As Russia’s largest retailer, X5 is uniquely positioned to capitalise on longer term consumer growth trends. Our goal is to be the number one choice for customers and reinforce X5's leadership in our retail formats – discounters, supermarkets and hypermarkets.
Like many countries, Russia was deeply affected by the global financial crisis and economic downturn in 2009. Consumer confidence dropped to its lowest levels since 1998 due to high unemployment levels and diminished purchasing power. The crisis was an important test of X5 Retail Group’s strategy, and we have learned much that will make us a stronger, more efficient and disciplined Company for the future.
First, our response to trading down by consumers was fast and effective. Thanks to aggressive price leadership, especially in discounters, X5 delivered the best like-for-like performance of any Russian food retailer in 2009. We also managed costs to offset price reinvestment and thus support operating margins, and reined in capital expenditures to preserve financial strength.
Just as importantly, the Company continued to execute its longer-term strategy to create durable competitive advantages:
Customer Focus
With our three retail formats – discounters, supermarkets and hypermarkets – we have stores for every lifestyle and family budget. Our “Close to the Customer” policy aims to ensure that each of our formats leads its market segment by offering the right products at the most attractive prices. We continue to invest in our value propositions, quality and service in order to build customer loyalty, while innovating to drive growth in areas such as private label and non-food merchandising.
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Operational Excellence
X5’s price leadership is made possible by continuous gains in efficiency. As the Russian market develops, we believe efficiency will be even more important for sustaining leadership and shareholder returns. Our Strategic Efficiency Programme is a multi-year effort to develop X5’s operational excellence as a competitive advantage. This means implementing international best practices, increasing in-store productivity, and upgrading distribution infrastructure and IT systems to better manage our supply chain and leverage the Company’s growing scale.
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Disciplined Growth
The third leg of our strategy is disciplined growth and prudent financial management to produce the best long-term returns for our investors. With many retailers weakened by the economic downturn, X5 has responded aggressively to strengthen its leadership in all regions of operations, both through organic expansion of our store base and selective consolidation of smaller retail chains. Our investments focus on prioritising projects with the best potential returns, while increasing cash flows and strengthening our balance sheet to support steady growth in the years to come.
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