Magnit invested in price in newer markets

Magnit invested in price in newer markets

Russian retailer Magnit has reported higher first-quarter earnings.

Magnit, which claims to be the country's largest food retailer, booked a 13.5% rise in net income to RUB6.99bn (US$195.8m). EBIT was up 19.6% at RUB10.73bn, the grocer said.

However, there were some signs investment in price had weighed on margins. Gross margins rose year-on-year but Magnit's EBITDA margin dipped from 9.31% to 9.07%.

CEO Sergey Galitskiy said the retailer had invested in new regions and insisted its EBITDA margin met company forecasts.

"In the middle of 1Q 2014, the company started active price investments in the new regions of our geographical coverage: Moscow, Saint-Petersburg, Urals and western Siberia. The company's EBITDA margin in the first quarter is in line with our FY 2014 guidance," Galitskiy said.

Earlier this month, Magnit said its like-for-like sales in the quarter were up over 7%.

Magnit, which has over 8,200 stores, posted a 7.5% increase in like-for-likes. In 2013 as a whole, Magnit saw its like-for-like sales rise 3.9%.

Sales from Magnit's convenience stores - of which it runs over 7,300 - were up 6%. Growth from its hypermarkets and cosmetics stores was higher at 9.2% and 53.5%.

Magnit saw ticket and traffic growth across each of its formats, although its c-stores saw traffic inch up by just 0.6%.

The retailer's net sales were up 25% at RUB163.95bn.