X5 Group (Пятерочка). Годовой отчет за 2021 год - часть 5

STRATEGIC REPORT

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STRATEGIC REVIEW

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CEO STATEMENT

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CEO statement

We also launched payment services and piloted subscriptions, which will be 
integrated into our existing loyalty programmes.   

Our core grocery formats have continued developing with a focus on 
adjusting their CVPs to market and customer trends. Based on the current 
macroeconomic situation and long-term dynamics in real disposable 
incomes in Russia, we took a decision to launch a new offline format, the 
Chizhik hard discounter brand. We believe that in the medium term, the 
hard discounter segment will be the fastest-growing part of the food retail 
market, and Chizhik gives X5 exposure to new groups of customers, 
complementing our existing footprint.    

We maintain our position as one of market leaders in Russia’s fast-
developing e-grocery segment, thanks to our scale, efficient logistics, 
customer loyalty and strong in-house digital capabilities.  

Looking at internal processes, we are working to reduce capital expenditure 
as a percentage of revenue. Capital investments under pre-IFRS 16 in 2021 
amounted to RUB 97.9 billion, or 4.4% of revenue vs 4.5% in 2020. We 
opened 1,414 new stores and six DCs. In addition to new openings, we 
refurbished 1,037 stores and invested in projects to improve efficiency, 
logistics and new businesses. We also completed the next stage of our 
digital transformation programme, which had a positive impact of RUB 18 
billion on X5 Group’s FY 2021 EBITDA. Despite the significant investment 
programme in 2021, our net debt/EBITDA remained at a comfortable level of 
1.67x under pre-IFRS 16 at year end. 

On top of that, X5 significantly strengthened its free cash flow generation, 
driven by a continued focus on working capital improvements. In FY 2021, 
we delivered an adjusted FCF under pre-IFRS 16 of RUB 73 billion, which is 
RUB 56 billion higher than in 2020. 

In 2021, we implemented changes to our senior management team with the 
appointment of Vsevolod Starukhin as CFO of X5. In January 2022, Vladislav 
Kurbatov, previously General Director of Perekrestok, was appointed 
General Director of Pyaterochka. The seamless transition of both Vsevolod 
and Vladislav into their new roles has further strengthened X5’s senior 
team, ensuring we are ready to seize opportunities as they emerge in the 
year ahead.

At the same time, we are taking steps to address these challenges and 
ensure that our position as Russia’s #1 food retailer is secure over the long 
term. The success of these actions is reflected in our performance: revenue 
growth accelerated to 11.5% year-on-year in 2021 to RUB 2.2 trillion, and we 
achieved a 7.3% EBITDA margin pre-IFRS 16. Despite the challenging 
external environment, X5 delivered solid performance in 2021. We take a 
long-term view of our business and we seek to anticipate consumer 
demand and ensure we are well positioned across all commerce channels. 
As such, we continue to develop our digital businesses, which comprise e-
grocery services, 5Post and Mnogo Lososya. Revenue from our digital 
businesses rose 140% year-on-year to RUB 47.9 billion and contributed 
2.2% to our consolidated revenue for 2021 (including a 2.7% share in 
Q4 2021). 

ESG performance was another area where we excelled, with the Company 
on track to achieve or over-delivering on the 2023 targets set by the 
Supervisory Board. X5 improved its key ESG ratings (MSCI ESG, S&P Global, 
CDP) and published its first sustainability report under GRI Standards in 
2021.  

We achieved other key strategic milestones in 2021: we expanded the 
reach of our offering to cover all stages of the customer journey, with the 
launch the Food-centric media platform Food.ru, which attracts customers 
looking to plan meals and discover new food ideas; Food.ru already has 21 
million MAUs.

Igor Shekhterman

X5 CHIEF EXECUTIVE OFFICER,  
CHAIRMAN AND MEMBER  
OF THE MANAGEMENT BOARD

Main highlights of 2021

X5 continued to deliver revenue growth and securely maintained its #1 
position on the food retail market, despite consolidation by major 
competitors during the year.

Our e-grocery business continued its aggressive expansion, remaining 
firmly on track to achieve profitability and maintaining a high quality of 
service that attracts and retains customers for our offline businesses. The 
number of express delivery orders increased by four times to 19.2 million 
in 2021, while Vprok.ru Perekrestok delivered 4.7 million orders, up 30.1%.

