X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Investor Day (October 2019)
71 slides from X5 Corporate Center's investor day presentation, Oct 23, 2019
Slide 1: X5: Riding Retail Waves
X5: RIDING RETAIL WAVES X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 2: Disclaimer
DISCLAIMER This 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 the solicitation of an offer to buy or acquire or subscribe for securities of X5 Retail Group N.V. or any of its subsidiaries or
Slide 3: Agenda
AGENDA %.° Performance update =* Development of Big Data ls] Financial results Q3 and 9M 2019 (ary Overview by format: -Pyaterochka *Perekrestok
Slide 4: Stephan DuCharme, Chairman of the Supervisory Board
X5: RIDING RETAIL WAVES Stephan DuCharme Chairman of the Supervisory Board X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 5: Our Approach: Profit-People-Planet Concept
OUR APPROACH PROFIT-PEOPLE-PLANET CONCEPT Profit / \ b xs ; People \ Sustainable Planet
Slide 6: Igor Shekhterman, Chief Executive Officer
X5: RIDING RETAIL WAVES Igor Shekhterman Chief Executive Officer X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 7: Our Mission and Goals
OUR MISSION AND GOALS Customer = Employee recognition recognition FOCuS on strategic NPS K ROIC Price perception i Employee turnover Market capitalisation LFL q Net retail sales Employee engagement Dividends q Valuation multiples
Slide 8: People Make the Business (1/2)
PEOPLE MAKE THE BUSINESS (1/2) IMPROVED EMPLOYMENT DURATION FOR MANAGEMENT TEAM Average length Average length of employment of CEO-1, months of employment of CEO-2, months { y 52 52 J 31 2019 , .2019 23 y 208 Miao 22 2017 19/2017 me = 71% me 67% Internal promotions for CEO-1 Internal promotions for
Slide 9: People Make the Business (2/2)
Number of participants What issues were addressed IIVD PEOPLE MAKE THE BUSINESS (2/2) PERSONNEL DEVELOPMENT, & SKOLKOVO onion Sota ttnagenent Digital Rte XS Top management Middle management Middle management Top management Middle management ~50 ~100 ~15,000 + Increase multi-format interaction + Rete
Slide 10: A Glance into the Future (1/3)
A GLANCE INTO THE FUTURE (1/3) OLDER GENERATION 2019 \-- Married couple (late 50s) Both have smartphones, but they rarely use or download new apps. The couple shops at proximity stores and hypermarkets and prefers cooking at home. Married couple (late 60s) Every two weeks they order heavy goods onli
Slide 11: A Glance into the Future (2/3)
A GLANCE INTO THE FUTURE (2/3) TECH-SAVVY GENERATION Just married couple (late 20s) They have long been making purchases online for clothing. This year they placed their first online supermarket order. Several times a week, the newlyweds visit a nearby mall to dine out at its food court. Married cou
Slide 12: A Glance into the Future (3/3)
A GLANCE INTO THE FUTURE (3/3) NEW GENERATION Teenager (late teens) Teenager (mid 20s) While he has no bank account yet, he uses his He has a job with great career growth prospects and dad's credit card via Apple Pay. lives in a rented apartment with his girlfriend. He likes to order fast food via m
Slide 13: By 2029, the Core of X5's Client Base Will Consist of Millennials
BY 2029, THE CORE OF X5'S CLIENT BASE WILL CONSIST OF MILLENNIALS TEENS/ YOUTH NEWLYWEDS MATURE ELDERLY/PENSIONERS MONTHLY FOOD SPEND, THS. ROUBLES 15.2 14.7 rs 13.8 14.0 40-44 50-54 Yearsold 15-19 Source: Ipsos, X5 data 13
Slide 14: Russian Food Retail Market Trends
RUSSIAN FOOD RETAIL MARKET TRENDS NON-PRICE ELEMENTS GAIN IMPORTANCE What clients expect from retail? Price/ Quality 2018 2023E -7p.p. 1 -3p.p. ——— 53% 50% _ +4p.p. + +9 p.p. ———_ 3 Convenience 32% 36% : | | L f +3 p.p. +1 +5 p.p. ———al ms, Assortment 32% passe e, Pleasant +5p.p. vi +7p.p. 7: atmosp
Slide 15: Evolution of Russia's Food Market
