X5 Retail Group N.V. (FIVE) Earnings Call Transcript & Summary

Ladies and gentlemen, on behalf of X5 Retail Group, I welcome you at our Annual Investor Day, which this year X5 is holding for the first time online. The company has much to be proud of. When we look back the past 12 months, they were challenging, and we have new strategic plans to share with you today. At X5, we view challenges as new opportunities. And the COVID-19 pandemic was, of course, such a challenge. However, it was the online format that made it possible to invite a much larger group of investors than usual. Because over the last 2 years since we listed X5 depositary receipts at Moscow Stock Exchange, dozens of -- thousands of domestic retail investors have joined our investor pool and to more than 700 participants are registered at this event. And now I would like everyone to note the obligatory disclaimer. And I do hope that you will see it on the screen straightaway. And today, we offer you a format, which is packed with both management presentations and short video clips to sustain the interest of such a wide audience. And we intend to spend about 3 hours with you, and we will split the event into 2 parts with a 30-minute Q&A session at the end of each part, with a 15-minute break after the first Q&A session. And we, together with Andrey Basin, will facilitate them. In the first batch, we will cover the new strategy and discuss the financial results published yesterday. And in the second part, the heads of the [indiscernible].

Two years ago in London, we introduced -- respect the past, but create the future. We definitely have something to respect and to be proud of. So I would like to sum up what has been done. The focus of our strategy dealt with 3 elements, components, strengthening the existing business, digital transformation and creating the basis for a new generation retail. And they will focus on key achievements in each of the 3 pillars. In strengthening the current business, we managed to keep the EBIT margin above 7% throughout the period. Our profitability came to 7.8 in the 9 months, and it had to do with operational efficiency, including a 69 basis point shrink -- reduction over the last 2 years. We also managed to achieve a major improvement in key personnel turnover. This figure dropped to 40% in 2020 compared to 69% in 2018. This led to a higher like-for-like and BS figures. And you see the like-for-like growth is largely due to the deployment of the new formats. And Sergey [indiscernible] will talk about it in more detail. Our stronger customer focus is reflected in the NPS growth. We surpassed our [ traditional ] competitors while the new Pyaterochka format, NPS rose by 50% to 53 points. We are successfully implementing the private label program. The share of private label has grown to 17%. In Pyaterochka -- it is 18% in Pyaterochka and 14.5% in Perekrestok. We continue the digital transformation of our business. We have automated the decision-making algorithms for key processes and pricing, assortment management and demand. And this will have the major improvement to -- for our EBITDA, and this will also ensure that access to the data about their clients to all the businesses of X5. This is achieved through X5 IT. Based on the results of the entire digital transformation program, we expect the total EBITDA effect to exceed RUB 20 billion per year starting from 2021. And we have created an innovation center that has become a benchmark for the industry. 32 pilot base solutions have already been implemented. For example, we developed our own self-service cash registers which save about RUB 200,000 per unit compared to the average mortgage prices. And more than 1,200 X5 stores already have 3,500 of service cash registers. And total CapEx savings this year alone will exceed RUB 900 million. We successfully implemented the first stage of our new generation [ retail ] development program this April. For the first time, we became the leader domestic e-grocery market. This was due to the successful development of the online hypermarket, Perekrestok.ru, and the rapid development of Express Delivery. In October, we delivered 20,000 orders per day by Express Delivery. In 2021, Perekrestok.ru will reach positive EBITDA. Our logistics platform 5Post, that is the parcel delivery service, already has more than 14,000 outlets in our stores and handles over 700,000 parcels per month. It attracts customers to our stores, and it is fully in line with our concept that a store is a place where guests can get the maximum number of services and definitely, it drives additional traffic to the stores. And this year, we faced a new reality of the pandemic. And I can't but thank our team which has faced all the challenges of this period with dignity. I'm especially thankful to our salespeople, our drivers, the distribution center staff, to all those who cannot work remotely from the comfort of their homes because of the nature of their work. And every single day, they are at the risk of getting sick. But from the very onset of the pandemic, all the systems have been working smoothly. We have not allowed any interruptions. And we were -- when of the first large companies in Moscow, which transferred 90% of our office staff to home office remote. At the moment, 95% of Moscow office workers worked remotely. During the lockdown, a large number of new customers came to our stores. People's mobility was restricted, and this made them -- convenience stores their first and sometimes, the only choice. And we emphasize the service level and the security. During the pandemic, digital services experienced explosive growth. We were able to quickly promote the Express Delivery service and to buy contactlessly. Now during the second wave Pyaterochka and Perekrestok help customers receive product safely from the comfort of their homes as per Express Delivery service in Moscow, St. Petersburg, Kazan, Krasnodar, Rostov-on-Don, Nizhny Novgorod, Yekaterinburg and [indiscernible]. And just the other day, we launched it in Novosibirsk. A pandemic is a crisis, but it also means new development opportunities for the companies that are quickly adapting to new realities. Companies that have the infrastructure for the development of online services are well positioned to accelerate growth and to strengthen their leadership. Now moving on to our new strategy. When forming our strategy for the next 3 years, we'll certainly analyze consumer trends. The scale and pace of changes over the past 5 years have created a completely different competitive environment and are quickly forming a new type of consumer with great expectations. We can no longer say that food retail has a separate online and offline segments. We also can no longer say that there are separate markets for food retail and catering. All of this is becoming a single food market. And consumer behaviors are changing before our eyes. I would like to show to you a short video with key consumer trends that are at the base of our new strategy. [Presentation]