Our 5Post e-commerce delivery service reached positive EBITDA in 2021, 
having delivered 27.0 million e-commerce packages, finishing the year by 
handling 5.1 million parcels in December through its network of 5,692 
parcel lockers and 16,943 delivery points at X5 stores.

We maintained an EBITDA margin pre-IFRS 16 of 7.3% and continued 
investments in digital transformation and the development of the Chizhik 
format.

We sustained positive momentum in personnel turnover and labour 
productivity: turnover declined 1.5 p.p. to 36.4%, and our average labour 
productivity improved by 7.4%.

We continued to roll out new concepts and CVPs in our proximity and 
supermarket formats, having refurbished 1,037 stores (992 proximity and 
45 supermarkets). The new concept stores continued to demonstrate 
strong like-for-like and NPS dynamics compared with the previous 
concept.

We began the rollout of Chizhik hard discounter stores, with 72 stores as 
of 31 December 2021 and plans to open over 3,000 stores in the next 
three years.

The Food.ru media platform was launched in July 2021. This new digital 
media platform helps us to attract customers at the search and discovery 
stage of the customer journey.

The formats' loyalty programmes are adding joint initiatives with its 
strategic banking partner.

We entered the Irkutsk region in November 2021 — our 67th region of our 
presence in Russia.

STRATEGIC REPORT

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STRATEGIC REVIEW

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CEO STATEMENT

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Delivering on strategic targets

Market environment 

X5 remained the leader in food retail, with a market 
share of 12.7%, up from 12.6% in 2020. We also 
remained among the top players in e-grocery, with 
digital sales growth continuing at a rapid pace, rising 
by 140% year-on-year to RUB 47.9 billion. Our digital 
consumer platforms had a combined total of 26.8 
million MAUs, up by 78% year-on-year. 

In line with our goal of strengthening our existing 
business, we achieved higher sales densities, which 
rose to RUB 271.5 ths/sqm from RUB 262.3 ths/sqm in 
2020. In addition, we continued to increase the 
number of active loyalty card users, with a rise of 3.2% 
year-on-year to 62.6 million in FY 2021.   

At the same time, the overall performance of X5’s retail 
store portfolio is at an all-time high with the number of 
retail stores in "clinic" at a record low.  

With a relentless focus on efficiency and improving the 
customer experience, X5 is a market leader in 
digitalisation. 

While the market environment was challenging in 2021, 
X5 was among the best placed to continue to create 
value for a wide range of stakeholders, during the year. 
Real GDP growth turned positive in 2021 and was 4.7%. 
Real disposable income also moved into growth 
territory, rising 3.4% for the year.   

Despite these positive trends, customers began 
demonstrating rational behaviour in the context of high 
inflation levels in 2021, while also continuing to shift 
towards using online services as an essential part of 
their food shopping routine. 

Unemployment continued to fall, reaching 4.3% at the 
end of 2021, the lowest level since August 2019. 
Demand for labour remains strong, while supply is 
restricted amid reduced labour migration and a 
declining working-age population due to the ongoing 
Covid-19 pandemic.

Client-facing and back-office digitalisation projects 
had a positive impact of RUB 18 billion on EBITDA for 
2021, compared with RUB 7 billion a year earlier.  

Our strategy aims to create value for all of our 
stakeholders, including our shareholders. In 2021, 
EBITDA margin was 7.3% under pre-IFRS 16, and total 
shareholder return over the last three years was 31.8% 
in RUB as of December 2021. Adjusted ROIC (pre-IFRS 
16) increased by 1.0 percentage points year-on-year in 
2021; FCF improved by 315% in 2021. I believe this 
demonstrates that we have been effective in delivering 
what our shareholders expect, while creating value for 
all our key stakeholders. 

Our environmental, social and governance 
performance is another strategic priority for X5 Group. 
We will disclose our progress against our ESG strategy 
targets in our sustainability report, which will be 
published in May 2022. 

At the same time, food inflation grew faster than 
disposable income, reaching 8.4% for the full year and 
leading to cost-conscious customer behaviour. 
Increasing costs and prices have spurred higher 
government involvement in the food market, as 
officials seek to keep inflation under control.  

