russians Are Tightening Their Belts, While Retailers Are Seeing Profits Drop

“x5 group”, one of the rf’s largest food retailers, released its interim financial results for the first half of 2026, and the results fell short of russian analysts’ expectations. In the second quarter, the company’s revenue grew by 9.9% year-on-year to $15.25 billion, while net profit plummeted by 28.9%. The chain, which operates more than 30,600 shops under the “pyaterochka,” “perekrestok,” and “chizhik” brands, has faced the same set of challenges that are weighing on the entire russian retail sector.

The slowdown in food inflation is depriving retailers of their usual tool for boosting revenue through pricing, so companies are increasingly resorting to discounts and promotions, which are eroding profit margins. In parallel, a labor shortage is driving up personnel costs: at “x5 group”, they rose by 15.2% to $1.34 billion, while nationwide, wages in the retail sector increased by approximately 24%: specifically, by 39% – for shop assistants, and by 25%. – for cashiers.

Another telling trend is the shift in demand toward cheaper formats: revenue at the “chizhik” discount chain jumped by 29.8% to $1.59 billion, while the flagship “pyaterochka” chain grew by only 7.6% to $11.74 billion. russians are becoming more price-sensitive, and the company has to rely on discounters, even though this format yields lower profitability.

Online sales are growing faster than offline sales, by 25.4%, but here, too, profits are being eroded by expenses: delivery costs rose by 38.2% to $143.7 million, utility bills – by 20.5%, and rent – by 9.1%. Expensive borrowing is adding to the pressure: the company’s net debt rose by 20.2% to $3.67 billion, and high interest rates in russia are increasing the cost of servicing that debt. In response, “x5 group” is cutting back on investments: capital expenditures have fallen to approximately 3.6% of revenue, while the number of new shops has dropped by 39.1%.

Taken together, these trends indicate that the limit to growth for the rf’s retailers is no longer weak demand, but rather a sharp decline in profitability amid high labor costs, expensive capital, and intensifying price competition.