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The decline in the demand for food products and staple goods will be limited.
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Non-food retail is the most affected trade segment.
In the first quarter of 2022, the largest grocery retailers reported positive LFL sales on the back of sustained margins. This is due, among other things, to a surge in retail sales in March in real and nominal terms, which, in the Agency's opinion, was of a short-term nature. Some of the largest companies have already noted a cooling in demand in April, which is most likely to continue in May. While overall demand for food and staple goods has low elasticity, it can be subject to negative adjustment, as it is largely determined by the purchasing power of the population and is directly related to income levels, which are currently on a downward trend. Therefore, until the end of the year, a relatively stable demand for products comprising the minimum consumer basket will remain, while a decrease in demand will be observed in other food retail niches. It is worth noting that a sharp increase in interest rates mostly threatens small companies, most of which finance their working capital with short-term loans.
Liquidity in the industry is primarily determined by the fact that in 2021 the largest companies, in addition to sufficient availability of credit lines, raised medium-term market debt at very low rates, which makes them more competitive in the current situation.
It should be noted that discounter stores demonstrate super-positive performance, and this trend is likely to continue due to a decrease in real disposable incomes of the population in 2022. In general, the credit quality of the industry should remain fairly stable, without a significant deterioration in credit metrics.
In the non-grocery retail trade, the dynamics are multidirectional. In certain segments, Russian companies face a near-zero competition, as previously widely represented foreign brands have left the Russian market; however, the lack of competition may negatively affect consumers in the long term. It should be noted that companies with a built-in production of goods in Asian countries have a significant advantage and do not depend on the withdrawal of foreign brands, but at the same time, their production costs largely depend on the exchange rate and, if it grows significantly, can negatively affect the margins of the business. Retailers of household appliances and consumer electronics are forced to urgently change their supply chains and suppliers (according to various estimates, the growth in logistics costs is in the range of 20–30%). The current strengthening of the ruble makes it possible to cover part of the increased logistics costs, however, a decline in the exchange rate may lead to further price increases and a decrease in the margins of such companies. The operating and financial performance of non-grocery retailers currently appears to be more uncertain and volatile, and the ability to maintain their credit quality is less likely.
Figure 1. Retail trade turnover
Source: Federal Service for State Statistics