X5 Retail Regulatory News (FIVE)

X5 Retail Group REPORTS Q4 & FY 2010 Trading Results(1):

enhanced # 1 position with nearly USD 15 bln 2010 pro forma gross sales

Record organic store openings and Kopeyka Acquisition added nearly 1,100 stores for the year

In 2011 x5 plans to add 540 stores and increase sales by approx. 40%on organic growth and kopeYka consolidation

Q4 2010 Rur sales growth of 35% driven by improved consumer spending, organic growth and initial kopeyka contribution

FY 2010 CONSOLIDATED(2) net RETAIL SALES up 24% in RUR and 30% in USD

Amsterdam, 19 January 2011 - X5 Retail Group N.V., Russia's largest retailer in terms of revenue (LSE ticker: "FIVE"), announced today its retail sales and operational performance for the fourth quarter and full year of 2010.

X5 reiterates its 2011 Outlook as announced on 23 December 2010. The Company plans to open a record 540 new stores in 2011 to deliver gross sales in excess of RUR 500 billion, representing top-line growth of approx. 40%. We expect this increase to be driven by organic RUR net sales growth in the low 20 percent range on a higher base compared to 2010, with the remainder contributed by the Kopeyka acquisition.

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(1) Numbers provided in this press-release are preliminary and not audited.

(2) Acquired Kopeyka stores sales are included from 1 December 2010.

(3) Numbers include 294,768 sq.m. from acquired Kopeyka stores.

Lev Khasis, X5 Retail Group CEO, commented:

"Q4 2010 was a milestone quarter for X5 marked by a 35% increase in RUR net sales. Growth was driven by a recovery in consumer spending, record store openings and the acquisition of Kopeyka to reinforce X5's number one position and complement our organic growth strategy. As a result, we successfully delivered on the Company's FY 2010 Outlook with consolidated net retail sales growth of 24% in ruble terms, or 22% excluding initial Kopeyka sales contribution.

"Soft discounters delivered healthy LFL sales growth of 13% in Q4 2010 against a very strong base last year. Supermarkets improved significantly with 11% LFL growth and a 9% year-on-year increase in basket supported by recovery in consumer spending. Supermarkets performance was boosted by surging LFL sales of acquired Paterson stores, following successful integration and rebranding earlier in the year. We continue to win customers by enhancing our assortment and restraining price growth to well below the level of official inflation.

"For the year we opened a record 437 stores organically, exceeding the Company's plan for 2010 while remaining below our CapEx limit. Only 12 stores were closed due to uneconomic performance, underscoring the quality and discipline of X5's expansion program to date.

"X5 begins 2011 in an excellent position to accelerate growth. We plan to significantly increase the pace of organic expansion with some 540 new store openings this year. This together with the Kopeyka acquisition should enable X5 to deliver in excess of RUR 500 billion in gross sales, representing top-line growth of approximately 40%."

Net Retail Sales(1) Performance

Net Retail Sales Dynamics by Format(2)

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 (1) Net retail sales represent revenue from operations of X5 managed stores excluding VAT. This number differs from total net sales that also include revenue from franchisees (royalty payments) and other revenue. The total net sales number will be reported along with Q4 2010 financial results.

 (2) Please note that in this and other tables of this press release immaterial deviations in calculation of % change, subtotals and totals are explained by rounding.

 (3) Included from 1 April 2010.

 (4) Included from 1 October 2009.

(5) Kopeyka sales consolidated by X5 from 1 December 2010. Kopeyka Q4 & FY 2010 and 2009 figures are

presented for information purposes.

On a consolidated basis X5 net retail sales for the full year of 2010 reached RUR 341,596 mln, a year-on-year increase of 24% in RUR terms, or USD 11,248 mln, a year-on-year increase of 30% in USD terms. Kopeyka December sales contributed RUR 6,589 mln or USD 217 mln to X5's consolidated net retail sales, which added approximated 2% to X5's FY 2010 consolidated RUR net sales growth. For information purposes only, Kopeyka's full year 2010 sales were RUR 61,213 mln or USD 2,016 mln. Please see Appendix V for more details on Kopeyka's performance in 2010 and 2009. If the acquisition of Kopeyka had occurred on 1 January 2010, X5's net retail sales in 2010 would have been RUR 396,221 mln or USD 13,047 mln(1) and X5's gross retail sales would have been RUR 452,133 mln or USD 14,888 mln(1).

