Russian retailer Dixy reported both its first-quarter sales update and full-year financial results today (26 April) and the picture painted seems to be fairly mixed. Full-year margins came in well below market expectations, and the company’s bottom line took a notable hit. However, the company seems to be off to a better start this year, with like-for-like growth suggesting that it is gaining market share. Katy Askew reports.
Dixy, Russia’s third largest retailer, missed market expectations when it reported its fiscal 2012 results this morning. The company revealed that fourth-quarter net profit was down 14% to RUB271m. This weighed on the full-year result, which saw net profit up just 4.5% – despite a 52% jump in gross profit.
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Dixy was able to drive improved gross margin last year, thanks to better purchasing terms (a consequence of its growing scale and purchasing power). The group has also grown its proportion of higher-margin private label sales and has embarked on a strategy to centralise its back-end operations. All of this has had a positive impact on gross profits.
However, the net figure has been hit by higher SG&A expenses, which rose 0.9 basis points year-on-year to 26% of sales. The company has seen its lease and personnel expenses accelerate as it has opened new stores in order to drive top line growth. As a consequence EBITDA margin slipped to 5.5% in the fourth quarter – down 1.1 bps – and 5.7% for fiscal 2012.
Previously, Dixy had said that it was targeting EBITDA margins of 5.9-6%.
However, the company did have some cause for optimism: Dixy is gaining market share in the Russian retail sector. The group was able to report 5% year-on-year growth in like-for-like revenues in the first quarter, outpacing its larger rivals X5 and Magnit. Significantly, Dixy reported positive traffic trends as well as an increase in basket size.
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By GlobalDataTotal sales were up 21.9% – just shy of the group’s targeted expansion range of 25-28%, but not too shoddy for a quarter that is traditionally one of the slowest for Russian retailers.
Looking to the full-year of 2013, Dixy is guiding towards EBITDA margin of “at least” 7%. As Dixy’s head of investor relations Natalya Belyavskaya told just-food in a recent interview, the company has now turned its attention to expanding sales while keeping a lid on capex. This will be achieved by opening smaller format stores.
If Dixy is able to deliver market-beating sales growth while also boosting margins this year, the group could be moving toward becoming a force to be reckoned with in the Russian grocery sector – which is currently dominated by the two largest players.
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