So where did we start with our new strategy? We looked at the entire customer journey, which more and more often begins in the digital environment long before customer comes to the store. And if we are to have more customers in our stores, it's vital that we are at the very beginning of that journey. It's important to be with the customer before they even show up in our store. Today, more than 64% of consumers decide to buy something, the planning and selection stages, which start in the digital format. Digital resources are still at the planning phase, and they're just trying to connect directly to retailers. But these resources at the selection stage are already defining the customer's future journeys. They are aggregators and price comparison tools. Only after the choice is made, the purchase takes place at the store. And so far, this is the only step of the client journey within X5's control. But even today, we already compete not only with food retailers there, but also with restaurants and cafes and delivery services. After buying and receiving food, the client journey is not over. Our digital competitors offers the customer related services. For example, payment services or subscription that generate new purchases. The presence of X5 in most stages of their customer journey represents a strategic opportunity that our new strategy will allow us to later. And in the next 3 years, our main focus will be on strengthening our business in the food market. We will expand our presence in all segments. Our strategy is based on our competitive advantages. As the largest retailer in the country's food market, that is the purchasing power and millions of loyal customers, it is important for us to create a digital infrastructure for our customers to be present at all stages of the customer's journey in food. And this will be our advantage, both in competing with traditional retailers and with new ecosystem players. Technological leadership becomes the most powerful driver for us and part of our competitive edge. The growth strategy of the core business is largely related to digital transformation. 80% of our investment in digitization goes to the automation of our core business processes. We also realize that achieving our goals will be impossible with our transforming our culture. In the rapidly changing business environment, the key success factors are speed, the ability to delegate authority and the ability to make decisions in an uncertain environment. And our new model will be about efficiency and speed of decision-making. The new strategy will allow us to maintain our leadership position. The 2023 strategy will determine the company's development for the next 3 years, but we are convinced that the foundation for is that next 5, 10 years. Our main goal is to create value for shareholders and society by taking technology and competition to a new level, remaining the #1 choice on the food market for our guests. And the new strategy, implementation offers, all the necessary tools to achieve this growth. The implementation of strategy 2023 will ensure X5's presence at all the stages of the client path customer journey and will form the necessary competencies in media, finance and e-commerce. We will create full-fledged services that cover the majority of key human needs. New directions can be formed either by ourselves or through partnerships. In present, at all the stages of customer journey will enable us to strengthen our core business, attract more guests and provide them with a full range of services. While the key priorities, which will help us to achieve the goals of the new strategy are: the first priority is leadership in the food market. Our focus will be on the 3 key areas. Leadership in key client missions versus customer experience and services at all stages of the customer journey. By 2023, our share in the food retail market should make up 15% not less, and have increase from 11.5% in 2029. In the e-grocery market, we plan to increase our share up to 20% by 2023. Moving over to #2. Achievement of leadership within technology. Our goal is to achieve industry leadership in digitalization for the best mobile interfaces in the retail market as well as through end-to-end digitalization services, the level of the store and the supplying chain. By 2023, the share of digital businesses of X5 revenue should be at least 5%, and by 2030, 20%. The total MAU for digital channels and mobile applications by 2023 should reach 38 million customers, and this will provide us with a critical mass of users for a complete transformation into a digital company. Currently, the MAU for X5 is at 12 million customers level. We're fully aware of how important sustainable development and social responsibility are for society and communities and investors today. For the first time, sustainable development goals with specific metrics have become a valid part of our strategy, and I'll tell about that in more details later. And the X5 Supervisory Board fully recognizes the value of the company's contribution to sustainable development. One of the indicators for the new LTI program will be in the field of ESG. And all the objectives of the new LTI program will be announced next March after this final approval. And finally, another important priority, and that is to create value for shareholders through increased earnings per share. We will try to ensure the growth of shareholders' value through effective and efficient management and use of development opportunities as well as by maintaining high dividend payouts. Now it's time for me to turn the floor to Vladimir Salakhutdinov, he's Director of Strategy and who will speak in more details about the strategy.

Thank you very much, Igor. Ladies and gentlemen, colleagues, good afternoon. I would like to disclose a number of key priorities, which Igor has outlined. Let's start with priority 1. It's leadership in the food market. It's composed of 3 main elements. So the first, the leader in key customer missions. In this area, we target to strengthen our position, our leadership in all commissions in food retail. And most of the initiatives you can see here deals with the further CBP development of the formats. We have a clear card agenda for all our initiatives for the next years that will enable us to make a good progress, has to do with the development of new concepts, formats, assortments, broad range in the area of ready-to-eat products. I will speak about later. And one of the crucial elements of that block is the implementation of digital solutions. First of all, it's the decision-making automation based on AI. It's commercial decisions, pricing decisions, promo decisions. We have already launched those prior projects, and we can see that the impact has paid back immensely. But it does not complete the chapter. In the same block, further on, we will present a new format a little bit later. It's a hard discounter format for our new stores. I will speak about that later. Another priority, which is inside our first priority, is best-in-the-market customer experience. And it's true that over the past year, we have established a very efficient platform for feedback collection. We are receiving feedback about preferences and consumer experience from 15 different channels, and it enables us to cast a unique look at the business, and so to build all our processes and decisions based on the interests of the customers. In fact, it's not just on account of some new decisions. It's a transformation of the model. And partially, it's the transformation of the culture. And so it is CX, acronym of customer experience. It doesn't matter which channel provides the service, digital or offline channel. The ultimate goal is that average channel of X5 is to be the best in the market. And the information that we have now, data that have now enables us to change our views and strategies to promo. And we know that if we are aware of what we can offer our customers, we can really start our journey to customized promos, which will be our next horizon. So the first priority here is the infrastructure of our services in all the stages of the customer journey. Igor already told you every detail of that, but I'll also speak about that later. On this slide, you can see a number of key notions which shape X5's vision in the next horizon. First of all, there is the structure of the formats. We mostly 3 offline and 1 digital or online format. We are fully aware of [indiscernible], that's Pyaterochka and Perekrestok, their physical formats, Perekrestok online or Perekrestok [indiscernible] is another digital format of Perekrestok. And here, you can see one more, and it is a hard discounter. It's the first time when we announced its name. It is called Chizhik. And later on, I'll also speak on more details about that name. What is also important here? Well, we have serious progress in the digital formats is our Express Delivery service. It's the delivery from Pyaterochka and Perekrestok, from the food chain and the ocular aggregator, which is nearby or near and it aggregates the capabilities not with us, but our suppliers such as QSR restaurants and drugstores and many others. And when we speak about -- when we come to the breakdown of our businesses, I'll also give you more details. Speaking of CVP, here is target that we're going to achieve in the strategic horizon up to 2023. That's the breakdown distribution of CVP of the 3 retail formats enable us to have the maximum coverage for all customer groups and maximize the market share. Currently, there is a specific set of initiatives for each format, which is very clearly planned. And we think that this is the combination which provides us with the best diversification, which enables us to know all customers' preferences and which enable us to maximize the market share. Earlier, I made a point saying that big data analytics is playing more and more an importance here with us. And here, I would like to tell you what we are doing with the big data to enhance the CVP. [Presentation]