EVOLUTION OF RUSSIA'S FOOD MARKET . : 2029E Food Retail Market: RUB 30.2 tn i 0.2% - Online food retail 4.5% - Online food retail 2019E Food Retail Market: RUB 17.6 tn 8.8% - Offline ready-to-eat segment 8.4% - Offline ready-to-eat segment 2.5% - Online ready-to-eat segment 1.0% - Online ready-to-ea
Slide 16: 2029 Vision
2029 VISION Today, X5’s market share is 11.6% X5 is the largest food retailer in Russia X5 continues its expansion, while implementing projects to improve operational efficiency X5 strives to meet new customers’ needs by enhancing its CVP with digital services X5 is already launching new businesses
Slide 17: Update on Our Strategy
UPDATE ON OUR STRATEGY 1-2 years 1-3 years 1-5 years * * ° Strengthen the i 1 poh business 2 Digital transformation 3 NextGen Retail * Improved efficiency and results * Solid IT infrastructure * Perekrestok.ru online store already ; in e-grocer = Adapted CVPs and launched new * Fully functional Big
Slide 18: Key Strategic Priorities
KEY STRATEGIC PRIORITIES p> Data-driven customer solutions. Launch of CVM > Focus on operational efficiency to drive higher sales densities and ROIC > Digital transformation > Regular update of CVP in existing business and launch of new businesses > Focus on private label and ready-to-eat P Sustaina
Slide 19: X5: Riding Retail Waves
X5: RIDING RETAIL WAVES X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 20: Anton Mironenkov, Director of Big Data
X5: RIDING RETAIL WAVES Anton Mironenkov Director of Big Data X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 21: Data-driven Organisation
Data-driven organisation Data-driven decisions Data democratisation Technological competencies and staff discipline Structuring y; . ive, ions v | Predictive analytics 21
Slide 22: Key Big Data Goals
KEY BIG DATAG Adapt the assortment to local needs and customers of a particular store Cover the maximum number of customer needs and missions with the same number of SKUs Replace regular promo with personalised promotions and reduce the negative impact of promo on margins f Automate business process
Slide 23: Loyalty Program Is a Base for Big Data
LOYALTY PROGRAM IS A BASE FOR BIG DATA i c.14 min tickets per day —h N=: a 5) cs I Se Active users, min 3 31 ie 6 pe 2 Penetration in sales, % -— 68% | 70% 91% etration in traffi —--— 53% 55% 78% Ne 5 oe c./7 min personalised data points daily 23
Slide 24: Key Big Data Projects (1/4)
Peo SiNS THE DATA - KEY PROJECTS (1/4) . —— Pricing ae =o Assortment Sa Promo | Vee Pricing decision-making to become more transparent and effective process Assortment review process using AA More efficient and transparent promo management, with decision-making based on facts 24
Slide 25: Key Big Data Projects (2/4): Pricing
KEY BIG DATA PROJECTS (2/4) PRICING F=) Description — T ‘C} Goal = _ What we’ve done jah SE i Plans oS i | — Transformation of pricing from decentralised, manual decision-making to centralised and based on AA tools . Increase Pyaterochka front margin based on an automated product pricing system that
Slide 26: Key Big Data Projects (2/4)
ECTS (2/4) PRACTICE
Slide 27: Key Big Data Projects (3/4): Assortment
KEY BIG DATA PROJECTS (3/4) ASSORTMENT F=) Description — || T ‘C) Goal i} ji, What we’ve — lI gone ? | | Plans = —=—=_ —— Improvement of assortment review process through AA Enhance Pyaterochka revenue and margin growth through customer-centric category management, by: + Understanding granular custo
Slide 28: Key Big Data Projects (4/4): Promo
KEY BIG DATA PROJECTS (4/4) PROMO sane = a ar — Enhancement of promo process with analytics based on AA tools and analysis of FS Description historical performance to drive precise and efficient decision-making “I Increase Pyaterochka front margin through a robust AA-enabled promo management ‘C} Goa
Slide 29: Customer Value Management (CVM)