During this difficult year, the market underwent active 
consolidation, with the combined share of the top 10 
players accounting for 37% in 2021. 

In the digital space, ecosystems and marketplaces that 
did not historically specialise in food have sought to 
use this market as another way to keep consumers on 
their own platforms, often sacrificing margins and 
profitability to gain market share.  

Responding to challenges

Years of work on developing a strong company 
capable of delivering sustainable growth in a changing 
market means we are in a good position to adapt to 
the challenges we face today. Amid the latest external 
developments, X5 has a number of strengths that 
support our continued growth. 

The first is a robust infrastructure that has been refined 
during the economic challenges of 2020-21 and has 
proven flexible in responding to new market demands. 
This includes our in-house logistics infrastructure and 
our dedicated direct import operations, which enables 
us to ensure continued deliveries from suppliers all 
over the world. Our own digital sales platform, supports 
the resiliency of our business amid challenges that 
may arise for domestic players in the digital sphere. 
Meanwhile, our technology platform that relies largely 
on in-house developments further ensures the 
flexibility and information security of our business. 

X5’s long-term approach to relationships with 
suppliers enables us to maintain a stable supply of 
goods while diversifying our customer offering. We 
focus on partnerships with local suppliers to ensure 
the quality and freshness of our products, and 
continuously bring new suppliers on board to expand 
our assortment. The development of X5’s private 
labels is a major initiative in this regard, and responds 
to increasing demand among rational consumers 
seeking the best value for their money.

We are already addressing increased competition in 
our offline operations through the rationalisation of our 
CVPs across formats and the rollout of Chizhik, X5’s 
hard discounter. As labour and other resources 
increase in cost, we are expanding the digitalisation of 
business processes in commercial operations, supply 
chain and back office, as well as optimising our supply 
chain and increasing our purchasing power. In 
response to the growing footprint of online 
ecosystems in the food market, we are also expanding 
our own digital infrastructure to reach across the entire 
customer journey and support our core businesses. 

We are well-placed to address these challenges: X5 
has a track record for innovation and strong in-house 
technology capabilities; organic growth is part of our 
DNA, and our strong brands will continue to replace 
smaller existing players as they expand further. We 
have also succeeded in quickly integrating new 
businesses like Mnogo Lososya dark kitchens while 
creating and quickly rolling out our own new 
businesses and services, like 5Post and express 
delivery. Finally, our flexible business model has 
enabled the Company to build up sufficient cash 
reserves to continue implementing our strategy in 
changing market conditions. 

I am confident that X5 will continue to grow and adapt, 
remaining Russia’s top food market player and 
delivering value for shareholders in the years ahead.

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CEO STATEMENT

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Sustainable development

We announced our sustainable development goals for 
2023 in the autumn of 2020, and I am happy to inform 
you that, as of 31 December 2021, we were significantly 
ahead of schedule or had already achieved our goals. 
X5’s sustainable development strategy is focused on 
four different areas where we can make the greatest 
impact: health, the planet, employees and 
communities. We continue to integrate these goals into 
our business processes and to develop sustainability 
projects.  

However, given the current environment resulting from 
external events, it is extremely important to double 
down on our support for local communities, in 
particular our programme for helping the most 
vulnerable members of society. We plan to scale up 
our “Basket of Kindness” project in 2022 in order to 
offer food support to more people than before, 
including by increasing the supplies we donate to 
charities.  

We also understand that X5 Group’s sustainability is a 
result of the hard work of our employees, who ensure 
smooth day-to-day operations, which is why we need 
to increase our focus on supporting our staff and 
improving working conditions and safety.  

Sustainability will be one of X5 Group’s key strategic 
priorities in the years to come, and I am certain we can 
make an even bigger impact together.

Outlook

Looking ahead to 2022, we are now operating in 
unprecedented and historic times, with volatility and 
unpredictability becoming the defining factors 
influencing the Russian economy and business. While 
we currently continue our normal day-to-day 
operations without interruption, X5 Group is also 
engaged in contingency planning to ensure business 
continuity, including selection of key suppliers, liquidity 
management and debt portfolio diversification.