Gross Retail Sales(2) Analysis

Gross Retail Sales Dynamics

Sales growth in the fourth quarter 2010 totalled 35% which consisted of 10% LFL sales growth with the rest coming from organic expansion (+17%) as well as the contribution from acquired Kopeyka stores (+8%). This resulted in a 24% increase in consolidated RUR gross sales for full year 2010.

LFL Sales Performance

X5's LFL sales in the fourth quarter 2010 increased 10% in RUR terms, driven by a 2% increase in customer traffic and 8% increase in average basket. This translated into 7% LFL sales growth for the full year with traffic up 3% and basket up 4%.  

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(1) This is preliminary and the final number for Kopeyka sales will be announced along with FY 2010 financial results in April 2011.

(2) In this section all sales dynamics analysis is based on RUR-denominated gross retail sales (including VAT, excluding FX). Net retail sales RUR growth rates may immaterially differ due to effective VAT rate.

Like-For-Like(1) Store Performance (see Appendix I for detailed LFL performance)

Soft discounters continued to deliver strong performance in terms of sales, LFL sales and sales per sq. meter. Soft discounters achieved 13% LFL growth in Q4 2010 against last year's high comparable base, when the format delivered record 16% LFL growth despite a tough economic environment thanks to the phenomenal success of Pyaterochka's new price positioning.

Supermarkets improved strongly in Q4 2010 resulting in 11% LFL growth on a 2% rise in traffic and 9% basket increase as trading up trends become more and more visible in Russia.

Hypermarkets LFL sales remained flat YoY, affected by intensified competition in St. Petersburg.

Prices on X5's shelves rose on average by 8.7% YoY in December 2010 compared to December 2009. By comparison, Russia's official food inflation rate in December 2010 was 12.9% YoY.

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(1) Like-for-like (LFL) comparisons of retail sales between two periods are comparisons of retail sales in local currency (including VAT) generated by the relevant stores. The stores that are included in LFL comparisons are those that have operated for at least twelve full months preceding the beginning of the last month of the reporting period. Their sales are included in LFL calculation starting from the first day of the month following the month of the store opening.

(2)  Kopeyka's stores are not included in X5's LFL calculation. 

Expansion 

In the fourth quarter 2010, X5 added 839 stores, including a record net 179 stores organically. This includes 160 soft discounters, 12 supermarkets, 6 hypermarkets and one convenience store, adding total net organic selling space of 83,589 sq.m. During the fourth quarter, X5 closed one convenience store and one ex-Ostrov soft discounter in the Moscow region to maximize store portfolio efficiency.

In December 2010, X5 acquired the Kopeyka retail chain with 660 stores and total net selling space of 294,768 sq.m. This includes 22 stores opened by Kopeyka from 1 December 2010 and excludes 27 stores closed in accordance with the requirements of the Federal Antimonopoly Service decision. X5 also has rights to about 20 additional stores in planning phase.

Additional information is provided in Attachment IV to this press release.

As at 31 December 2010, X5 Retail Group was present in 52cities of European Russia, the Urals and Ukraine, operating 2,469 stores in total (1,555 thousand sq.m. in selling space).  This includes 1,392 soft discounters, 301 supermarkets, 71 hypermarket stores, 45 convenience stores and 660 Kopeyka stores.

Franchisee Relationship Update

As at 31 December 2010 the Company's franchisee store network totalled 665 stores across Russia, including 618 Pyaterochka, 19 Paterson, 27 convenience stores and one Perekrestok. 

Logistics Infrastructure Development

During 2010 X5 Retail Group expanded its warehouse capacity by a net 96.9 thousand sq.m.