CUSTOMER VALUE MANAGEMENT (CVM) The CVM system: * aims to increase value for loyal customers of X5 + allows X5 to maximise value of each loyal customer for the ‘company + allows X5 to not only better meet consumer needs, but shape them Examples of CVM usage Vv Cross-sell (sell additional products) V
Slide 30: Key Strategic Priorities
> ie -* KEY STRATEGIC PRIORITIES * » a eX « * * & Increasing quality of management decisions Sl j ® Speeding up processes -“ - & Decreasing number of errors in routine operations - & Development of CVM val a > Faster response to business requests Zed 30
Slide 31: Svetlana Demyashkevich, Chief Financial Officer
X5: RIDING RETAIL WAVES Svetlana Demyashkevich Chief Financial Officer X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 32: The Market Remains Attractive
THE MARKET REMAINS ATTRACTIVE RUSSIAN FOOD RETAIL MARKET — KEY DATA gi 26% 13% largest globally share of top five players share of modern formats by food retail turnover in overall retail market VV av 5 RETAIL GROUP POSITION 22" 11.6% C.2 among global food retaile: share of Russian food of new openi
Slide 33: Committed to Major Food Retail Formats
COMMITTED TO MAJOR FOOD RETAIL FORMATS 2022E: RUB 8.4 tn ARUB26in grown Total market size: 2019E: RUB 15.9 tn 2022E: RUB 18.8 tn 2022E: RUB 4.2 tn 2022E: RUB 3.6 tn ARUB 0.6 tn A RUB (0.3 tn) 2019E: RUB 5.8 tn 2022E: RUB 1.7 tn 2019E: RUB 3.6 tn A RUB (0.3 tn) 2022E: RUB 0.8 tn ARUB 0.3 tn 2019E: RU
Slide 34: Key Macro Indicators
KEY MACRO INDICATORS GDP growth Food retail market growth Nominal wage growth 2.3% 11.6% 2018 2019E 2020E 19M2018 9M 2019 2018 2019E 2020E 1 9M2018 9M 2019 2018 2019E 2020E 1 8M2018 8M 2019 CPI CPI food Nominal food retail market growth 2018 2019E 2020E 19M2018 9M 2019 2018 2019E 2020E 19M2018 9M 20
Slide 35: Balanced and Profitable Growth
BALANCED AND PROFITABLE GROWTH Revenue growth, y-o-y 35% 31% —_—, 15% 6% 3% 2013 2014 2015 2016 2017 2018 H1 2019 EBITDA margin, % 11.6% 11.2% Te 11.2% 11.1% 11.0% 11.1% has 9.7% = 8.8% 9.9% Pre 8.8% sam = — —s — a a % 7.2% 7.2% S5% 74% TA% 7.0% —a 6.6% 2013 2014 2015 2016 2017 2018 H1 2019 Source:
Slide 36: Quality of New Openings
QUALITY OF NEW OPENINGS Cash return on new store opened >30% +5 p.p. y-o-y Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Note: Opened 12-36 months ago ee Share of stores in ‘clinic 15,752 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 © Number of stores, eop — t— Share of stores in ‘EBITDA clinic’ Source: X5 dat
Slide 37: Sales Density Stabilisation
SALES DENSITY STABILISATION PRESSURE FROM REGIONAL MIX Unit: '000 RUB/m2 (annualised) Overall ae ee ee) 256 256 255 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Moscow & Moscow region St Petersburg & Leningrad region Rest of Russia 372 372371 330 203 203 371 327 202 202 370 aa 322 a 317 Q3 Q4 Qi Q2 Q3 Q3
Slide 38: Transformation of Karusel
TRANSFORMATION OF KARUSEL + 91 stores (42 leased, 49 owned) Karusel now + 5.0% of X5’s revenue in 9M 2019 + 2.7% of X5’s EBITDA in 9M 2019 + 34 stores (8 leased, 26 owned) will be transferred to the Perekrestok brand and will become large supermarkets + 20 leased Karusel stores will be closed Transf
Slide 39: Strong Results for 9M 2019
STRONG RESULTS FOR 9M 2019 Revenue Gross margin Inventory turnover RUB1,265bn | 24.8% ' 81 days aii LFL sales ' EBITDAmargin | EV/EBITDANTM +11% y-o-y 4.7% 7.4% 5.4x Note: EV/EBITDA NTM as of 18 October 2019 Source: X5 data Internal target Fact 39
Slide 40: Capital Expenditure (1/2)
CAPITAL EXPENDITURE (1/2) OVERVIEW Capex breakdown, 9M 2019 New store openings Refurbishments | l™@ New businesses © Logistics a Efficiency, IT, digital ir tranformation, etc. @ Current business Maintenance Other 2019E 2022E Source: X5 data In 9M 2019, the capex programme focused mainly on organic e
Slide 41: Capital Expenditure (2/2)