Well, it's very important to point out that the analytics services we're using are also accessible to our partners, as you could see, that our suppliers, to our vendors, and it also makes up one of our competitive natures. But let's move on. Ladies and gentlemen, for the first time, I would like to introduce a new brand, which is Chizhik. Those are the hard discounter stores, and they're going to be opened, to be launched even this week on this Thursday, on the [indiscernible] street, 11A. A store will be commissioned, will be launched. This year, we are going to open only a few pilot stores. Next year, the share will be added with another 50, and we will keep on increasing the scale. Chizhik, what made us call it this name, it's a bird. And we -- it took us long to figure out what name we can give to our new format, to our new store. We decided that it had to be a friendly, something that generates positive emotions. Chizhik is a bird, a very friendly bird. And also, it's an acronym for a black and yellow colors in Russian. And those are the colors of the format of the stores, a format we're going to introduce. Please remember the name. I think very soon, this name will be as popular as Pyaterochka and Perekrestok. It's a hard discounter with a limited product range, not more than 800 SKUs. And our targeted model, 60% of the products will be made up of private-label products. It's not going to be the case at the start but later, we will reach that. Some sales area will be about 200, 300 square meters, and the choice of assortment of product range will be different as well as the management models. So the format that we'll offer just another category of prices. So we borrowed something from hard discounter models of the foreign markets, but we also complemented that with all technological advantages that X5 has mastered. And we are convinced that this format will be quite solid and strong in the retail market. The most competitive edge of the new format will be its price, pricing policy, and you are all invited. Another important point to make, but we would like to emphasize it once again. One of the very important trends we've been witnessing of late is the very fast growth of ready-to-eat category, and it cannot be ignored. On the contrary, we are absolutely convinced that it's exactly what our consumers want to have. So the new category will offer a very important leap in selling the numbers of ready-to-eat products. And looking at our ambitions, it's true that we would like to see its volumes to make 4% in Pyaterochka and 8% in Perekrestok. It's something that we are aware of, and we have all the capabilities to cope with the problem, and we are negotiating with our partners to support us in that. Now it's time to speak in more details about the customer journey. Igor already said something about our plans. But what do we want to make exactly so that to be present at all stages of the customer journey, which starts long before customers come into this store. I'm well aware of the fact that 60% of the customers have already made up their minds before entering the store, and the question, where they make their decisions? They'll -- that question led us to the graph that we have on the slide now. What is it? What does it consist of? Very often, the journey starts in social media or the blogs about food or podcasts. All of these are shaping our preferences. Now we don't have any other choice but to be close to our customer at the beginning of the customer journey. This is why we are going to have our own media platform around food. And this will be the most important stage at the start to settle their relations with our customers. But that's not all. We also know that apart from the planning, that customers often deal with their choice of where they want this need to be met. And one of the tools in the market are the aggregators. Because an aggregator is not just an app where one can buy something, it's also an app to compare prices and select the product. And for us, this situation is very obvious, and we've made a decision that we are going to have our own aggregator called Okolo. We have already made an announcement, as well as our own price comparison service. We were asked by the colleagues whether creating an aggregator means competing against, say, incumbent players like their existing digital competitors. Yes and no. Yes, we are going to offer different services, including our own formats; and other services, including fast food, restaurants, [ groceries ] and other sellers of different products and services. But the difference will be that we are not targeting to maximize the profit with the aggregator. It is about attracting more traffic to our core business. Our task is to offer maximum of choice, staying within X5, and we will do this with Okolo aggregator, to which we announced, but we will launch the app mid-November. And we have a lot of vested hopes with that. And as to perekrestok.ru, today, this is an online hypermarket with the wider nonfood assortment. We understand that to compete successfully inside perekrestok.ru, we have to cover adjacent needs. What it means to us is that perekrestok.ru will transform into an FMCG marketplace, and Leonid Dovladbegyan will cover this in detail. But this is an important step forward, which creates new horizons, new scale for this segment. And then saying about the core business, everything that is shown in orange in the slide, this is why we are creating this infrastructure. We are attracting customers to our core business. And this is the main task of working on all stages of the customer journey. Understandably, no, we will see the portfolio of businesses. Each of them is communicating with the clients, and our task is to make sure that these communications are not built from scratch. We want a single, unified approach and a single log in for all of our services. This is why we are creating X5 ID as a single platform. On the one hand, it is a single authorization center for all of our apps. And for the clients on the other, it is a way to offer different services in different channels and to put together all their customers that are using X5 services. And this will also come with a subscription that we are planning to launch next year. And the last important thing, it's also very important that their customer would stay within our services, within the perimeter of our services. Any payment, any purchase is connected with payment, so creating a payment service is another task for the next strategic horizon. And further, I would like to move on to the second important priority, leadership in digital transformation. And being the leader in digitalization is key. It's not just about the technologies creating additional opportunities. If there is yet another important aspect is that the industry of retail is going digital really fast. And when the industry, any industry, goes digital, the values go down, and the speed of -- increases and the question is how effective the income plays are. So we want to involve our internal efficiency, which will be boosted by our digital transformation. We expect a RUB 20 billion effect from the digital initiatives. And we are going to keep a similar profitability and keep our promises to the shareholders despite investing in our development. I would like to show to you the video which covers what we do. [Presentation]

Yes. And here, in this slide, you can also see the digitalization index, which is 50%, and then we'll explain somewhat later what exactly it means. But before that, I would like to cover and another important aspect because digital transformation definitely is about how we communicate with our customers. And here, I would like also to show to you what we will look like in the next 3 years in mobile. And our 4 formats will have their own apps, which will incorporate the services, including delivery services. And separately, there will be Okolo aggregator, which we are going to announce in detail in the very near time. Speaking more about them digitalization index. Definitely, when we were thinking about digital transformation, we were thinking about the growth. Now we can calculate the level of digitalization for each of the function and business through unique methodology. And what's even more important, we can set ourselves goals and the digitalization goals are a part of the KPI. 39 is where we are now, 50 is where we need to get. And this is how we get that RUB 20 billion of effect for our EBITDA that we expect in our strategy. Those were 2 key priorities, but there is also something about caring for the community and social goals.

Thank you, Vladimir. In December 2019, the X5 Supervisory Board approved the ESG's long-term sustainable development strategy and specific goals that are set until 2023, that you can see in this slide, they are included in the new X5 strategy. I'd like to stress that the ESG programs as well as the [indiscernible] investments are integrated into the strategic programs of our business development. And we would like to show to you a video that reflects the progress made over the past year in key areas of sustainable development of X5. [Presentation]

And now I would like to give the floor to Svetlana Demyashkevich to speak about our financial results as well as our forecast.

