Russian retailer X5 targets big expansion of Chizhik discount stores

FILE PHOTO: Employees attend a ceremony to launch the discount shop Chizhik in Moscow

MOSCOW (Reuters) - Russia's X5 Group plans to open around 1,000 discount stores next year, the country's largest retailer said on Wednesday, as it seeks to gain a stronghold in a sector it expects to account for 20% of the market in five years' time.

X5 has prioritised the expansion of its Chizhik hard discounter format, which saw a 19-fold increase in revenue year on year from January through September. The retailer in July identified that Russian shoppers were switching to cheaper food items because of a drop in real disposable income.

Ilya Yakubson, head of Chizhik, said the company planned to bring Chizhik store numbers to more than 1,500 in 2023 from more than 400 now, and to 5,000 in 2026.

Yakubson, who was speaking at an X5 conference, said discounters were growing faster than other shop formats in Russia and would account for a fifth of the market in five years' time.

X5 intends to push ahead with the expansion of its other formats, too, and expects to open its 20,000th Pyaterochka store next year.

CEO Igor Shekhterman said leading the market was a priority for the company, which targets an annual growth rate of at least 20% in the coming years.

Revenue for 2022 should be at least 2 trillion roubles ($32.9 billion), he said, which would be similar to that achieved in 2021.

As well as falling incomes, high inflation, which was running at an annualised rate of 12.3% as of Nov. 21, has contributed to the shift in consumer habits.

With Western sanctions hampering Russia's access to goods, X5 President Ekaterina Lobacheva said the company had adjusted its supply chains.

"There is Turkey - volumes have increased. Vietnam and Iran have appeared. We are working on contracts with India," Lobacheva said.

"Our geography has changed a little, but on the whole the volume continues to be consistently high."

($1 = 60.8000 roubles)

(Reporting by Olga Popova; Writing by Alexander Marrow; Editing by Conor Humphries, Kirsten Donovan)