OREANDA-NEWS. August 21, 2009. After posting a 6.5% YoY decline in June, Russian retail trade sank a further 8.2% YoY in July, which is its deepest drop in the past ten years, Rosstat reported. Russian retail trade continued to increase in nominal terms, and added 1.9% YoY, reported the press-centre of OTKRITIE FC.

The contraction in retail sales is primarily attributable to wage cuts, rising unemployment and higher rates of savings. According to the country’s Deposit Insurance Agency, Russians put 17% of their income into savings accounts last quarter, compared with 8.7% in the first three months of the this year.

View: From our standpoint, the July retail trade statistics are quite poor, and we believe that the situation could degenerate further in the next couple of months. We believe that the retail trade data is a signal that LfL-sales growth of retail companies might be deteriorating.

Action: We advise investors to pay close attention to our top pick in the sector, FIVE LI, which still offers attractive valuation, trading at an average 25-30% discount to EM peers.