X5 delivered revenue growth of 16.9 percent year-on-year in the fourth quarter of 2018 on the back of positive like-for-like (LFL) sales and selling space expansion. Gross margin improved by 30 b.p. (basis points) year-on-year to 24.1 percent in the fourth quarter of 2018 despite a challenging external environment, driven by year-on-year commercial margin improvement, a stable share of promo and the format mix effect from proportionally more sales at Perekrestok, as well as successful measures to control shrinkage levels.

Selling, general, and administrative expenses as a percentage of revenue increased by 35 b.p. year-on-year to 18.1 percent, primarily as a result of non-food inflation’s exceeding food inflation, an increase in lease expenses due to the growing share of leased space in X5’s total real estate portfolio, and utilities expenses due to the rates’ rising faster than food inflation and other expenses.

The adjusted EBITDA grew by 26.2 percent year-on-year, reaching RUB30,387 million (mln) in the fourth quarter of 2018. The adjusted EBITDA margin improved by 53 b.p. year-on-year, reaching 7.2 percent. In line with the company’s dividend policy, the X5 Supervisory Board recommended a 2018 dividend of RUB25.0 billion, or RUB92.06 per Global Depositary Receipt (GDR), which represents 87.3 percent of consolidated IFRS net profit. The net-debt-to-EBITDA ratio was 1.70x as of December 31, 2018.

Commenting on the company’s results, X5’s chief executive officer Igor Shekhterman said, “I am pleased to report another quarter of sustainable growth, which X5 has achieved by staying true to our mission of putting customers at the center and adapting our business to meet their needs: in a challenging macro environment with increasing competition, we grew revenue by 16.9 percent year-on-year and delivered positive LFL performance at the group level for the fourth quarter of 2018. We improved our gross margin by 30 b.p. year-on-year to 24.1 percent, thanks to more effective management of promo and successful measures introduced by the new team at Pyaterochka to control shrinkage that started to yield results from the third quarter.