X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Investor Day (October 2016)

88 slides from X5 Corporate Center's investor day presentation, Oct 27, 2016

  1. Slide 1: Climb Higher! X5 Capital Markets Day 2016

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016

  2. Slide 2: Disclaimer

    02 DISCLAIMER T his presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or invitation to sell or issue or This presentation includes statements that are, or may be deemed to be, “forward- looking statements”, with respect to the fi

  3. Slide 3: Agenda

    03 AGENDA Performance update and financial results Q3 and 9M 2016 X5’s path to leadership in food retail Overview by format:  Pyaterochka  Perekrestok  Karusel

  4. Slide 4: Climb Higher! Igor Shekhterman, CEO

    CLIMB HIGHER! Igor Shekhterman, CEO X5 Capital Markets Day 2016 Moscow, 27 October 2016

  5. Slide 5: X5 is committed to its strategy, with a focus on execution

    05 X5 IS COMMITED TO ITS STRATEGY, WITH A FOCUS ON EXECUTION

  6. Slide 6: Strong performance in 9M 2016

    06 STRONG PERFORMANCE IN 9M 2016  Revenue up  7.7% LFL sales growth 27.8% y-o-y  2.8% LFL traffic growth  EBITDA margin up 40 b.p. to 7.6%  1,554 new stores  SG&A expenses improved  1,013 stores refurbished by 87 b.p. to 17.2%  Net debt / EBITDA decreased to 2.15x  692.0 th. sq. m.  Weight

  7. Slide 7: Key achievements in 9M 2016

    07 KEY ACHIVEMENTS IN 9M 2016  Pyaterochka added  >90% of Pyaterochka stores and >46% of Perekrestok 668.1 th. sq. m. stores operating under of net selling space new concept  Positive LFL traffic  New DCs in Moscow, for Perekrestok for St. Petersburg, Adygea and three quarters in a row Krasnodar

  8. Slide 8: We are the fastest-growing retailer in Russia

    08 WE ARE THE FASTEST-GROWING RETAILER IN RUSSIA 28% 28% 23% 20% 21% 19% 17% Top-10 12% 11% 8% 9% 3% Market 2013 2014 2015 9M 2016 Note: revenue growth y-o-y Source: Infoline, X5 analysis and estimates Significantly accelerated growth since 2013

  9. Slide 9: Committed to strategy, focus on execution

    09 COMMITTED TO STRATEGY, FOCUS ON EXECUTION 2 Strong leadership team 3 Superior 1 Customer Effective Value Proposition operating model KEY ISSUES AND CONSIDERATIONS 4 Intelligent growth 5 while maintaining End-to-end operational margins excellence

  10. Slide 10: Committed to the three major food retail formats

    10 COMMITTED TO THE THREE MAJOR FOOD RETAIL FORMATS Total market size: 2020: 2015: 13.4 trn RUB 6,000 bn RUB 2020: 17.4 trn RUB 2020: Market ∆ 1,900 3,800 bn RUB growth bn RUB 2020: ∆ 650 bn RUB 2,500 bn RUB ∆ 600 bn RUB 2015: 2015: 2015: 4,100 bn RUB 3,150 bn RUB 1,900 bn RUB ∆ 310 Proximity / Supe

  11. Slide 11: Building leadership: from #1 in the heart of customers to #1 in share of wallet

    11 BUILDING LEADERSHIP: FROM #1 IN THE HEART OF CUSTOMERS TO #1 IN SHARE OF WALLET #1 in Russian grocery retail – 15% market share by 2020 Proximity Supermarkets Hypers Other formats Express #2  #1 #1 Growth above market average  Growth above  Further adaptation  Team  New CVP market rate of CV

  12. Slide 12: Leadership benefits all X5 stakeholders

    12 LEADERSHIP BENEFITS ALL X5 STAKEHOLDERS! 1 Customer perception affects 2 Growth & customer satisfaction and profitability affects loyalty…which shareholder affects growth & satisfaction…which profitability…. affects company and employee satisfaction…. 3 Employee satisfaction affects employee loya

