, technological innovations
were scouted out across nine areas: HR, logistics, transport, sustainability, food
waste recycling, fruit and vegetable quality, store operations, loyalty programme, and
CVM.

Our scouting function also set up a system to engage with Russia’s leading research
institutes, universities and technology transfer centres. As a result, over 40 projects
for extending the storage life of fruit and vegetables were proposed by research
institutes and higher education institutions, with 23 projects selected for future pilot.

In 2022, X5 worked with Internet Initiatives Development Fund (IIDF) to launch

Russia’s ﬁrst and largest sustainability scouting programme. The programme

scouted out innovations in carbon reduction, food waste minimisation, sustainable
packaging, and social programmes. A total of 156 startups entered the programme

funnel. Following a granular analysis, 10 sustainability startups were shortlisted for

piloting.

As far as international scouting is concerned, we have built relationships with major
accelerators such as Asian LeanSpark and Latin American Liquid Ventures.

Innovation scouting

The Retail Innovation Tech Alliance (X5 Group, Beeline, M.Video-Eldorado Group,
Hoff, and Magnum Cash & Carry) has also seen considerable changes in ways
of working. In early 2022, ROLF, Russia’s leading car dealer, joined the Alliance’s

ecosystem as a partner. The Alliance has grown signiﬁcantly through new

partnerships in technology (VK and Yandex Cloud) and venture capital (Syndicate
Venture Club and United Investors) as well as with the Moscow Innovation Cluster
and research communities across the country’s research institutes and
universities (Technovery). The Alliance’s expansion was focused on creating a
supportive environment for retail tech startups to emerge and develop. The New
Horizons programme was developed in the summer of 2022 to scout out
technologies for the Alliance in new markets. Instead of wider scouting initiatives,
the programme offers tech-watching and trend-watching across the greatest
focus areas for the Alliance’s functional teams.

For tech-watching, the Alliance has selected Russia’s leading scouting partners:
GoTech Innovation, IIDF, LOGA Group, Startech.vc, Dsight, and SOLYANKA,
with 23 scouting areas assigned among them. In this way, the Alliance is
supporting and enhancing Russia’s innovation ecosystem.

Today, the Retail Innovation Tech Alliance is a major source of external solu-
tions for X5.

Joint innovations

Our internal innovation engine, the X5 Idea Challenge programme, has become a
key tool for boosting our business performance. In 2022, the Company began to
reap the results of pilots launched in 2021. A third of the Innovation Department’s
impact on X5’s EBITDA was generated by this programme.

Despite last year’s challenges, in September, we launched a third wave of internal
innovations, X5 Idea Challenge 3.0, gathering 309 ideas. The total audience of the
programme’s three waves exceeded 1,000 people. Over 450 employees from
various units of X5 Group took part in the acceleration programme. Different
Russian regions are strongly involved in the project, with most participants coming
from Moscow, St Petersburg, Nizhny Novgorod, Voronezh, Yekaterinburg,
Chelyabinsk, and Omsk.

A total 897 ideas were generated from the programme’s three waves. Sixteen

projects were piloted after the ﬁrst two waves. Eight pilots have already been
successfully completed, conﬁrming they make a positive impact and are ready to

be rolled out across our retail chains. Successful teams each received a bonus of
RUB 1 million.

X5 Idea Challenge is also a career enhancement programme, identifying, upskilling
and training internal candidates – proactive, promising talents with an
entrepreneurial mindset. On completion of the programme, almost 40% of
participants are promoted, with many of them expanding their competencies and
achieving horizontal growth within the Company as experts. We have built a
community of internal innovators who now act as change agents across the
Company.

Fostering intrapreneurship

and working with students

Financial review

STRATEGIC REPORT

FINANCIAL REVIEW

The ﬁnancial and operational information contained in this ﬁnancial
review comprises information about X5 Group N.V. and its
consolidated subsidiaries (hereinafter jointly referred to as “we”, “X5”
or the “Company”). The following is a review of our ﬁnancial condition
and results of operations as at 31 December 2022 and for the years
ended 31 December 2022 and 31 December 2021. The consolidated
ﬁnancial statements and related notes thereto are available on pages

of this document and were prepared in accordance with

International Financial Reporting Standards (IFRS), as adopted by the
European Union.

148–239

Key 2022 highlights

REVENUE

2,605

RUB

BLN

+18.2%, 2021/22

GROSS PROFIT MARGIN

24.4

IFRS 16

−108 b.p., 2021/22

ADJUSTED EBITDA MARGIN

11.7

IFRS 16

−56 b.p., 2021/22

NET DEBT/EBITDA

2.58

IFRS 16

CAPITAL EXPENDITURE

82.0

RUB

BLN

−16.2%, 2021/22

24.1

pre-IFRS 16

−104 b.p., 2021/22

7.3

pre-IFRS 16

−17 b.p., 2021/22

1.02

pre-IFRS 16

Capital expenditure structure,

2021

97.9

RUB

BLN

34%

11%

10%

20%

15%

2022

82.0

RUB

BLN

38%

12%

13%

24%

New store openings

Maintenance

Logistics

Refurbishments

Other, including new businesses

The following table and discussion provide a
summary of our consolidated results of
operations for the years ended 31 December
2022 and 31 December 2021.