Thank you, Igor. You know what, I was listening to you, and I was recalling London last year. And great. Unfortunately, today, we're not going to have any of that, but we still wanted you to feel our drive, energy, our warmth, which is also reflected in our new strategy. And through the presentation, I would like to start with a brief overview of the markets we operate in. And the Russian grocery retail market still has significant headroom for development and consolidation potential, especially for major players like X5. And we expect that this market will come to RUB 16.7 trillion in 2020 in The turnover and X5 base going to remain the largest food retailer in Russia by revenue and market share. And according to our estimates, X5 market share is 13%. At the beginning of the year, it was 11.5%. We were surprised by this, and we have grown by 1.5% and the market remains highly fragmented. Today, the market share of the top 5 players is about 29%. Well, that of the top 10 players is only 33%. In 50%, 60% of cases when new stores are replacing smaller ones. And we see that in 50%, 60% of the cases, we are taking over the premises of smaller retailers. In addition to retaining a leading position in the moderately growing offline retail segment, X5 is also building a presence in the fast-growing segment of online food. We estimate that in 2020, the turnover of the Russian online food retail will reach approximately RUB 145 billion, up from RUB 43 billion in 2019. Since April 2020, X5 has been a leader in this segment, showing a 320% year-on-year growth in total online sales, which is 270 -- 67x higher than the growth rate on the offline market. Further on, I'll share our view on the development of the market segments. Offline retail will remain to be a dominant market segment in the coming years. We agree with the assessment of info online agency, according to which by 2023, the offline food and retail market will grow by approximately 20%. And we believe there will be a quite rapid development and growth for hard discounters. And as Vladimir told you, we have already launched our pilot here. We also realized that the penetration level of more retail chains will continue to trail. And by 2023, the penetration will make up some 80%, now it's 76%. And by 2023, the retail market will grow by approximately 20%. In online, by 2023, the growth will make up 4x and online retail market will reach RUB 600 billion mark. And Express Delivery will grow the fastest along with online hypermarkets. Now I'm going to quickly speak about macroeconomic trends. We have been working in Russia for 25 years now, and we -- just 3 macro things that's something that should not stand in the way of our work. But if you look at the 2020/2021 picture. I think it will be quite a positive scenario given we saw it -- how we saw it in March/April. Well, the appreciation of dollar is not impacting us much. We understand that the inflation rate into the food market, we have now both 3% and 4%, is positive to us. It provides us some flexibility in pricing and it does not affect the customer profits. But in terms of customer incomes, there will be some decline in those growth. And that decline will be addressed probably next year. And major Russian companies expect that nominal wages and salaries will grow by 6%, 7%. And as for the 2021 outlook, there remains uncertainty about the future dynamics of the main trend in 2020, in which HORECA and restrictive measures approximate the pandemic effect of the performance of food retailers, we see stagnation risk in the food retail market in 2021. But according to our baseline scenario, the market will grow at a rate of food inflation, which could reach 3% to 8% -- 3% to 4%. Before discussing our performance and our forecast to 2021, I would like to draw your attention to the dynamics of X5's share price over the last few years as compared to the dynamics of the Russian stock and consumer sector securities market. As you can see here, over the past few years, our total shareholder term has drove much more than the average rates for both the domestic markets in general and the retail sector in particular. So no, we think that a return of 91% in dollar terms is quite impressive. And we'd like to thank who assisted us in achieving those -- that performance. We believe that the trend will continue and as we implement the strategy until 2023, we are confident that we will produce same dynamics as far as the shareholder return is concerned. I will move now to an overview of our key results for the 9 months of 2020. The company's revenue grew by 14.6%. Executing the plan for this year, driven by strong market demand in the neighborhood store format and our continued efforts to expand our retail space, comparable sales increased by -- like-for-like increased by 6 -- 5.6% despite a 5.5% decline in the comparable traffic. And despite the competition, the growth of comparable like-for-like X5 sales remain high with 6.9% growth in Q3 while comparable basket growth contributed 8.8% the last quarter's result. And comparable traffic growth maintained a slight negative trend of minus 1.8%. But we managed to maintain same kind of relation with our supporters and promo. EBITDA for 9 months of 2020 totaled RUB 112.5 billion, up 20% year-on-year. EBITDA margin was up 35 basic points year-on-year to nearly 8%, driven by higher gross margin and low-cost share as a percentage of revenue. We expect that our digital transformation projects, as well as efficiency improvement projects will add to the positive EBITDA. Vladimir spoke of cumulative effects of the task mission. But I will say that even now, we are getting some revenues of RUB 8 billion and such project specialists continues to that. Put together, it helped us to increase our market capitalization up 45% year-over-year. And as I said, we are confident that the indicator will grove further. A number of slides now which will make you more comfortable in terms of our plans for the future, in terms of how we going to maintain our margins and return on equity. Here is the dynamics of the revenues breakdown. Now you can see that the Pyaterochka, the most profitable format, the share is growing. Now the least profitable formats of the markets is shrinking. We have taken a decision on the transformation of Karusel. New formats perekrestok.ru profits by 5Post will produce positive EBITDA in the next year according to our plans. Now I'm going to tell you how we are going to open new stores and what our OIC we may have here. Here, we think we will have return on investment in -- which will be not less than 30%. Well, the benchmark for us is 19%. It is true about both Pyaterochka and Perekrestok and no matter where they are located in the capital or in the regions. Another half of the stores which were open of last year now allocated at the distance of 500 meters from each other in average. But we still hope that they will produce positive results. Despite some traffic cannibalization, we see some better dynamics, better productivity. And we always see a greater density of sales, and it makes up for the cannibalization of the stores located at a distance of 500 meters. And the breakeven time for those new stores are not changed. It's 4, 5 months for Pyaterochka and 6 -- 4 months for Perekrestok supermarkets. Here in the graph, you can see another important indicator. And it's stores and clinic. Those are the stores which underperformed in terms of EBITDA, and we are making -- taking measures to restore the situation. This share of such stores is continuing to become less. It's also important to say that there is a relationship between a greater market and greater presence in the regions, and the yields and the returns of the regions. Well, in those regions, with our presence above 10%, we can see better, both better margin, but better EBITDA, return on capital, only 17 percentage points of municipalities, where we have more than 25%, and which work -- and we see restrictions on the part of the Federal Antitrust Agency. In Moscow, the share was 14% to 15%. So a lot can be. There is a great room to grow and to reach 25%. Our dynamic is that we make -- we add another percent year-on-year. Here is the CapEx structure -- breakdown over the past 9 months. The total CapEx has grown 12% year-over-year. And the renovation and upgrade of stores is the greatest share. So 50% of our CapEx spent for new stores to open; 11% for renovation, maintenance; and only 7% is spent on IT, despite the fact that we invest heavily in EBITDA and online businesses. IT expenses breakdown shows us that RUB 4 billion were invested into big projects on digital room to grow and to reach 25%. Our dynamic is that we make -- we add another percent year-on-year. Here is the CapEx structure breakdown over the past 9 months. The total CapEx have grown -- has grown 12% year-over-year, and the renovation and upgrade of stores is the greatest share. So 50% of CapEx spent for new stores to open, 11% for renovation and maintenance, and only 7% is spent on IT despite the fact that we invest heavily in EBITDA and online businesses. IT expansion breakdown shows us about that RUB 4 billion were invested into the projects on digital transformation. And the return rate is 143% is much higher than the -- if compared with other projects of high performance. In conclusion, I'd like to dwell on the current performance and our plans for the remaining months of 2020 and for 2021. In October, we continue showing quite high growth of the revenues, 13.8% like-for-like, 5.5% growth. And trading up with that is still here. Average basket is growing. And also the online services share is growing quite fast. Now it's 0.8% in terms of revenue. Our outlook for 2021. Of course, we are already accustomed to be operating in a very rapidly changing situation. And we expect that next year, we will show same rate of new stores and upgrades line on the best formats and concepts we have now. We can maintain and even increase the rate of margins and the return on capital margin, and our expectations remain the same. We -- our gearing remains in place to play -- pay quite liberal dividends. Last year, we paid RUB 30 billion in dividends. We think that we can increase this amount by at least 1.5x this year. So the midterm financial goals are planned together with the strategy. What is important for us here? First of all, we fully realize that we show -- we have been showing very good growth, and we expect to be in excess of 10% annual rate. We can very well maintain and then will increase our EBITDA margin, and we are going to maintain and then exceed the 7% level. At the same time, we are evolving as a digital company. We're investing heavily in new businesses on a smart basis. And we are doing that with not impacting our main businesses, our core business. We keep on paying liberal dividends, and we are going to increase the amount of dividends both in ruble and dollar terms. And it will be supported by our free operating cash flow. That brings me to the end of my presentation, and thank you very much for your patience. Now it's Q&A time. Thank you, Igor. Thank you, Vladimir. And now it's Q&A time.