  13. Slide 13: Regulation is a key focus

    13 REGULATION IS A KEY FOCUS GOVERNMENT MARKET/ X5 ACTIONS RESPONSE The Government has  Self-regulation approach intensified control over the  Partnerships with suppliers: retail industry From: Supplier – Customer To: Partner – Partner The Duma approved  Switch to net-net amendments to the pricin

  14. Slide 14: Effective operating model already in place

    14 EFFECTIVE OPERATING MODEL ALREADY IN PLACE X5 2005 – 2012 X5 NOW Strategy, Strategic marketing, Centralized commercial function, M&A / Partnerships, Legal, IT, Talent management, Finance, GR, PR, IR Operations Operations Operations Marketing Marketing Marketing Category Category Category manageme

  15. Slide 15: Key elements of responsibility matrix between corporate centre and retail formats

    15 KEY ELEMENTS OF RESPONSIBILITY MATRIX BETWEEN CORPORATE CENTRE AND RETAIL FORMATS Corporate Centre Retail formats  Business planning and control  Implementation of format  Pooling of purchasing power strategy according to CVP  Incubator and launch of new  Above-market growth while projects m

  16. Slide 16: Strong management team in place

    16 STRONG MANAGEMENT TEAM IN PLACE…

  17. Slide 17: With effective motivation scheme (LTI)

    17 …WITH EFFECTIVE MOTIVATION SCHEME (LTI)  A two-phase programme with a drop-dead date of December 2019 that aligns shareholder and management interests  Simple metrics, well understood by management, based on market share growth without sacrificing EBITDA margin  Underpinning X5’s strategic goa

  18. Slide 18: X5 is committed to its strategy, with a focus on execution

    18 X5 IS COMMITED TO ITS STRATEGY, WITH A FOCUS ON EXECUTION

  19. Slide 19: Climb Higher! Dmitry Gimmelberg, CFO

    CLIMB HIGHER! Dmitry Gimmelberg, CFO X5 Capital Markets Day 2016 Moscow, 27 October 2016

  20. Slide 20: Turnaround in finance (1/2): much has been done

    20 TURNAROUND IN FINANCE (1/2): MUCH HAS BEEN DONE… Redesign of the financial function to align it with X5’s new operating model Implementation of an efficient investment management system that supports strong organic growth Development of an efficient post-launch analysis of investment projects Red

  21. Slide 21: Turnaround in finance (2/2): but still much to do

    21 TURNAROUND IN FINANCE (2/2): …BUT STILL MUCH TO DO Plan for 2016 – 2017 Further enhancing internal controls to support continued sustainable growth as the Company matures Development of a roadmap to align the cost structure with global best practices:  Logistics  Lease costs  Shrinkage costs 

  22. Slide 22: Stable share of stores in 'Clinic' despite accelerating growth

    STABLE SHARE OF STORES IN ‘CLINIC’ DESPITE 22 ACCELERATING GROWTH  ‘Clinic’ is the process of monitoring and decision-making on projects with low operating efficiency (below the business plan target)  Key drivers behind stores’ low efficiency: location, competition, operations management CLINIC in

  23. Slide 23: Q3 2016 results: operational highlights

    23 Q3 2016 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop), th. sq. m 30.2% 31.0% 31.8% 30.7% 28.3% 29.6% 29.6% 26.3% 26.7% 25.7% 768 799 4,025 672 674 3,514 3,747 633 3,333 250 254 3,080 228 231 195 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q3 2015 Q4 2

  24. Slide 24: Q3 2016 results: net retail sales summary

    24 Q3 2016 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln 195,390 253,978 194,995 35,916 19,941 2,731 Q3 2015 Q3 2016 Source: X5 data KEY DRIVERS  Perekrestok net retail sales accelerated for the seventh quarter in a row  Pyaterochka, which continues to meet

  25. Slide 25: Q3 2016 results: expansion summary

    25 Q3 2016 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m. Net selling space added  Total store base increased to 8,574 stores as of (last 12 months), th. sq. m. 30 September 2016 4,025 30 September 2016  Continued investments into existing stores, with 5520 284 refurbishments in 3,080 Q3

