Russia's O'Key sells supermarket business to X5

MOSCOW, Dec 15 (Reuters) - Russian food retailer O’Key Group said on Friday it had reached an agreement to sell its supermarket business to X5 Retail Group and would focus on developing compact hypermarkets and low-cost neighbourhood stores.

O’Key’s supermarket business consists of 32 supermarkets, of which five are in or near Moscow, 19 in St Petersburg and the region, and the rest in the southern and central regions.

The sale would allow the company to focus on “efficiency improvement at compact city hypermarkets and accelerating the expansion of our discounters,” O’Key said.

O’Key has underperformed rivals as a drop in oil prices and Western sanctions over Moscow’s role in Ukraine led to the rouble weakening, hitting consumers’ disposable incomes.

Its like-for-like net retail sales were down 1.8 percent in the first nine months of 2017.

X5, Russia’s biggest food retailer by sales, said the acquisition would strengthen its Perekrestok supermarkets business which comprised 584 stores as of Sept. 30.

The deal has already been approved by Russia’s anti-monopoly service, O’Key said. (Reporting by Maria Kiselyova; editing by Jason Neely)