X5 Retail Group, the country's top grocer by sales, said Thursday that it trimmed its 2010 sales growth outlook, citing low food price inflation, and posted a forecast-beating first-quarter net profit of $79 million.
Russian retailers have yet to see a sustainable recovery after consumer demand was battered last year by the economic turmoil, and falling inflation is another constraint to revenue flows.
"Due to significantly lower food inflation to date and in the official forecast rate for the year, X5 provides a more conservative 2010 revenue growth outlook in the low-20 percent range in nominal ruble terms," the company said.
Prices rose 8.8 percent in 2009.
X5 previously expected to deliver 2010 sales growth comparable to its 2009 pro-forma level, or 25 percent.
"Actual top-line performance will depend on inflationary trends and the timing of a recovery in consumer spending," it said in a statement.
X5, which sees consumer spending beginning to improve toward the end of this year, said first-quarter net profit was helped by a $37 million foreign exchange gain from the strengthening of the ruble against the dollar, as well as tight cost control.
Analysts had expected a net profit of $68 million after a net loss of $82 million a year ago.
X5 closed up 0.5 percent in London, outperforming its main competitor, Magnit, which fell 3.6 percent there.
Total sales rose 36 percent in dollar terms to $2.54 billion against a $2.55 billion forecast, and were up a more moderate 20 percent in ruble terms.
The company, whose chains include Perekryostok supermarkets and Pyatyorochka discount stores, in December completed the acquisition of the Paterson retailer for $275 million in cash and debt, adding 80 stores to its network.
"We expect consumer spending to begin to show improvement towards the end of the year," X5 chief executive Lev Khasis said in the statement. "This, in combination with new store openings and post-integration contribution from Paterson, should enable X5 to deliver top-line growth in the low-20% range."
Earnings before interest, taxation, depreciation and amortization rose 10 percent to $178.5 million, below expectations, and included a $25 million cost related to its employee stock option plan after its stock increased.
(Reuters, Bloomberg)