  26. Slide 26: Q3 2016 results: financial highlights

    26 Q3 2016 RESULTS: FINANCIAL HIGHLIGHTS Revenue Gross profit & gross margin SG&A (excl. D&A&I), RUB bn 28.6% 30.7% 26.7% 26.8% 25.0% 18.4% 19.4% 17.8% 20.0% 25.9% 16.5% 17.4% 24.5% 24.4% 60 24.3% 251.6 256.2 23.8% 50 44.6 44.5 230.1 231.6 41.3 41.5 15.0% 196.1 40 36.1 59.8 62.6 56.4 56.2 49.0 30 10

  27. Slide 27: Q3 2016 results: SG&A expenses analysis

    27 Q3 2016 RESULTS: SG&A EXPENSES ANALYSIS Q3 analysis 9M analysis as percent of revenue as percent of revenue 18.4% (106) b.p. 17.4% 18.1% (87) b.p. 17.2% 1.2 (2) b.p. 1.3 1.2 Other expenses (25) b.p. 1.0 (26) b.p. 0.9 1.0 0.7 Third party services (17) b.p. 0.7 1.7 (32) b.p. 1.3 1.6 (15) b.p. Other

  28. Slide 28: Q3 2016 results: capital expenditure overview

    28 Q3 2016 RESULTS: CAPITAL EXPENDITURE OVERVIEW Capex breakdown for Q3 2016 Capex breakdown by quarter, RUB mln 665 stores Total Capex in Q3 2016: 20,613 RUB mln opened (gross) 25,604 19% New store openings 20,691 20,613 18,589 2% Refurbishments 14,329 54% Logistics 25% IT, Maintenance and other 28

  29. Slide 29: Q3 2016 results: debt structure

    29 Q3 2016 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 12% RUB mln 30 Sep 2016 30 Sep 2015 21% Total Debt 156,435 141,698 46% Short-term debt 43,281 44,220 % of total debt 27.7% 31.2% Long-term debt 113,154 97,478 22% % of total debt 72.3% 68.8% Net debt 150,417 136,857 30 Sep

  30. Slide 30: Thank you for your attention

    >x5 THANK YOU FOR YOUR ATTENTION

  31. Slide 31: Financial statements (1/3): profit and loss statement

    FINANCIAL STATEMENTS (1/3) 31 PROFIT AND LOSS STATEMENT +/ ( - ), +/ ( - ), RUB mln Q3 2016 Q3 2015 +/( - ) 9M 2016 9M 2015 +/( - ) % % Revenue 256,247 196,093 60,154 30.7 739,491 578,701 160,790 27.8 Net retail sales 253,978 194,995 58,983 30.2 734,300 575,671 158,629 27.6 COGS 193,693 147,103 46,5

  32. Slide 32: Financial statements (2/3): balance sheet

    FINANCIAL STATEMENTS (2/3) 32 BALANCE SHEET RUB mln 30 Sep 2016 31 Dec 2015 +/( - ) +/( - )% Total current assets 104,187 108,705 (4,518) (4.2)% Cash & cash equivalents 6,018 8,958 (2,940) (32.8)% Inventories 64,809 57,887 6,922 12.0% Total non-current assets 329,580 293,410 36,170 12.3% Net PP&E 21

  33. Slide 33: Financial statements (3/3): cash flow

    FINANCIAL STATEMENTS (3/3) 33 CASH FLOW RUB mln Q3 2016 Q3 2015 +/( - ) +/( - )% 9M 2016 9M 2015 +/( - ) +/( - )% Net cash generated 20,135 7,241 12,894 178.1 38,416 11,833 26,583 224.7 from operating Net cash from operating activities before changes in 20,050 14,458 5,592 38.7 56,860 43,415 13,445

  34. Slide 34: Climb Higher! Anton Mironenkov, Head of Strategy

    CLIMB HIGHER! Anton Mironenkov, Head of Strategy X5 Capital Markets Day 2016 Moscow, 27 October 2016