To moderate the Q&A session, given the fact that we have a lot of participants, [ Yury ] will assist me in that. I will start with the first question, which is addressed to Igor, I think. It has to do with the growth strategy. So what factors will be the drivers of the further growth of business in the next 3 to 5 years with due regard to the slowdown in the retail spaces?

Thank you very much for this question. As was pointed out here, by 2023, the goal is to have not less than 15% of the Russian food retail market. We believe the objective is quite feasible. And given -- by recognizing 29, we think that our share could be not less than 20%. It can be achieved through the organic growth through greater density of sales and with the help of new formats. Express delivery is a digital service, but it may be used as a service to new customers. And Pyaterochka-based delivery service shows us that 50% of the customers are new customers. So aggregate capability will also be our new factor. And [ X5Post ] service will also be a new attractant of new customers. As for the growth factors, Svetlana has already told us about that, and the rate will be not less than 10% of growth on an annual basis. Like-for-like growth is to be continuous. And thanks to the Pyaterochka, Perekrestok dynamics, we have every opportunity to achieve that. And Vlad and Sergey is going to speak of some more concepts development later on. And we expect we'll have great opportunities because of the consolidation of the sector. And we will see how least efficient players will lead the market.

Svetlana, you have said a lot about your dividend policy. But still, what's the outlook for 2020 dividends given the strong performance this year? Will you give us more details?

You can see that we are above the target in that in terms of margin, in terms of returns. And it's true that the amount of debt-to-EBITDA ratio is in the range of 1.5x. In our case, we try to target an indicator of 1.8x to 2x. Now there's 1.5x, so we have a lot of room for maneuver. And I will expect -- our outlook is the amount of dividends will increase and they'll exceed the amount of the last year by 1.5x.

Vlad, question to you. Can we estimate the impact on business from our own operations and those of competitors?

Of course. It's a good question. And the digital infrastructure has been built in order to impact positively on our core business. And we see how fast the environment is changing. And the systemic digital companies appear in the market with a range of services. And actually, we are going to join the race. So our target is to meet the customer at the beginning of its journey and accompany our customer all through the journey. And the ultimate objective is not only to retain the existing customers inside our boundaries but to attract more, to attract new. And all our services are aimed at enhancing our core businesses. And we expect a positive effect, and the development of digital businesses provides us positive dynamics with that.

Thank you, Vladimir. And the next question probably is for you, Igor. It's about the KPIs. It's about short-term and long-term goals. And we said that we are going to declare -- announce them in March next year. But what are they as to your metrics now and what they will be for the next year?

Let's speak about the LTI, which is expiring at the end of this year. It is leadership in revenue and in the multiple, and we have 2 triggers. Now when -- for the net debt to EBITDA, the program is going to be approved by the Advisory Board, but the multiple will remain one of the key metrics for the new LTI. And on top of that, there will also be the ESG metric. And there will be yet another one. And so in December, we will have the same triggers, that is EBITDA and net debt to EBITDA. As to STI for this year, the short-term incentive program includes the financial and nonfinancial metrics. 50% are financial. And for example, that includes ROI, and this is important for investors. And one of the nonfinancial ones is NPS. And like-for-like is also one of the metrics for our short-term incentive program.

Thank you, Vladimir. Probably the next question is to you about the hard discounters. The colleagues are asking, what do you think about the cannibalization that is possible between Chizhik and Pyaterochka? And what do you think about the price differentiation, what could be the price differentiation between the formats?

Yes, thank you for the question, colleagues. And we showed in our presentation in a separate slide very clearly how we differentiate our hard discounter, Chizhik. Now we can give it a name, how it is different from Pyaterochka and Perekrestok. And this is going to be the best price offering. As to cannibalization, colleagues, here the answer is quite simple. Currently, the customers go on average to 5, 6 stores. Especially in metropolitan cities, most of the time, they cover the different stores. And by covering a larger segment base, we are covering a larger customer base, too. And so Chizhik should increase the client base of X5.

Thank you, Vladimir. Svetlana, the next question is to you. It is about COVID. What is the volume of additional expenses for the company that it had to incur starting from the beginning of the year? And what do you expect until the end of the year around COVID?

We believe it is around RUB 4 billion. Primarily, it was for the PPE devices, the masks and the gloves that are used in the stores, DCs and offices as well as disinfection and additional security. And this is what we started spending money on in March. And we will continue doing this until the end of the year. And this is our priority to ensure our guests' safety. And as you can see from the overall results, the overall effect of COVID this year is positive despite the expenses we have.

