Sedmoi Kontinent Profit Expected to Drop

VedomostiShoppers leaving a Sedmoi Kontinent store. The chain is expected to post a 40 percent drop in net income Monday.
Sedmoi Kontinent, the country's fourth-largest publicly traded food retailer, is expected to post a drop in second-quarter profit Monday on costs for store openings and as a year-earlier gain is not repeated.

Net income fell 40 percent to $22 million in April through June from $36.6 million a year earlier, according to the average estimate of four analysts. The company booked a gain on land holdings in the second quarter of 2007 and, excluding that, had a profit of $21 million for the period, according to UBS. Sales rose 36 percent to $412 million in this year's second quarter, the estimate shows.

"The company still remains the slowest growing retail chain" among the country's public food retailers, Mikhail Krasnoperov, an analyst at Troika Dialog with a "hold" rating on the shares, wrote in a note to investors Friday. "The increasing contribution of hypermarkets to overall revenues, alongside regional expansion" hurt profitability, he added.

Sedmoi Kontinent opened 10 outlets in the first half. The company, whose main format is supermarkets, is opening hypermarkets to capitalize on rising incomes outside Russia's largest cities.

Earnings before interest, taxes, depreciation and amortization rose 5 percent to $37 million, the survey shows.

Sedmoi Kontinent's sales growth was hurt by "the company's high exposure to the maturing Moscow market," Mlada Yegikyan, an analyst at Goldman Sachs in Moscow, said in a note Thursday.