  35. Slide 35: Russia is the 8th largest grocery market globally, and one of the fastest growing

    RUSSIA IS THE 8TH LARGEST GROCERY MARKET 35 GLOBALLY, AND ONE OF THE FASTEST GROWING 1,001 719 bn US$, 2015 311 287 248 237 215 172 88 83 51 USA China India Japan UK France Germany Russia Turkey Brazil Poland CAGR 2005-15 2% 11% 7% -1% 1% 0% 1% 7% -4% 7% 2% Source: Euromonitor

  36. Slide 36: Grocery retail will grow 5% p.a. mid-term

    GROCERY RETAIL WILL GROW 5% P.A. MID-TERM 36 3% LFL AND 2% DUE TO GROWTH IN RETAIL SPACE 5% 17.4 16.6 15.7 14.7 11% 13.4 13.9 12.4 11.1 Nominal 10.0 9.1 CAGR 8.0 Trn RUB 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F Growth 14% 9% 12% 11% 8% 3% 6% 7% 6% 5% Inflation 7% 8% 5% 7% 8% 16% 7

  37. Slide 37: Top-5 retailers control just 20% of the market

    37 TOP-5 RETAILERS CONTROL JUST 20% OF THE MARKET 70% 70% 60% 60% 47% 46% 20% 18% Czech Rep Germany France UK Poland USA Russia Turkey Leader’s sales/ 2nd player’s 1.6 1.5 1.4 1.7 1.7 2.8 1.1 2.2 sales Note: Data for 2015. Federal players are Magnit, X5, Auchan, Lenta, O’Key, Dixy, 7 Continent Sourc

  38. Slide 38: Potential long-term market structure

    38 POTENTIAL LONG-TERM MARKET STRUCTURE Schwarz Group 16.2% Kroger 9.1% Sainsbury 12.9% Player 2 12-17% Edeka 24.4% Wal-Mart 25.2% Tesco 21.8% Player 1 20%+ Germany UK USA Russia Source: Euromonitor, X5 analysis The market leader will hold ca. 20%+ market share, while the second player – 12-17%

  39. Slide 39: Shift from traditional trade to modern trade

    39 SHIFT FROM TRADITIONAL TRADE TO MODERN TRADE CAGR CAGR 2013-2015 2015-2020 ~20% 2% 0% 30-35% ~30% 25-30% ~45% 10% 3% 45-50% 45-50% 45-50% ~35% 21% 15% ~20% 20-25% ~25% 2013 2014 2015 … 2020F Federal chains Regional modern trade Traditional trade Despite substantial level of modern trade penetrati

  40. Slide 40: Key macro trends – no major changes

    40 KEY MACRO TRENDS – NO MAJOR CHANGES Russian population to grow from 146 mln people in 2015 to 148 in 2020 Real GDP growth to increase from negative 3.7% in 2015 to 2.2% in 2020 Consumer price index to decelerate from 15.6% in 2015 to 4.0% in 2020 Real wage growth to increase from negative 9.3% in

  41. Slide 41: Recent market trends

    41 RECENT MARKET TRENDS… KEY TRENDS DESCRIPTION CONCLUSIONS  Growth of price-sensitive  Growth of 60+ age population consumer segment Changing by 2-3% p.a. vs. reduction of demographics  Growth of proximity format 20-29 year group by 6% p.a. popularity  Growth in attractiveness  Increased price

  42. Slide 42: …and X5's response

    42 …AND X5’S RESPONSE… KEY TRENDS X5 RESPONSE  Continued expansion of proximity segment (>75% of X5 revenues) Changing  5% discounts for pensioners from 9:00 until 13:00 demographics  Focus on mothers with children Declining  Constant adaptation of value proposition to customers’ needs populatio

  43. Slide 43: …means development in all major formats

    43 …MEANS DEVELOPMENT IN ALL MAJOR FORMATS #1 in Russian grocery retail – 15% market share by 2020 Proximity Other Supermarkets Hypers formats Express #2  #1 #1 Growth above market average