And probably, the question is to Vladimir and probably also to Igor. Since there are constraints because of the pandemic, Perekrestok and Pyaterochka, since they are broadly present and they have express delivery, they were able to attract a lot of new customers. What are the chances to turn those new customers into loyal customers and to retain them?

I could start, and Vladimir could continue. I believe that we have very good chances. And we see from the numbers that the new clients that we saw in spring and in express delivery, we saw a lot of new clients. They stayed with us and become our loyal customers because they like the [ simplicity ] of our existing formats. They like the concepts -- the new concepts of Perekrestok and Pyaterochka. And our task is to retain them within our perimeter. And the implementation of our strategy will enable us to provide all the necessary services to our clients. Probably Vladimir could add something here.

And I believe the CEO was able to cover this. Because they offer the service that is very relevant, 80% of those who've tried the service out stayed with us. And most of the people who joined us during the pandemic are staying with us.

Okay. Thank you. Svetlana, there are 2 questions to you. You have covered it a lot, but probably you have to repeat it on what are the results for October. Probably somebody missed it. And also, what factors drives the higher sales density in the regions where we have a higher market share? I don't know which is the chicken, which is the egg. Probably you could provide more color on that.

Okay. Probably I could cover that in more detail. So the results for October, so the turnover increased 13.1; revenue, 13.8; like-for-like, 3.5%. And as this was done primarily towards the increase in the basket, we still see trading up, and the shelf inflation is 3.8%. We also see people coming to us from the HoReCa segment. And we believe that this trend will continue into the rest of the year. And the growth in online, we see acceleration there as we see that the share of our online services already stands at [ north of 8% ]. There was also the question on why in the regions where our share is more than 10%, now how can we show higher margins and higher return on capital. And so this is the scales effect. We can calculate it. It is about more optimal logistics until one says the store base increases, until we grow to more than 10% in the region. It's also about high productivity of our personnel. All of those things are measurable. And we do understand also that in the regions where we have been present for a longer time, we have more experienced teams who have a better knowledge of their local guests. And they can better encounter -- or accommodate the needs of the local guests. This drives the sales in those regions.

Than you, Svetlana. And the next question is to both Vladimir and Svetlana because Vladimir started speaking of that and Svetlana then continued. The RUB 20 billion that you are planning to add to your EBITDA from the digital initiatives, what will drive that?

This will be the total effect that we will get from the projects of digital transformation that are currently implemented. I will just quote a few of those, and they were mentioned in our presentation. They include a different approach to pricing. And right now, on 90% of the pricing is done by an algorithm, not a person. It is also about shaping the assortment of a store, which includes the preferences and expectations of the customers. And the second is the financial effects we get from certain products, then the significant automation of our stores. And today, Igor, the CEO, [ rolled out ] self-service cash registers. And now they do 25% of order checkouts, which means the store employees can work more with the shelves, with the customers, and this creates a positive effect. All of these projects are part of a single digital program for X5. And this is the effect we expect to see. And for many projects within the digital transformation program, the effect is even more ambitious, but RUB 20 billion is the figure that we are to confirm based on the pilot. I'm going to speak more about the Feedback project. It will be covered further by the heads of the formats. We get positive feedback from our customers and respond faster to their needs as well as changes in the assortment, which drives sales from a square meter and also improving commercial margin. You can see it in the numbers.

And if I could add a few financial metrics here, as I said before as the return on investments for the digital transformation project, it's 43%. As you remember, the stores generate around 30%, and the minimum for us is 19% in ROI. And how do we make sure that they are so profitable? We have the system for measuring those effects. And when the project gets financing, we have very clearly set material success and particular metrics to follow those effects. Then we run the pilots, about which we agree at the start during which period, in which region and which stores. Then we measure the effect. And this is done independently by big data and risks teams. Then we confirm that we see the effect, and then only they become part of the budget. When we are talking about investments in CapEx, you can see increased investments. And 80% of those investments are for the internal automation, which improves these processes. It's about optimizing our base processes. And this is a goldmine. And this is about how we can make our processes more and more efficient. And mere 20% are investments into our new online businesses. In total, those are not future months, but the impact of the market is huge. Starting from April, we have been #1 in e-grocery in Russia, although the total investments are not so high. Speaking about the prospects, we see huge potential in the project that we are currently doing, that this is customer value management we do at both Pyaterochka and Perekrestok. As a result of this project, we can communicate individually with our customers if we're doing massive promo campaigns. And now we will be able to decrease the share of promo campaigns and communicate with our customers individually. And it should drive both the commercial launch and EBITDA.

Thank you very much, Svetlana, Vladimir, Igor. Igor, probably, again, the question is to you. Based on the results of 2020, what adjustments were made to the strategy of the company?

The trends that we saw in the Russian market, they are related to the changes in our customer priorities and preferences. And the pandemic showed that the customers focus on healthy lifestyles and security. It's about the recession. And we understand that the price is becoming the main and very important factor for our customers. It's the explosive growth in digital channel. And this was driven by the pandemic. And I'm happy that last year, we created the right platform for the fast growth of express delivery. All of this is the base of our strategy.

And as to the next question, now we have partially touched upon that. Svetlana, probably you could cover that, the CapEx for 2021, 2023 or probably just what you said within your presentation.

I believe that we are going to invest in the areas where we see the effect. We do that cautiously, and I would say that we are doing this in a well-thought manner. And we see opportunities in renovating our stores, the market consolidation. We see the payback from the new concept of the stores. And the like-for-like is up to 10% in the new concept of Pyaterochka. And the NPS is also high. We are going to continue investing in these areas, but we believe that CapEx definitely is not going to outgrow our revenue. And we do understand how we can manage this increase in CapEx at the beginning of the year when the situation changed or we were able to undertake measures to roll in the CapEx. And this is why we can pay higher dividends for this year.

Thank you very much colleagues. And I suggest that we stick to the plan. Let's have the last question in this round of Q&A. Svetlana, probably again a question to you. How does the company distribute the capital? Are you looking at the possible increase of dividends payout by 50%? Do you view it as a sustainable trend?

We believe that midterm every year, we are going to see the higher absolute amount of dividends, both in rubles and in dollars. We are going to give the debt to EBITDA under 2x. And we see already now that with the growth of our businesses and the improvement of the structure in terms of profitability for our business, we are definitely going to see more opportunities for the free operating cash flow, which will enable us to pay more dividends.