We are realistic about the challenges we face, but 
optimistic about our ability to continue to deliver solid 
financial performance in the long term. We expect to 
achieve double digit revenue growth, optimise capital 
expenditure and deliver strong positive cashflow. 

Thank you for your continued interest in X5 Group. We 
are living in challenging times, but I wholeheartedly 
believe that X5 has the right team and the right 
strategic approach to continue to successfully 
navigate the difficulties we will face in 2022 and to 
thrive in the years ahead.

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OUR FUTURE-READY STRATEGY

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Our future-ready strategy

X5 Group’s strategic focus remains on leading the 
introduction of innovations and new technologies for 
food retail while continuing to develop and strengthen 
our existing business. This approach has enabled 
us to adapt quickly to changes in the market 
landscape, from evolving customer preferences and 
intensified competition to the impact of COVID-19 on 
everything from consumer behaviour to supply chains 
and the labour market.  

During 2021 we made significant progress towards our 
goal of being with customers at every stage of their 
food purchasing journey, launching the Food.ru media 
platform, integrating Mnogo Lososya dark kitchens and 
beginning to offer X5 Bank financial services.  

We are pursuing this strategic goal because most 
of our customers function in a digital environment, 
even if they make their food purchases offline. 
Beginning our engagement with current and potential 
customers at the stage of planning and discovery 
through a media platform like Food.ru will be a key way 
to guide them towards X5 Group services, and 
to compete with emerging online commercial 
ecosystems that also offer their users food retail 
services.  

At the same time, we have undertaken major initiatives 
to strengthen our existing business, from the full 
launch of our Chizhik hard discounter format and 
the ongoing refinement of existing formats’ CVPs 
to numerous digitalisation initiatives aimed at further 
improving the efficiency and accuracy of planning and 
decision-making. 

Vladimir Salakhutdinov

DIRECTOR OF STRATEGY 
AND BUSINESS DEVELOPMENT

After the reporting date, we announced our decision 
to explore ways to develop Vprok.ru Perekrestok 
together with an ecosystem partner like Sber. We 
believe that the expanded audience that the Sber 
ecosystem could bring to Vprok.ru Perekrestok could 
benefit the online hypermarket’s business model. 
Express delivery services from stores and mini-dark 
stores will remain an area that we at X5 Group focus 
on, as we believe this is the best way to leverage our 
existing infrastructure to create value for our 
customers and shareholders.   

Our sustainability strategy continues to develop, and 
while we are well on target to meet or beat our 2023 
goals, we are also working to build out what we started, 
including the introduction of a climate strategy in 2022.  

We continue to be the absolute leader in Russia’s food 
retail market, and successful implementation of our 
strategy has enabled us to strengthen this position 
while also maintaining profitability margins. Looking 
ahead, I am confident that all of our stakeholders stand 
to benefit as we continue to deliver on our strategic 
business and sustainability goals. 

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OUR FUTURE-READY STRATEGY

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Strategic goals to 2023

12.7

%

Share of grocery market 
in 2021

+

140 

%

Growth in digital
sales

62.6

MLN

Total active loyalty
card users 

+3.2% y-o-y

18

RUB

BLN

EBITDA impact from 
digitalisation projects

17.1

%

Adjusted ROIC 
(pre-IFRS 16) 

7.3

%

EBITDA margin 
(pre-IFRS 16)

31.8

%

3Y TSR in RUB

26.8

MLN

MAUs

+78% y-o-y

272

RUB

TH SQM

S/

Sales density LTM

+3.5% y-o-y

Throughout 2021 we worked hard to achieve our 2023 
strategic goals while adapting to challenging market 
conditions during the year. Thanks to our focus on 
efficiency and investments in creating robust business 
processes and retail operations infrastructure, we were 
able to turn the challenges we face into opportunities.  

With our customers at the centre of everything we do, 
we seek to create value for X5 shareholders and all our 
stakeholders by building a multifaceted food retail 
business that provides Russian society with modern, 
reliable and high-quality goods and services.  