CAPITAL EXPENDITURE (2/2) NON-ORGANIC PROJECTS EFFICIENCY RISK MITIGATION CUSTOMERS & PERSONNEL Source: X5 data Non-organic projects classification Investment decision Description Impacton | *APParent and quantifiable Target current base &| __ financial effect IRR standard Sion templates | * Financi
Slide 42: Structure of Growth Will Evolve
STRUCTURE OF GROWTH WILL EVOLVE Contributors to revenue growth 66.4% Net 55.7% 4 expansion 41.0% 2019E 2020E 2021E 2022E Revenue growth structure is expected to change: + Share of LFL sales and new businesses will increase ¢ Share of growth from expansion will decline Structure of X5 digital sales,
Slide 43: 2020 Guidance
2020 GUIDANCE Up to 2,000 gross new openings Maintaining profitability level and returns sew eweew ewe 43
Slide 44: Sergei Goncharov, General Director, Pyaterochka
X5: RIDING RETAIL WAVES Sergei Goncharov General Director, Pyaterochka X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 45: Pyaterochka Today: Highlights
PYATEROCHKA TODAY: HIGHLIGHTS B 14,850 stores TO as of 30 September 2019 fat 15.8% increase y-o-y 2 Q3 2019 net retail sales i 13.4% increase y-o-y eC) Share of X5's Q3 2019 sales: 80% Average check RUB 341 (Q3 2019) S 5,789 ths. sq. m of selling space as of 30 September 2019 15.0% increase y-o-y 1,
Slide 46: Where We Are: Strong Outlook for the Proximity Segment
WHERE WE ARE: STRONG OUTLOOK FOR THE PROXIMITY SEGMENT Proximity segment Key trends (RUB tn, incl. VAT) + Proximity segment is 37% of the Russian food retail 12.8% 8.4 N + Pyaterochka is 27% of the proximity segment \ + From 2019 to 2022 the segment is expected to 5.8 contribute 91% to offline food
Slide 47: What We Achieved (1/3): Progress Since Last Capital Markets Day
WHAT WE ACHIEVED (1/3): PROGRESS SINCE LAST CAPITAL MARKETS DAY Operational efficiency Operational and financial results Balanced growth Development of new CVP + Stable top-management team + Shrinkage level down by 78 b.p. in 9M 2019 y-o-y + Staff turnover decreased by 20 p.p. in 9M 2019 y-o-y + Inv
Slide 48: What We Achieved (2/3)
WHAT WE ACHIEVED (2/3): IMPROVEMENT IN PERSONNEL TURNOVER, SHRINKAGE AND INVENTORY TURNOVER Personnel turnover, % -20 p.p. in 9M 2019 y-o-y | ‘Apr May Jun Jul ‘Aug Sep — 2018 —— 2019 Shrinkage level, % of sales \ © Oe =, N -78 b.p. in 9M 2019 y-o-y | May -18 Jul -18 Sep -18 Nov -18 Jan -19 Mar -19 M
Slide 49: What We Achieved (3/3): Balanced Growth
WHAT WE ACHIEVED (3/3) BALANCED GROWTH Decelerating number of openings 4+22% +10% +35% 0 ~~ <s * Gradual slowdown of new store [) = 12,822 | openings — L] 7,787 + ROIC and profitability are key criteria Senge as co sone + Focus on existing regions oae pity ag * Consolidation of smaller market player
Slide 50: Pyaterochka's Market
Source: Ipsos c. 10% Pyaterochka’s market share of food retail market 50
Slide 51: What We Will Do
WHAT WE WILL DO Further adaptation and roll out of CVP Leadership in NPS and service level 51
Slide 52: Customer Perception Challenge
CUSTOMER PERCEPTION CHALLENGE Stressed and under pressure when va shopping Always ready to confront the retailer
Slide 53: Pyaterochka's Renewed CVP
PYATEROCHKA’S RENEWED CVP KEY GOAL IS TO EARN CUSTOMERS’ TRUST AMAZING FRESH YOU CAN CARE AND COMFORT ZONE CONVENIENCE TRUST INSPIRATION FOR IN PRICE THE COMMUNITY The caring smart fresh convenience store 53
Slide 54: New CVP: Store
NEW CVP: STORE - Key elements Quick and Long routes inside the store for greater convenience ai | New fresh arena and bakery zones to generate more traffic Expanded assortment of fresh and ready-to-eat ll | Self-checkout terminals and last mile services in the stores 540
Slide 55: Different Shopping Trips for Different Store Formats
DIFFERENT SHOPPING TRIPS FOR DIFFERENT STORE FORMATS CITY: TIME POOR REGION: MONEY POOR Fresh, ready-to-eat, food-to-go —— Sines upindeesten
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Slide 57: Vladislav Kurbatov, General Director, Perekrestok
