UPDATE 1-Russian food retailer X5's sales growth raises turnaround hopes

Thu Jan 23, 2014 6:17am EST

* Sales growth rose to 11.9 pct in Q4 vs 6.6 pct in Q3

* Last year's sales beat forecasts with a 8.7 pct jump

* Shares gain 5.4 percent (Adds CEO comments, details, context, share price)

MOSCOW, Jan 23 (Reuters) - Russia's No. 2 food retailer X5 Retail Group said promotions, better product selection and marketing drove sales growth at the end of last year, boosting its shares on Thursday on hopes it can sustain the turnaround.

Magnit became sectoral market leader by sales last year after X5 changed its strategy in 2011 to focus on opening new stores, rather than buying existing store chains, and then suffered operational problems as well as increased competition from aggressively expanding rivals.

In October, X5 cut its 2013 sales growth forecast to about 8 percent from 11 percent after growth slowed to 6.6 percent in the third quarter.

In a statement on Thursday, X5 said sales jumped by nearly 12 percent year-on-year in the final quarter of 2013 and rose by 8.7 percent to 532.7 billion roubles ($15.7 billion) in the year overall.

Like-for-like sales rose 3.9 percent year-on-year in the fourth quarter and 0.7 percent in 2013 as a whole.

X5 said it will continue to open new stores and go ahead with a significant refurbishment programme for existing ones in 2014 to speed up recovery. It plans to release 2014 guidance on Feb. 14.

Its London-traded shares rose 5.4 percent to $18.60 by 1057 GMT.

"The fourth quarter provides momentum going into 2014, however with signs that consumer confidence may be ebbing we need to continue executing on many fronts to complete the turnaround in our operations," X5 CEO Stephan DuCharme said.

Magnit, which increased revenue by 29 percent last year to 579.5 billion roubles, said earlier that its sales growth slowed in December as customers chose to buy cheaper products. And the sector's No. 4, O'Key, said its own growth may slow this year and that sales had been declining since last month.

($1 = 33.9392 Russian roubles) (Reporting by Maria Kiselyova; Editing by Louise Ireland)

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