We opened two new food DCs in the Moscow and Urals regions. We also expanded storage capacity of existing DCs in the Moscow region, St. Petersburg, Perm, Voronezh, Rostov-on-Don and Chelyabinsk. The Company closed one small DC in Lipetsk.

As a result, at 31 December 2010 the Group operated 24 DCs in 10 cities with overall warehouse capacity of 406 thousand sq.m. The Company's supply centralization rate totaled 70% for 2010 (versus initial target of 67%). This increases X5's opportunities to drive future gains in efficiency and competitiveness and support execution of our long-term strategy for market leadership.

Appendices

I. LFL Store Performance by Format and Region

II. Net Retail Sales Performance by Region

III. Average Ticket and Number of Customers

IV. Net Store Addition by Format and Region

V. Kopeyka Operational Performance

VI. Financial Calendar for 2011

Note to Editors:

X5 Retail Group N.V. is Russia's largest retailer in terms of sales. The Company was created as a result of a merger between Pyaterochka (soft discounter chain) and Perekrestok (supermarket chain) on 18 May 2006. In June 2008, X5 acquired Karusel hypermarket chain and substantially strengthened its position in hypermarket format.

As at 31 December 2010, X5 had 2,469 Company-managed stores located in Moscow,St. Petersburg and other regions of European Russia, Urals and Ukraine, including 1,392 soft discount stores, 301 supermarkets, 71 hypermarkets, 45 convenience stores and 660 acquired Kopeyka stores.

As at 31 December 2010, X5's franchisees operated 665 stores across Russia.

For the first nine months 2010, net sales totaled USD 7,798 mln, EBITDA reached USD 593 mln, and net profit amounted to USD 183 mln. For the full year 2010, net retail sales totaled USD 11,248 mln.

X5 Shareholder structure is as follows: Alfa Group - 47.9%, founders of Pyaterochka - 19.8%, X5 Management - 1.9%, treasury shares - 0.1%, free float - 30.3%.

Forward looking statements:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as" anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal" believe", or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Retail Group N.V.'s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

Any forward-looking statements made by or on behalf of X5 Retail Group N.V. speak only as at the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail Group N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

Appendix I: LFL Store Performance by Format and Region(1)

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(1) Based on RUR-denominated gross sales (including VAT, excluding FX). Net sales RUR growth rates may immaterially differ due to effective VAT rate.

Like-for-like comparisons of retail sales between two periods are comparisons of retail sales in local currency (including VAT) generated by the relevant stores. The stores that are included in like-for-like comparisons are those that have operated for at least twelve full months preceding the beginning of the last month of the reporting period. Their sales are included in like-for-like calculation starting from the first day of the month following the month of the store opening. The like-for-like comparison for each store takes into account retail sales generated by that store during the same months it was in operation in both the reporting period and the period of comparison. The retail sales of all the relevant stores in the relevant months are then aggregated and compared. Like-for-like sales are calculated on the basis of traffic and basket amounts of relevant stores in the period under review.

Please note that acquired Kopeyka stores are not included in X5's LFL calculations for Q4 and full year 2010 as X5 did not operate Kopeyka until after the acquisition in December 2010. Information on Kopeyka's stand-alone operational performance is provided in Appendix V to this press release.

Appendix II: Net Retail Sales Performance by Region

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(1) Included from 1 October 2009.

(2) Acquired Kopeyka stores' sales are included from 1 December 2010.

Appendix III: Average Ticket and Number of Customers(1)

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(1) Based on all stores' gross sales, which include acquired Kopeyka stores' sales from 1 December 2010.

(2) Included from 1 April 2010.

(3) Included from 1 October 2009.

Appendix IV: Net Store Addition by Format and Region

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(1) Included from 1 April 2010.

Appendix V: Kopeyka Operational Performance

Quarterly Net Retail Sales Performance

LFL Sales Performance

Average Ticket and Number of Customers(1)

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(1) Based on all Kopeyka stores' gross retail sales. LFL performance includes VAT and excludes FX.

Appendix VI: Financial Calendar for 2011