Chizhik is creating a lot of questions, Vladimir. Probably, you can add some granularity here. People are asking you whether those Chizhik stores are going to be close to Pyaterochka. Which towns, states, regions you are considering before the beginning, whether they are the high discounters in Russia? And how are we going to reposition against those?

I will try to answer some of the questions because there are a lot of questions asked. So what I need to say, I will start with the last question. Are there any other high discounters in Russia? Yes, but we believe that none of them is the model that we will use Chizhik because Chizhik is, on the one hand, the store for lower prices; on the other hand, it is about the high share of private label of a very decent quality. So here, you cannot compare us to the other place who are using the promo motto, offering different products at lower product -- prices. But nevertheless, I'd like to repeat that the core of the value proposition will be an attractive price. As to is the geographic footprint during this year, the stores will be launched in Moscow and the nearby areas around Moscow, New Moscow or Moscow region. Then next year, we are planning to go to a few regions. So far, I'm not going to give you the details because it is still under discussion. But when we discuss the development of this chain, we believe that it is quite logical for them to have federal coverage. It can be a big one comparable to our current formats. And in case there is a successful pilot and fine-tuning the model, this is the way to go.

And then now Vladimir has already said that next year, we are planning to open 45 pilot Chizhik stores. And at the end of next year, we'll have the whole understanding of the model and how we will roll it this out starting from 2022. We also expect relatively small CapEx for our openings, and the OpEx will be rather low too, which in terms of return on capital will make this model quite attractive. As to the private label, the strategy we are going to use in Chizhik is that the quality of our private lag is -- each of the categories will be in line with the branded products, and the price will be 50% lower.

And the last question probably is for our CEO. What is the status of the hypermarket transformation program. We are speaking much about the new format, but we are still also transforming one of those formats. Thank you very much for the question.

Thank you very much for the question. For this year, 74 hypermarkets have -- Karusel hypermarkets were transformed and converted to Perekrestok, 7 were closed, and 1 was sold out. And we're going to maintain our operating management of those hypermarkets until 2022. And further on, the Management Board and us are going to make a final decision.

With that, I would like to thank the speakers of the first part of the Investor Day. It's not the end, and rather, it will be a 15-minute break. So we will reconvene at 5:55, in 15 minutes, in other words. [Break]

So again, we're back on air after a short break. So the second part of the presentations, which I'm confident are going to be not less interesting than before. And Pyaterochka, Perekrestok business unit [ brought 5 of those heads ]. Those are going to make their presentations. We start with the head of the Pyaterochka chain. He's Sergey Goncharov. Sergey, the floor is yours.

Good afternoon, ladies and gentlemen. It's my pleasure to tell you about the successes and plans of the [ unit ]. A year ago, we presented you with the renewed CVP, and we achieved success in every element of that. The priority, which is the systemic -- continued systemic improvements in our stores, which are known to every customer are well then underway. The logistics chain streamlining is also our priority. They are parts of the true priority, which is to win the confidence and the trust of our guests, to be a company they can rely on. The sales and margins indicators will be the monetization of the trust. How can we win the trust through the continuous systemic improvements? Well, our staff, our employees must be confident that they are employed by the best employers. The convenience, proximity of stores are better suited to the current situation compared with traditional formats. Pyaterochka, some customers was -- with average income, it was avoided by a number of customers even following the recent upgrade. It was not trusted. However during the lockdown, for many people, visit to our store became the only option to go out. A lot of new customers were attracted by Pyaterochka, and they saw that Pyaterochka is a good store. And it's not because of trading down, it's because, well, it's already changed repositioning of its status. 14,000 stores of Pyaterochka received thousands of accounts of shoppers. In more than 1,100 of such stores, we have bakeries, which is a new concept. And both teenager and adult feel comfortable in such stores no matter what income they have. Now I'd like to turn to the outstanding performance which we have achieved over the past several years. Pyaterochka is the biggest federal chain in terms of revenues in a food retail segment. More and more Russians like our stores. Over the past 2 years, the trust has risen 9%. Now it is on the all-time high. The launch of the goods rating through an application helped us to improve our feedback, and 6 million people -- or 6 million responses we have every month. Earlier, an employee was a source of a problem and an opportunity to reduce costs. Now our employees are front-office workers. And following the upgrades, the ancillary rooms in stores were improved. We have streamlined our policy in enrolling -- hiring people. And politeness is on the rise. The turnover, the rotation of the staff has reduced 2x. Labor productivity rose 8%. Advantage, an international consultant company, estimated us as the third and the top 3 major retail chains in Russia. Pyaterochka is responsible for 80% of all the consolidated sales in X5 Group and the main driver of profitability and growth in the company. Like-for-like over 8 months made up 6.9%. There is high dynamics in a very hard environment because of the pandemic. The overall situation with the food retail dropped by 9% compared with the last year. Now the Pyaterochka format has advantages compared with other formats, but we keep on introducing some advantage, some innovations. Over the past 2 years [indiscernible], we have improved Pyaterochka's position against every of 10 priority criteria, which we have outlined and defined while making up our value proposition. On the slide, you can see that specifically, it's true about 3 indicators. Online accessibility, and because of that launch of the express delivery, online delivery, we supported our shoppers during the pandemic. And that's something that we're going to capitalize on. Politeness is number two. And I think that we have achieved great results here. And quality and freshness is another criteria where we are among the leaders. On the slide, you can see also the indicator of the reduction and shrinkage. We have neared to the best retail chains in those centers, and we maintain our high position in terms of price versus quality. Now consumers recognize that the Pyaterochka chain is the leaders in terms of the care of the community. We are promoting our value initiatives. The pandemic for Pyaterochka was a challenge. Now we are confident that we made use of the situation in order to strengthen our leadership. According to the BCG together with Romir, Pyaterochka was recognized the best brand by customers in the times of the first wave of the pandemic not only among local brands but among the international majors such as KFC, McDonald's, Sberbank. Since the time when the program of upgrade was launched, Pyaterochka opened about 300 new stores and upgraded and refurbished about 591. So it's not only the changes in the current stores, rather it's -- the aim was to improve the customer experience. And now we can see that NPS here in new concept is 1.5x higher than in the previous format. We can also see based on the loyalty cards that a new concept of Pyaterochka is more attractive for younger people. And the share of under 25 of age people make up some 13%. Like-for-like rates of growth is in excess of 10% following the refurbishment. EBITDA in new concept is also higher than that of the past of all the stores, and CapEx is nearly the same. We keep on introducing changes in order to reduce CapEx but not at the expense of the current concept. And also, we are trying to improve the customer experience through some different methods. And the concept is something that is going to be improved on a number of -- in a number of ways. It depends on the region specificity, locality of a store, customer requirements. And visually, our guests will see the same attractive appearances of a new brand. We are very happy with the performance of the new concept stores. More new stores are going to open, and the refurbishment will also follow that new format. And besides, we can say with confidence that those stores are among the world leaders. In [ Filyovskaya ] Street, the store is on the top 30 stores of its kind in the world. And so it's not a domestic but international recognition. This slide tells us what we do in order to ensure the long-term leadership of Pyaterochka in terms of convenience. We are improving the convenience both in stores but also through the application. We have managed to reduce the time of waiting in lines by 26% year-over-year. And our guests really would like to take advantage of all those capabilities. According to the estimate, the increase in traffic made up some 70% through the quicker cash registration. The pilot pickup points provide for additional services as precheck. And stores with pickup points have a higher traffic by 2% to 4%. And the new concept of Pyaterochka is -- the follow-up of the convenience store concept will continue expanding the service geography based on the existing chain. And we will open more stores in the regions where we see demand. We will reduce the time of servicing, reduce the lead time through the streamlining of all the processes both in-store and on delivery. You may ask me how many people, how many resources we need in order to cover all the gaps in delivery. In Moscow, in 155 stores, we provide services for all families living in Moscow. And it's very encouraging that 60% of users of express delivery are not among our loyal customers. And this is -- they are new, unique guests who can later turn into our loyal customers. For loyal customers, it's a common thing to visit our stores. And it's not because of lack of cannibalization. Since the time we launched the format, we saw some 130,000 new customers using the service. In Chelyabinsk, who became city #13 of our presence, we saw those processes. Speaking of feedback, I would emphasize the X5 mobile application, 23 million downloads, 6 million monthly users. And we are learning how to hear and listen to our customers. We work in social media. We analyze feedback. We come across, we cover all the responses. And that helps us to identify bottlenecks, problems and compare ourselves with competitors. Speaking of the convenient food assortment, the share of ready-to-eat products has grown 10x. And we try to offer those products at affordable prices. We keep pace together with the leading producers and also take advantage of our own kitchen. And we make plans to provide the bulk of all the products from the kitchen. Bakeries, coffee machines are installed in many of our stores. I would like to -- you to see a short video on the feedback. [Presentation]