  44. Slide 44: Consolidation across segments: proximity and supermarkets

    CONSOLIDATION ACROSS SEGMENTS: 44 PROXIMITY AND SUPERMARKETS Market share of proximity/ discounters Market share of supermarkets 4.1 bn RUB 6.0 bn RUB 3.2 bn RUB 3.8 bn RUB CAGR 32% (15-20): -4% CAGR 81% (15-20): 2% 58% 89% CAGR for CAGR for players #2-3 players #2-6 (15-20): 16% (15-20): 9% CAGR CA

  45. Slide 45: Strict focus on increasing sales densities in hypermarkets

    STRICT FOCUS ON INCREASING SALES DENSITIES IN 45 HYPERMARKETS Sales density of Russian hypermarkets Unit: th. RUB per sq. m. per year 179 Upside potential 389 Current sales 210 density Peerpeers average [1] karusel [1] − Average for Auchan, Lenta, Okey and Magnit Source: Company reports, Infoline, X

  46. Slide 46: What's next for X5

    46 WHAT’S NEXT FOR X5  Achieve market  Stay #1  Increase sales leadership in densities to level of proximity format  Confirm and roll out peers the new regional #2 #1 supermarket model in  Improve business Russia’s regions model and value  Continue applying the proposition current value propos

  47. Slide 47: Thank you for your attention

    >x5 THANK YOU FOR YOUR ATTENTION

  48. Slide 48: Climb Higher! Olga Naumova, Pyaterochka

    CLIMB HIGHER! Olga Naumova, General Director of Pyaterochka X5 Capital Markets Day 2016 Moscow, 27 October 2016

  49. Slide 49: Where we are: unlocking the potential of the proximity segment

    WHERE WE ARE: 49 UNLOCKING THE POTENTIAL OF THE PROXIMITY SEGMENT 2020: 6,000 bn RUB Total market size: Market ∆ 1,900 bn 2015: 13.4 trn RUB growth RUB +46% 2020: 17.4 trn RUB 2015: 4,100 bn RUB ∆ 310 ∆ 90 Proximity / Supermarkets Hypermarkets Other discounters segments Source: Infoline; Rosstat; Ba

  50. Slide 50: Pyaterochka today: highlights

    PYATEROCHKA TODAY: 50 HIGHLIGHTS 7,787 stores as of 3,091 th. sq. m. of selling 30 September 2016, space as of 30 September 34.4% increase y-o-y 2016, 39.2% increase y-o-y Q3 2016 net retail sales of 667 mln customers for RUB 195.4 bn, Q3 2016, 29.9% increase y-o-y 36.1% increase y-o-y Q3 2016 LFL R

  51. Slide 51: Building on a successful track record

    51 BUILDING ON A SUCCESSFUL TRACK RECORD Q3 2016 net retail sales growth: Q3 2016 selling space growth: Q3 2016 sales densities: 36.1% increase y-o-y 39.2% increase y-o-y 4.8% decline y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq.m. [1]) 35.3% 32

  52. Slide 52: What we did: overview since last Capital Markets Day

    WHAT WE DID: 52 OVERVIEW SINCE LAST CAPITAL MARKETS DAY STRATEGIC KEY ACHIVEMENTS PRIORITIES Maximum sustainable  7,787 stores as of 30 September 2016, up 34.4% year-on-year growth  3,091 th. sq. m. of selling space, up 39.2% year-on-year  Entered Siberia in Q3 2016 Development in new  Further e

  53. Slide 53: Building success: new openings accelerating the speed of new openings

    BUILDING SUCCESS: NEW OPENINGS 53 ACCELERATING THE SPEED OF NEW OPENINGS New openings Net retail sales by region, +1,522 9M 2016 vs. 2015 +1,476 6% 1% 2015 4% 9M 2016 +907 6% 3% 1% +662 18% +695 17% 7,787 6,265 56% 4,789 17% 55% 3,220 3,882 2,525 16% 2011 2012 2013 2014 2015 9M 2016 Selling space, C

