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. Last Updated: 07/27/2016

Magnit to Aggressively Expand

MTWomen exiting a Magnit store near Aeroport metro station on Wednesday.��
Regional food retailer Magnit reported better-than-expected 2008 results for net income and revenue on Wednesday, and it pledged to carry its aggressive expansion plan into 2009.

CEO Sergei Galitsky said in a statement that Magnit opened 385 new stores in 2008, bringing its total to 2,579 at the end of the year. The Krasnodar-based discounter said the openings helped it boost profits 93 percent under international financial reporting standards.

"We have ended the year better than the previous, which is logical due to the increased number of stores," he said in a statement. "Next year, we will continue our work to improve the efficiency of our business, keeping in mind the expansion rate."

Magnit, Russia's second-largest grocer after X5 Retail Group, plans to invest 5.6 billion rubles ($165 million) to open 300 stores this year as well as six to nine hypermarkets, Galitsky said later in a conference call.

In 2008, net income rose 93 percent in dollar terms to $187.9 million from $97.4 million, surpassing the market's expectations, Citibank and VTB Capital said in notes Wednesday. Sales increased 45.5 percent to $5.4 billion, from $3.7 billion, and earnings before interest, taxes, depreciation and amortization rose 83.2 percent to $401.7 million.

VTB said Magnit's EBITDA and net income would likely remain in the black this year because of falling costs for rent, utilities and wages.

The company's shares rose as much as 10.1 percent on the MICEX and finished the day up 3.7 percent.

Magnit also stands to benefit from its discount model during the economic crisis, analysts said, as consumers turn to big chains in hopes of better discounts.

"Traffic in the company's stores turned out to be positive in fourth quarter 2008, which supports our view that customers are switching from supermarkets to discounters and hypermarkets," VTB said.

The company has also set aside a "reserve fund" of 1.5 billion rubles ($44 million) to acquire crisis-priced real estate this year, "depending on market conditions," Galitsky said.