So freshness and quality. To ensure both freshness and quality, I want to tell you about the initiatives that we launched in the past 18 months. The global experience shows that the level of freshness is one of the decision-making factors when the customers choose a store. And if the customers are happy with the freshness of the products, they spend 25% more on fresh products, and they come to the store 9% more often. And we are targeting the share of the customers who believe that Pyaterochka sells fresh and high-quality products from 31% in 2020 to 55% in 2023. We are scaling up the freshness project. And starting from the beginning of the project, we were able to improve the perception of freshness by 14 points. All of our processes, from buying from the supplier to storing and delivery, should exclude any loss in freshness. And we are actively developing the private label, and we expect that the share of our private label will come to 18% in 2020. And our plan is to increase it further to 28% in 2023. And right now, we are talking to the suppliers to improve the quality and the variety of the products that are offered for private label. The rating of the private label is defined by the buyers. Now every guest can select it themselves, so what will be on shelves of their store. And the key projects for private label are digital, the life cycle of the product and the portal of the suppliers, the feedback, the rating of the product as well as quality assurance, tasting kitchen as the depository of the samples of the products as well as introducing the processes for regular quality assurance. Caring for the community, and this is the key pillar of our CVP. We are developing social and charitable programs. And we ensure, as a sense of security in our stores, making sure that after people visit our stores, they feel better primarily through increasing the friendliness of our employees. And Pyaterochka is the biggest retailer in Russia, at the same time, is trying to become low cost. And we have 2 tasks: caring for each and every customer and caring about the community. And the chain is working on the initiatives in 3 areas: supporting local communities; second, promoting health and lifestyle; and three, rational consumption of resources promotion. And the key initiatives include the Basket of Kindness. The guests of Pyaterochka can buy the products and give them to those who need them. This year alone, we have handed over 100 tonnes of products. Then the Safety Island. Over the past year, we were able to help out 500 people and saved the lives of 15 people. We are doing this together with Liza Alert, which this year is turning 10. Promotion healthy lifestyle, it includes expanding healthy assortment, creating health food corners in stores. And the share of products that get into the healthy lifestyle assortments will increase from 6% in 2020 to 2023 -- or to 20% in 2023. To promote rational consumption of resources, we do waste management. And half of our private labels is using the recycled packaging. And now 94% of all the waste goes to recycling. We are still reducing the shrinkage at the loss ratio through better algorithms of planning and replenishing their stocks and also through the freshness project. Pyaterochka is going to further take care of the environment, developing the existing initiatives and offering the new ones. It might seem strange to ensure low prices. It might seem strange to you. And -- but we really see that the satisfaction of our guests is not reached by only the attractive price, although prices definitely, especially in these challenging times, are an important factor for our guests. So we implement advanced pricing based on big data, automatic accounting and also automatic accounting for the prices of competitors and purchasing power. We optimize the prices of the products. And so we use a more personalized offerings than from campaigns. And in pricing, one of the key areas is using the algorithms of predictive analytics based on big data, which ensures better precision and objectivity. And the pilot project in 700 stores in Moscow and in the Urals demonstrated the higher margins from -- plus 1%, which is the equivalent of RUB 4 billion with the traffic and turnover. And the key principles for managing pricing include the initiatives like automatic calculation of the pricing, where we start with the guests. We look at the competitive environment and the budget of the family and how much they are ready to spend on food. And the products where the prices are not monitored, we are using other product categories. And we also might adjust the prices sometimes. And prices vary by stores depending on the competition, which competitors are present and the profile of the guests. And promo is still one of the key tools for managing pricing motivation. And we are looking at the strategy for combining massive promo and personalized promo. And we increased the attractiveness of promo for the client. And by 2023, we expect that the promo campaign share will go down below 30%. Our focus is about the accelerated revenue increase in the convenience stores and also supporting the steady profitability. Our strategic priorities are enlisted in this slide. I have already covered them. The key to us definitely is further improvement in the trust level and gaining the loyalty of our guests. But we also focus on innovative solutions based on big data and predictive analytics to improve the quality of our pricing assortment and promo with a positive effect on revenue and total gross profit. Thank you.

Sergey, thank you very much for this contribution. And now we are ready to move on to the presentation of Vladislav Kurbatov, Head of Perekrestok. And he is going to be with us using the video, and he will speak to us about Perekrestok.