Russia's X5 sees '08 gross sales at $10 billion

MOSCOW (Reuters) - Russia's top food retailer, X5 Retail Group (PJPq.L), expects gross sales to reach $10 billion this year despite double-digit inflation as consumers flock to discount stores, its chief executive said on Tuesday.

"I think gross sales will be more than $10 billion including Karusel on a pro-forma basis," Lev Khasis said in an interview at the second Reuters Russia Investment Summit.

The forecast implies a 40 percent year-on-year increase in gross sales -- sales before deducting value-added tax -- on a pro-forma basis. X5 bought Karusel in May 2008 for $940 million.

"Net sales are likely to be slightly lower that $10 billion," Khasis said at the event, held at the Reuters office in Moscow.

X5, controlled by billionaire Mikhail Fridman's Alfa Group, earlier said it expected full-year 2008 net sales to grow more than 40 percent, including Karusel's performance for the whole of 2008, on a pro-forma basis excluding forex gains.

Khasis also said he expected the Russian food retail market to reach $300 billion-$350 billion in the next several years if it keeps growing at the current pace.

"The market can grow this year by between 10 percent and 15 percent. I think that a $300 billion level can be reached in five years," he said.

X5 currently has a 3.5 percent share of the Russian food retail market, despite being undisputed market leader in revenues, as the market is very fragmented.

"We think that in Russia a market leader should target a 15-20 percent market share. We will do all we can to achieve that," Khasis said.

X5 was created through a merger between the Pyaterochka discount chain and the Perekrestok supermarket chain in May 2006. In 2007, revenues at X5 rose 53 percent to $5.32 billion.

(Reporting by Maria Kiselyova, Maria Plis, Guy Faulconbridge and Melissa Akin; Editing by Jason Neely)