  54. Slide 54: Successful openings every time: rollout of GIS

    SUCCESSFUL OPENINGS EVERY TIME: 54 ROLLOUT OF GIS  To identify the best locations for stores, we use unique in-house GIS software  In 2016, X5 received a “Special Achievements in GIS” award Source: screens from GIS software UPGRADE TO GIS RESULTS  Decision-making time related to site  Improved b

  55. Slide 55: Sustaining growth

    55 SUSTAINING GROWTH Organisational structure Key organisational principles Cluster is the main Business Unit  Decentralised organisational structure ensures: − Local clusters maintain a high degree 11 Divisions – up to 10 of responsibility for performance clusters and 1,000 stores − Business is fi

  56. Slide 56: Building a winning mentality: attract and retain the best talent

    BUILDING A WINNING MENTALITY: 56 HOW TO ATTRACT AND RETAIN THE BEST TALENT What we need Talent Motivation Education Leadership What we do  How we recruit? Wide-scale but systematic approach to recruitment. We are constantly improving the recruitment process.  How we train? We are enhancing the int

  57. Slide 57: Refurbishment and rebranding programme: 2013-2016 highlights

    REFURBISHMENT ANR REBRANDING PROGRAMME: 57 2013-2016 HIGHLIGHTS Programme highlights for 1H 2016 Refurbishment programme progress Opened in new format, net 2,903 Refurbished 2,530 1,492 1,404 1,564 Average selling Average duration of space increase per store closure 402 944 1,411 store 320 460 966 8

  58. Slide 58: What's next on the store level (1/3): day-to-day improvements

    WHAT’S NEXT ON THE STORE LEVEL (1/3): 58 DAY-TO-DAY IMPROVEMENTS Before Now We constantly monitor new trends and innovations, analyse global best practices and roll out across our store base

  59. Slide 59: What's next on the store level (2/3): day-to-day improvements

    WHAT’S NEXT ON THE STORE LEVEL (2/3): 59 DAY-TO-DAY IMPROVEMENTS Before Now  In new stores, one of the checkout lanes is equipped with a Tobacco Shop offering premium spirits as well as tobacco products

  60. Slide 60: What's next on the store level (3/3): day-to-day improvements

    WHAT’S NEXT ON THE STORE LEVEL (3/3): 60 DAY-TO-DAY IMPROVEMENTS Proper automatic delivery settings for each store  In 2016, all planogram and layout designs have been incorporated into the JDA system  Extra opportunities available now: − unique planogram designs for each store − access to informa

  61. Slide 61: Efficient sublease partnerships

    61 EFFICIENT SUBLEASE PARTNERSHIPS “MORE THAN A MERE SUBLEASE”: HOW WE APPRAOCH PARTNERSHIPS Location in store affects the rent rates Priority groups for partnerships PRIORITY GROUP OF SERVICES Shop-in-Shop  Mobile services  Pharmacy  Baby goods High  Flowers  Cookery  Meat and fish Checkout S

  62. Slide 62: Efficient supply chain

    62 EFFICIENT SUPPLY CHAIN Efficient logistics system to ensure flexibility of supply options Divisions Clusters Self-pickup Satellit HUB Satellite KDK CD e Import- Satellit STORES Import Satellite export e HUB KDK CD + Federal Regional Local suppliers suppliers suppliers Types of DCs Cross- Cross- N

  63. Slide 63: Pyaterochka strategy overview

    63 PYATEROCHKA STRATEGY OVERVIEW  Maximise the share of customers, maximum share of these customers’ wallet: − Continue applying the current value proposition, enhancing it through implementation of new initiatives − Maximum sustainable growth with development in new regions (Siberia) − Further ada

  64. Slide 64: Thank you for your attention

    >x5 THANK YOU FOR YOUR ATTENTION

  65. Slide 65: Climb Higher! Vladimir Sorokin, Perekrestok

    CLIMB HIGHER! Vladimir Sorokin, General Director of Perekrestok X5 Capital Markets Day 2016 Moscow, 27 October 2016