Published first sustainability report under GRI 
Standards

Established Sustainable Development 
and Innovation Committee at Supervisory 
Board level

Leadership 

in the food 

market

Leadership

in digitalisation

Commitment

to shareholders

Care for 

the community

 

2021

TODAY

2023 TARGETS 

Leader in grocery

 market share

15%

Industry leader

in digitalisation

Strong return

on equity to shareholders

ESG agenda is a natural 

part of X5's DNA

STRATEGIC REPORT | STRATEGIC REVIEW | OUR FUTURE-READY STRATEGY

39

2023

STRATEGIC 

GOALS

LEADERSHIP 

IN THE FOOD MARKET

LEADERSHIP

IN DIGITALISATION

COMMITMENT 

TO SHAREHOLDERS 

COMMITMENT

TO SUSTAINABILITY

15

%

Share of food 
retail market 

38

MLN

Monthly active users 

of X5 digital channels 

and mobile apps 

5

%

Share of revenue from 

digital businesses 

Meet sustainability goals approved

under the sustainability strategy 

Continue dialogue with stakeholders

to adapt sustainability priorities

Increasing shareholder value

At least

At least

At least

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OUR FUTURE-READY STRATEGY

40

Converting challenges

into opportunities

We remain focused on the key strategic pillars for 
strengthening our existing business, furthering X5 
Group’s digital transformation and leading the way to 
next-generation retail. 

At the same time, we are operating in challenging 
macro and market conditions, with growing 
competition, rising prices and declining household 
incomes.   

We are addressing these challenges in three 
main ways:

CVP rationalisation across our 
formats

Rollout of a hard discounter

Growing competition in offline 
segment triggered by a decline 
in disposable household 
incomes

Scaling up digital products 
in commerce, operations, 
supply chain, back office

Optimising supply chain network 
across X5

Leveraging purchasing power 
and scale of existing 
infrastructure

Increasing cost of resources

Food.ru

media platform

X5 Bank

financial service

Dark kitchen

service

Single ID and subscription

service

Online delivery 

platform

Growing ecosystem 
footprint in food

Developing digital infrastructure 
around customer journey to 
support core business

As new offline competitors emerge and existing 
players improve their offer while disposable 
household incomes decline, we are already in the 
process of rationalising our CVP across all formats 
and rolling out a new hard discounter format, 
Chizhik.

With rising costs for resources, from labour to the 
food we sell on our shelves, we are investing in 
further digitalisation and automation of products and 
processes in order to achieve sustainable long-term 
savings that can be shared with customers. We are 
also optimising operations across the supply chain 
and constantly reviewing ways to further leverage 
X5 Group’s purchasing power and the scale of its 
infrastructure. 

In the online space, we are seeing ecosystems move 
into food retail as an attractive way to strengthen ties 
with users. X5 already has well-developed online 
businesses and has made good progress towards 
creating a digital infrastructure that enables X5 
Group to address this competition. We are now able 
to engage with customers at every stage of their 
journey in the process of purchasing food, from 
discovering recipes on our Food.ru media platform 
to paying with an X5 Bank branded debit card. 

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OUR FUTURE-READY STRATEGY

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Expanding our footprint 

in the customer journey

We believe that a key element to the long-term success of 
our core businesses is expanding our ability to engage and 
attract customers across all stages of their food purchase 
process. The customer journey often begins with searching 
for recipes or planning a menu, for example, which is why we 
have integrated the Food.ru media platform into our business. 

By the end of 2021, customers could use their X5.ID single 
sign-on account to browse articles and recipes, contribute 
their own content, and then compile an order via Vprok.ru 
Perekrestok with the click of a button. As we expand our 
reach into the broader food market beyond just groceries, the 
dark kitchen service Mnogo Lososya has also become a key 
element of our ability to address customer demand for quick 
delivery of meals that are ready to eat. Payment and 
subscription services mark the end of the customer journey, 
and we have already launched X5 Bank financial services, 
which are integrated into Perekrestok and Pyaterochka loyalty 
programmes. 

These various digital businesses and “enablers” help 
us to acquire and retain customers, and nearly all 
are revenue-generating for X5 Group.

Express delivery from
X5 retail chains

Last-mile e-commerce platform

Perekrestok

Chizhik

Online hypermarket
Vprok.ru Perekrestok

Pyaterochka

Media platform
Food.ru

X5 Bank

Subscription
service

Planning

Search / selection

Realisation

Related services

Enablers

X5 core bisinesses retail chains
and ready-to-eat food

Digital bisinesses

Mnogo Lososya dark kitchens