What's the market's mood?

Vladimir Lunin, General Director of Maratex
The year 2010 was very successful for our company: sales grew by 35% year-on-year and this year we’ll open 20 new stores. The average check has increased only by 5%, but this is not the best indicator. The point is that during the recent 18 months we’ve been developing brands at more “affordable prices” (discounters) at a much quicker pace.

At the present time we are pursuing a policy of cost optimization. To begin with, we were focusing on reviewing the profitability of our stores and had to close down several loss makers. This raised the company’s overall efficiency. Secondly, we toughened the selection of projects for new development, scrapping risky projects including those with high rental rates. This helped us shorten the time of return on investments. We also try to streamline our operation and raise the quality of shop management. Our logistics strategy has also undergone changes – the pool of our logistic partners partly changed, transportation routes and processes were optimized both on a global scale and domestically. Right now we are organizing shipments to Russia by motor transport via St. Petersburg (where we run our own warehousing operations) and via Moscow (where we deal with an external partner to handle, store and distribute the merchandise). We’ll be further optimizing this logistic scheme.

The rental policy has also changed. In most projects the rates were reviewed during the crisis. With growing sales the rates will surely rebound, though we’ll do it very selectively, rather than uniformly, considering specific conditions. We are now more cautious about entering new projects – the rent rate influences out investment decisions more than it did before the crisis. In times of crisis competition seemed to have slackened and retailers seemed to grow more professional and effective than before.

Kakha Kobakhidze, General Director of Eldorado
Eldorado flaunts double-digit earnings and like-for-like sales growth rates. In the first nine months of 2010 the earnings of Eldorado rose to 68.3 billion rubles (VAT inclusive). The like-for-like sales during the first nine months of 2010 grew by more than 20% and in the third quarter – almost by 32% YoY.

One of the factors of success was a 0-0-24 credit scheme (loans advanced for 24 months without any down payment or overpay) – the emphasis was placed on the quality client-oriented offer (Eldorado reimbursed the interest by offering a discount to the buyer).

The given action became a real driver not only for Eldorado, but for the market at large. And the market share of Eldorado among the large national retail chains, trading in electronics, computers, home appliances and telecommunications, reached 35% (as estimated by GfK) in the last week of June, which is a record performance.

HiTechnic, a service division of Eldorado providing integrated services of installation, hook-up and tuning of home appliances, electronics and computers, also demonstrates high growth rates. The sales turnover of this arm soared by almost 100% in the first nine months of 2010 yearonyear. HiTechnic was formed in 2008 and became the largest nationwide player in the said sector. The managerial experience of the international financial group PPF (PPF became the largest shareholder of Eldorado in autumn of 2009) was instrumental in fostering financial discipline and financial stability of Eldorado. This allowed fast business reorganization and development restarted within a short time.

Since the turn of this year Eldorado has already opened 18 new stores, some of which are located in Moscow and St. Petersburg. At the same time the company closed down a number of substandard stores, and plans to open 12 more stores till the year’s end. As of September 30, the network counted 325 companymanaged stores (more than 620 including franchising).

Eldorado goes on improving the quality of its selling space and raising the standards in accordance with a “perfect store” model developed in a joint venture with the international agency Fitch. The emphasis is placed on the accommodation of points of sale in most attractive shopping malls.

Eldorado plans to open its first 3,300-sqm perfect store this December at Mall of Russia located in MIBC Moscow City. The new format will have many winsome distinctions, from decor and merchandise display to a new level of comfort and service. Later on the company plans to introduce this format on a nationwide scale.

The company is considering a possibility of opening more than 100 new stores by 2013 with the level of investment in excess of $100 million.

Lev Khasis, X5 Retail Group CEO
X5 delivered its best performance of 2010 this quarter with RUR net sales growth of 21% year-on-year. Top-line maingrowth is being driven by good sales and record new store openings in our soft discounter segment. Our success in winning customers was on display in discounters’ 10% like-for-like sales growth year-on-year, which was achieved against the high growth rate in Q3 2009

X5 announced today its retail sales and operational performance for the nine months of 2010.

• Net retail sales increased 20% year-on-year in RUR terms to RUR 235,332 million or 29% in USD terms to USD 7,779 million;

• X5’s LFL sales grew 5% in RUR terms year-on-year on 3% traffic growth;

• Discounters’ customer traffic increased 7%, driving Pyaterochka’s LFL sales growth of 12% year-onyear;

• 258 stores added on net basis in the first 9 months of 2010, including 193 soft discounters, 14 supermarkets, and seven hypermarkets; in addition to consolidating 44 convenience stores;

Alexei Knyazev, Director of Development, Watcom|group
To compare the footfall dynamics for Moscow’s quality shopping centers in 2009 and 2010, it would be expedient to study it on a quarter-to-quarter basis. In Q1 2010 the density of human flows was 2% higher on average than in Q1 2009. In Q2 2010 the traffic density first aligned with the previous year’s figures and later fell behind (-2% on average). In Q3 of 2010 the down trend of Shopping Index gathered momentum year-onyear (-4%).

Out data indicates the apparent stagnation of purchasing activity relative to the Moscow market. New big-format retail projects designed and started before the crisis are still being delivered to the market, but this does not lead to any augmentation of shopper flows. As a result, they are actually redistributed between the properties and human traffic is thinning out.

As can be judged by financial statements recently made public by electronics and home appliances networks, the third quarter was quite successful for all of them as their sales grew 2030% year-on-year. The local splash of demand is normally attributed to the recovery of consumer loans and to the accumulated deferred demand. A buoyant growth of smart phones and 3D television segments make a significant contribution to positive dynamics which we expect to maintain in the medium term, whereas the growth of the smart phone segment is a long-term trend, according to our forecast.