  66. Slide 66: Where we are: supermarkets set to strengthen and consolidate

    WHERE WE ARE: 66 SUPERMARKETS SET TO STRENGTHEN AND CONSOLIDATE Total market size: 2020: 2015: 13.4 trn RUB 3,800 bn RUB 2020: 17.4 trn RUB ∆ 650 bn RUB +21% 2015: 3,150 bn RUB ∆ 310 Proximity / Supermarkets Other Hypermarkets discounters segments Source: Infoline; Rosstat; Bain estimates Substantia

  67. Slide 67: Perekrestok today: Russia's #1 supermarket

    PEREKRESTOK TODAY: 67 RUSSIA’S #1 SUPERMARKET 503 stores as of 513 th. sq. m. of selling 30 September 2016, space as of 30 September 11.5% increase y-o-y 2016, 12.0% increase y-o-y Q3 2016 net retail sales of RUB 35.9 bn, 86 mln customers in 19.5% increase y-o-y Q3 2016, 14.8% increase y-o-y Q3 2016

  68. Slide 68: Improving operations: growing LFL and selling space

    IMPROVING OPERATIONS: 68 GROWING LFL AND SELLING SPACE Q3 2016 net retail sales growth: Q3 2016 selling space growth: Q3 2016 sales densities: 19.5% increase y-o-y 12.0% increase y-o-y 3.1% increase y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq.m

  69. Slide 69: What we did: progress since last Capital Markets Day

    WHAT WE DID: 69 PROGRESS SINCE LAST CAPITAL MARKETS DAY STRATEGIC PRIORITIES KEY ACHIVEMENTS Development in Moscow and  50% of new stores opened in Moscow, Moscow region, St. Petersburg and St. Petersburg, reach critical Leningrad region in 9M 2016 mass in cities with >1 mln population  53% of new

  70. Slide 70: Refurbishments: the path to better brand perception

    REFURBISHMENTS: 70 THE PATH TO BETTER BRAND PERCEPTION Programme highlights for 1H 2016 Refurbishment programme dynamics Opened in new format, net Average share Refurbished 126 of selling space per store 60% 83 75 38 Average duration of 21 16 51 45 store closure 5 43 days 2014 2015 9M 2016 Share of

  71. Slide 71: CVP evolution: focus on supporting the customer

    CVP EVOLUTION 71 FOCUS ON SUPPORTING THE CUSTOMER WHERE WE WERE WHERE WE ARE NOW Core  Everyone who lives and works  Everyone who lives and works within a audience within a 1.5 km radius 1.5 km radius  Average or above-average  Average or below-average income income  Families with children with

  72. Slide 72: Regional model: affordable supermarket for all shopping missions

    REGIONAL MODEL: 72 AFFORDABLE SUPERMARKET FOR ALL SHOPPING MISSIONS Key components of regional model Change in assortment by price segments  PLU reduction to 8-10 th. per store Assortment  Focus on local PLUs  Clustering by price segment  Maximise selling space up to 65-70% Layout  30% lower Ca

  73. Slide 73: Slide 73

  74. Slide 74: Private label: expanding in all main categories

    PRIVATE LABEL: 74 EXPANDING IN ALL MAIN CATEGORIES Private labels in all price segments Private label development 7.0% Segment Current brands New brands Share in turnover, % 6.0% 5.6% High - In progress 5.0%  Perekrestok-Market Medium 4.0%  Perekrestok 3.0% First 2.0%  Prosto price 2.0%  Ocean (

  75. Slide 75: Loyalty programme: more than customer retention

    LOYALTY PROGRAMME: 75 MORE THAN CUSTOMER RETENTION "Perekrestok Club" at a glance Development plan  1 point for 10 RUB;  Developing personalised offering and 5 points for 10 RUB in personalised promo “favorite category”  Introduction of comprehensive CRM  Points can be used for  Developing new

  76. Slide 76: Online supermarket: a promising service for our core audience

    ONLINE SUPERMARKET: 76 A PROMISSING SERVICE FOR OUR CORE AUDIENCE Perekrestok online at a glance Product on a website and mobile application Launch  Due in 2017  Broad, high-quality assortment matrix to replicate shopping for a family at a store Product (10-12 th. PLUs)  Home delivery  Full inte