X5: RIDING RETAIL WAVES Vladislav Kurbatov General Director, Perekrestok X5 Capital Markets Day 2019 London, 23 October 2019 )X5 RETAIL GROUP
Slide 58: Perekrestok Today (1/2)
PEREKRESTOK TODAY (1/2) RUSSIA'S #1 SUPERMARKET 1 5 consecutive quarters of positive LFL traffic aa +3 5% loyal customers y-o-y (9.1 min*) 2 A N PS 21 in Q3 2019, +8 p.p. y-o-y Al 1 8 . 8 % revenue growth in Q3 2019 y-o-y *At least one purchase in the last three months 58
Slide 59: Perekrestok Today (2/2)
PEREKRESTOK TODAY (2/2) RUSSIA'S #1 SUPERMARKET 811 stores Smart kitchen: 2 as of 30 September 2019 Target output: 120 tonnes /day Product range: c. 600 SKUs ej 15% of X5's sales 5 Online infrastructure: in Q3 2019 oo 4 darkstores a) Average check (9M 2019) : Offline: RUB 512 Qr 144 min customer vis
Slide 60: Where We Are: Supermarkets Set to Strengthen
WHERE WE ARE: SUPERMARKETS SET TO STRENGTHEN Supermarket segment (RUB tn, incl. VAT) CAGR 5.4% 4.2 3.4 3.5 \ \ 2017 2018 =. 2019E re 2022E aoe" a 23% 23% 23% Pantene = 5.5% = 6.6% += 7.6% in the segment Source: Infoline, X5 data Key trends + The segment accounts for 23% of the Russian food retail ma
Slide 61: What We Did: Progress Since Last Capital Markets Day
WHAT WE DID: PROGRESS SINCE LAST CAPITAL MARKETS DAY CvP Business expansion NPS growth Customer loyalty Omni-channel *Opened stores in three new concepts — supermarket with focus on fresh, large ‘emotional’ supermarket and large supermarket +Launch of Smart Kitchen for ready-to-eat production + Expa
Slide 62: Stable and Profitable Growth
STABLE AND PROFITABLE GROWTH EBITDA margin 232 189 157 i i 2014 2015 2016 2017 2018 403 478 539 638 760 6.3% 7.0% H12018 H1 2019 + Perekrestok accelerated the pace of growth: 99 stores added 404 in the last 12M 164 + EBITDA margin improved by 74b.p. in H1 2019 y-o-y + 34 Karusel stores will be trans
Slide 63: Positive Response from Customers
POSITIVE RESPONSE FROM CUSTOMERS NPS dynamics 23 a1 19 ie z 13 an) Qi Q2 Q3 Q4 Qi Q2 Q3 2018 §=92018 §=2018 §=2018 2019 2019 2019 eNPS dynamics, 2019 a 7 18 19 19 n 0 Key highlights + Constant improvement of CVP + NPS is 21 points (+8 pts y-o-y in Q3 2019) + eNPS reached 27 points in August + Person
Slide 64: New Concept — Key Priorities
NEW CONCEPT — KEY PRIORITIES Assortment + Automation of category management, pricing and improving the effectiveness of promo + Expansion of assortment in ready-to-eat, healthy products and private label offerings Convenience Atmosphere + Development of ready-to-eat strategy + Development of digital
Slide 65: Key Elements of New Store Concepts
KEY ELEMENTS OF NEW STORE CONCEPTS Wide selection of fresh and fruits & vegetables, adding ready-to-eat assortment while remaining a standard supermarket in other categories Emotional communication with customers by creating warm atmosphere of gastro-market or craft shops & Extended selling space in
Slide 66: Convenient Routes for a Variety of Customers
CONVENIENT ROUTES FOR A VARIETY OF CUSTOMERS Stock-up mission —> Fresh, ready-to-eat, food-to-go 66
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Slide 68: Perekrestok.ru: On Track to Becoming #1 in Russian E-Grocery
PEREKRESTOK.RU ON TRACK TO BECOMING #1 IN RUSSIAN E-GROCERY Net sales, RUB min 891 g67 922 636 276 124 174 204 19 5! Q2 a3 Q4 Qi @2 Q3 Q4 ai @2 a3 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 Number of orders and average ticket RUB 4,000 3,390 Bisse ee 3,000 2,000 1,000 Q2 Q3 Q4 Qi Q2 Q3 Q4 Qi
Slide 69: Strategic Priorities
STRATEGIC PRIORITIES a Continue to grow business and market share Roll-out of updated CVPs, including large supermarket concepts % Improve customer experience and enhance customer service standards. 2B | Growth of NPS and eNPS Become #1 for customers in fresh, F&V, healthy food and ready-to-eat cate
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Slide 71: Thank You for Your Attention!
THANK YOU FOR YOUR ATTENTION! )X5 RETAIL GROUP