Results of operations for the year
ended 31 December 2022
compared with the year ended
31 December 2021

1 Please note that in this and other tables and text,

immaterial deviations in the calculation of percentage
changes, subtotals and totals are explained by
rounding.

2 Net of VAT and revenue from wholesale operations and

revenue from franchise services and other services.
Including Mnogo Lososya, Krasny Yar and Slata.

3 Adjusted SG&A is SG&A before depreciation,

amortisation and impairment costs as well as costs
related to the LTI programme, share-based payments
and other one-off remuneration payments and the one-
off impact of the Karusel transformation. For more
information on alternative performance measures, see
pages 73–76.

Adjusted net proﬁt is net proﬁt before the effect of the

Karusel transformation and tax accruals related to
previous periods, including X5’s reorganisation.

Revenue

2,605,232

2,204,819

18.2

2,605,232

2,204,819

18.2

incl. net retail sales²

2,596,086

2,194,477

18.3

2,596,086

2,194,477

18.3

Pyaterochka

2,122,793

1,793,676

18.3

2,122,793

1,793,676

18.3

Perekrestok

385,495

348,941

10.5

385,495

348,941

10.5

Karusel

15,693

31,742

(50.6)

15,693

31,742

(50.6)

Chizhik

35,893

2,940

12x

35,893

2,940

12x

Gross proﬁt

635,196

561,317

13.2

626,744

553,363

13.3

Gross proﬁt margin, %

24.4

25.5

(108) b.p.

24.1

25.1

(104) b.p.

Adj. SG&A

(352,346)

(314,017)

12.2

(457,640)

(410,205)

11.6

Adj. SG&A, % of revenue

13.5

14.2

(72) b.p.

17.6

18.6

(104) b.p.

Adj. EBITDA

305,529

271,023

12.7

189,468

164,197

15.4

Adj. EBITDA margin, %

11.7

12.3

(56) b.p.

7.3

7.4

(17) b.p.

EBITDA

302,849

267,850

13.1

186,788

161,024

16.0

EBITDA margin, %

11.6

12.1

(52) b.p.

7.2

7.3

(13) b.p.

Operating proﬁt

138,118

117,572

17.5

97,632

84,359

15.7

Operating proﬁt margin, %

5.3

(3) b.p.

3.7

3.8

(8) b.p.

Adj. net proﬁt

⁴

47,210

44,613

5.8

54,270

50,323

7.8

Adj. net proﬁt margin, %

1.8

2.0

(21) b.p.

2.1

2.3

(20) b.p.

Net proﬁt

45,188

42,738

5.7

52,248

48,513

7.7

Net proﬁt margin, %

1.7

1.9

(20) b.p.

2.0

2.2

(19) b.p.

Russian roubles (RUB), millions

2022

2021

% change,

y-o-y

2022

2021

% change,

y-o-y

IFRS 16

pre-IFRS 16

STRATEGIC REPORT

FINANCIAL REVIEW

Revenue and net retail sales

In 2022, X5’s revenue increased by 18.2% year-on-year to RUB 2,605
billion. Net retail sales for 2022 grew by 18.3% year-on-year, driven by a
10.8% increase in like-for-like (LFL) sales and a 7.5% sales growth
contribution from an 8.3% rise in selling space.

The Company’s proximity store format, Pyaterochka, was the main growth

driver in 2022: Pyaterochka’s net retail sales rose by 18.3% year-on-year,
driven by a 11.7% increase in LFL sales and a 6.6% contribution to sales
growth from a 6.4% expansion in selling space. LFL trafﬁc increased by
3.5% year-on-year, while the LFL basket grew by 7.9% year-on-year.

Perekrestok’s net sales increased by 10.5% in 2022, driven by a 7.1%
increase in LFL sales on the back of 7.1% LFL basket growth.

Karusel experienced a 50.6% decline in net retail sales, driven by

downsizing as part of the format’s transformation programme.

In 2022, Chizhik’s net sales rose 12x year-on-year. The number of stores
reached 517 as at 31 December 2022.

Gross proﬁt

The Company’s gross proﬁt margin under IFRS 16 in 2022 decreased by
108 b.p. year-on-year to 24.4% (decreased by 104 b.p. to 24.1%

pre-IFRS 16). The decline was mainly driven by a reduction in commercial
margin due to price investments and the aggressive expansion of Chizhik.
This is in line with the strategy of hard discounters, which typically operate
with lower commercial margins, thus contributing to the overall reduction.

Proﬁt and loss statement: highlights

содержание .. 2 3 4 5 ..