  77. Slide 77: Efficient supply chain: the key to profitable growth

    EFFICIENT SUPPLY CHAIN: 77 THE KEY TO PROFITABLE GROWTH Number of logistics What is next? facilities, eop  Two DCs to be opened by Dec 2017 Sep 2016 11 Saint Petersburg  DCs to cover all new locations, Dec 2017 10 cross-docking in remote regions or sharing Pyaterochka’s DCs Moscow Oblast Moscow 

  78. Slide 78: Perekrestok strategy overview

    78 PEREKRESTOK STRATEGY OVERVIEW  Fine-tuning value proposition and adapting to customer needs: − Maintaining the pace of organic growth and refurbishments − Confirm and roll out regional model − Further adaptation of assortment − Increase loyalty card penetration, and implement personalised promot

  79. Slide 79: Thank you for your attention

    THANK YOU FOR YOUR ATTENTION

  80. Slide 80: Climb Higher! Maksym Gatsuts, Karusel

    CLIMB HIGHER! Maksym Gatsuts, General Director of Karusel X5 Capital Markets Day 2016 Moscow, 27 October 2016

  81. Slide 81: Where we are: hypers are a significant part of Russian food retail

    WHERE WE ARE: 81 HYPERS ARE A SIGNIFICANT PART OF RUSSIAN FOOD RETAIL Total market size: 2015: 13.4 trn RUB 2020: 17.4 trn RUB 2020: 2,500 bn RUB ∆ 600 bn RUB +32% 2015: 1,900 bn RUB ∆ 310 Proximity / Supermarkets Other Hypermarkets discounters segments Source: Infoline; Rosstat; Bain estimates Furt

  82. Slide 82: Karusel today: highlights

    KARUSEL TODAY: 82 HIGHLIGHTS 384 th. sq. m. of selling space 90 stores as of as of 30 September 2016, 30 September 2016: up 5.4% y-o-y 7.1% increase y-o-y Q3 2016 net retail sales: 33 mln customers RUB 19.9 bn, 6.4% increase in Q3 2016, 2.7% increase y-o-y y-o-y Q3 2016 LFL Results Share of X5's Q3

  83. Slide 83: The right time for relaunch

    83 THE RIGHT TIME FOR RELAUNCH Q3 2016 net retail sales Q3 2016 selling space growth: Q3 2016 sales densities are stable growth: 6.4% increase y-o-y 6.5% increase y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq.m. [1]) 8.8% 9.1% 210 211 210 209 210

  84. Slide 84: Short-term improvement plan

    84 SHORT-TERM IMPROVEMENT PLAN Commerce  Basket and pricing optimisation, benchmarking development  Promo tuning, introduction of new algorithms to boost loyalty  Standardisation of selling space layout based on consumer behaviour Efficiency  Better manageability: business process review and fur

  85. Slide 85: Private labels: key developments

    85 PRIVATE LABELS: KEY DEVELOPMENTS Private labels in all major price segments Private label development 12.0% Share in turnover, % 10.0% Current 10.0% Segment New brands brands 8.0% 6.0% 4.3% Medium  Ampersand 4.0% 2.0%  Riviera 0.0% Current level … 2018  Pizza Pasta First  Krugli god Vino “Kru

  86. Slide 86: Loyalty programme: one step towards personalisation

    LOYALTY PROGRAMME: 86 ONE STEP TOWARDS PERSONALISATION Loyalty programme at a glance Development plan  Points collection:  Transition to targeted 10 points for 100 RUB personalised offering and  Points can be used to pay personalised promo for shopping: 10 points = 1 RUB  Participation in promos

  87. Slide 87: From model hypers to new commercial model

    87 FROM MODEL HYPERS TO NEW COMMERCIAL MODEL Good results at model hypers New commercial model development plan  Key achievements:  Upgrade the model of new hypermarkets − Positive LFL traffic in model hypers  Further adaptation of assortment and pricing optimisation − Increase of average check −

  88. Slide 88: Thank you for your attention

    THANK YOU FOR YOUR ATTENTION

X5 Retail Group — Investor Day (October 2016) on 6ix