Russian retailer X5 Retail Group has reported a fall in margins in the first quarter as it embarked on a promotional offensive to lure in customers.

Russian retailer X5 Retail Group saw its net profit jump by almost a quarter year-on-year in the first three months of 2014.

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However, gross margin dipped from 24.4% in the first quarter of 2013 to 24% this year. X5 pointed to an increase in promotions at its Perekrestok and Karusel stores. Shares in London-listed X5 had fallen almost 3% today.

Last week, larger rival Magnit also reported an erosion in its margins during the first quarter.

X5’s net profit increased 24.7% to RUR2.47bn (US$66.5m) for the first quarter of the year. Operating profit was up 11.8% at RUB5.9bn.

Sales were up 13.9% to RUB144.17bn as a result of space expansion and “the positive performance of maturing stores added over the past two years”. Like-for-like sales were up 6%.

X5 GDRs listed in London were down 2.92% at US$16.65 at 12:57 BST.

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