MAGNIT PJSC (MGNT)
MAGNIT PJSC: Magnit Reports 10.5% Sales Growth in 3Q 2019
29-Oct-2019 / 10:00 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Magnit Reports 10.5% Sales Growth in 3Q 2019
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Krasnodar, Russia (29 October, 2019): Magnit PJSC (MOEX and LSE: MGNT; the
Company), one of Russia's leading retailers, announces its 3Q 2019 operating
and unaudited financial results.
3Q 2019 key operating and financial highlights:
- Total revenue increased by 10.5% to RUB 342.6 billion.
- Net retail sales reached RUB 333.0 billion representing 9.1% growth YoY.
- Wholesale revenue increased by 97.8% to RUB 9.6 billion primarily driven
by distribution of pharmaceutical products.
- LFL[1] sales growth stood at -0.7% on 2.8% average ticket growth and
3.4% traffic decline.
- The Company opened 613 stores[2] on net basis (276 convenience stores, 1
supermarket and 336 drogerie stores). Total store base as of September 30,
2019 reached 20,497 stores.
- Addition of selling space amounted to 207 thousand sq. m. (or 17.2%
growth YoY).
- The Company redesigned 424 convenience stores and 214 drogerie stores.
As of September 30, 2019 the share of refurbished and new stores reached
67% and 48% respectively.
- Gross Profit[3] stood at RUB 76.6 billion with margin of 22.4%. The
impact of the inventory sell-off held in July-August on gross margin was
144 bps. Adjusted for this one-off factor, gross margin was 23.8% - 31 bps
higher YoY due to better commercial terms.
- EBITDA was RUB 19.8 billion with 5.8% margin down 124 bps YoY on passive
inventory sell-off, LTI provisions and operating expense partially offset
by improvements in commercial terms.
- Net income decreased by 57.3% YoY and stood at RUB 3.3 billion. Net
income margin decreased by 151 bps YoY to 0.9%.
Jan Dunning, President and CEO of Magnit, commented:
"I see clear signs of improvement in our business. Our convenience and
drogerie formats continue to show positive LFL Sales. LFL Traffic, although
still negative, is recovering with LFL Basket continuing its positive trend.
In the third quarter we took a strategic decision to sell more than half of
our passive matrix stock. It had a one-off negative effect on our EBITDA
margin and LFL Sales but allowed us to clear up crucial space for our new
assortment, a key component of our CVP. During the reporting period we
achieved significant assortment improvements, launched the category
management function and raised availability. These developments have not yet
been evident in the LFL numbers but I am looking to the coming quarters with
growing confidence."
Key events in 3Q and after the reported period:
- In 3Q Magnit sold more than half (RUB 16.7 billion) of its passive
matrix inventory, effecting EBITDA margin 144 bps and LFL sales 117 bps.
EBITDA margin adjusted[4] pre sell-off was 7.4% and LFL Sales 0.49%.
- During 3Q 2019 Magnit appointed two members to its senior leadership
team: Anna Bobrova as its HR Director and Andrey Bodrov as its Chief
Investment Officer.
- Analytical Credit Rating Agency (ACRA) assigned credit rating AA (RU) to
PJSC "Magnit" and its securities. The rating outlook is Stable.
- Magnit started to roll-out its unique multi-format loyalty program
across Russia after the successful launch in three pilot regions in 2Q
2019. As of today, the Company has over 6 million active card users. In
the pilot regions the share of tickets with the use of the loyalty card
was 46% with penetration in sales reaching 64%.
- Magnit launched a confectionary factory in its Industrial Park Krasnodar
- Konditer Kubani - the largest confectionary enterprise in the South of
Russia.
- Magnit started to pilot its new store format - Magnit Vecherniy (Magnit
Evening) offering wide range of liquor and low-alcoholic beverages and
Private Label products.
- In September Magnit opened a revamped Cash&Carry store with the updated
pricing model and new services for customers.
- Magnit launched its fruit and vegetables private label - Magnit
Freshness. Most of the SKUs are produced by Magnit greenhouses located in
the South of Russia.
- Exchange-traded bonds in a value of RUB 10 billion with an interest rate
of 6.9% per annum and 2.5-year duration will be placed on MoEx on November
5th, 2019.
FY 2019 Guidance Update
Previous New
Number of store openings, net
Convenience stores 1,500 1,200
Drogerie stores 1,200 1,200
Pharmacies 2,000 1,200
Number of redesigns 2,000 2,300
EBITDA margin Sustainable vs FY 2018 6.5%
CAPEX, RUB billion 70-75 70-75
Operating results for 3Q 2019
3Q 2018 3Q 2019 Change Change, %
Total net retail sales, million 305,249 332,965 27,716 9.1%
RUB
Convenience stores 229,682 254,239 24,556 10.7%
Supermarkets 52,142 49,263 -2,880 -5.5%
Drogerie Stores 23,276 28,719 5,442 23.4%
Other formats 148 745 596 401.7%
Number of Stores (EOP) 17,392 20,497 3,105 17.9%
Convenience stores 12,813 14,507 1,694 13.2%
Supermarkets 457 467 10 2.2%
Drogerie Stores 4,122 5,523 1,401 34.0%
New Store Openings (NET) 482 613 131 27.2%
Convenience stores 310 276 -34 -11.0%
Supermarkets 0 1 1 n/a
Drogerie Stores 172 336 164 95.3%
Total Selling Space (EOP), th. 6,092 7,143 1,051 17.2%
sq. m.
Convenience stores 4,205 4,900 695 16.5%
Supermarkets 931 941 10 1.0%
Drogerie Stores 954 1,280 325 34.1%
New Selling Space, th. sq. m. 148 207 59 40.2%
Convenience stores 112 123 10 9.2%
Supermarkets -2 2 3 -179.5%
Drogerie Stores 37 72 35 93.6%
Number of tickets, million 1,137 1,217 80 7.0%
Convenience stores 960 1,028 68 7.1%
Supermarkets 102 96 -6 -6.0%
Drogerie Stores 73 90 16 22.0%
Average ticket[5], RUB 269 274 5 1.9%
Convenience stores 239 247 8 3.4%
Supermarkets 509 512 3 0.5%
Drogerie Stores 317 321 4 1.1%
Operating results for 9M 2019
9M 2018 9M 2019 Change Change, %
Total net retail sales, million 889,994 975,976 85,982 9.7%
RUB
Convenience stores 673,330 750,016 76,686 11.4%
Supermarkets 151,209 146,262 -4,947 -3.3%
Drogerie Stores 65,049 78,477 13,428 20.6%
Other formats 407 1,222 815 200.3%
Number of Stores (EOP) 17,392 20,497 3,105 17.9%
Convenience stores 12,813 14,507 1,694 13.2%
Supermarkets 457 467 10 2.2%
Drogerie Stores 4,122 5,523 1,401 34.0%
New Store Openings (NET) 1,094 2,149 1,055 96.4%
Convenience stores 688 1,080 392 57.0%
Supermarkets 6 0 -6 -100.0%
Drogerie Stores 400 1,069 669 167.3%
Total Selling Space (EOP), th. 6,092 7,143 1,051 17.2%
sq. m.
Convenience stores 4,205 4,900 695 16.5%
Supermarkets 931 941 10 1.0%
Drogerie Stores 954 1,280 325 34.1%
New Selling Space, th. sq. m. 337 718 381 113.0%
Convenience stores 247 456 209 84.8%
Supermarkets 1 -1 -2 -305.2%
Drogerie Stores 90 244 154 171.2%
Number of tickets, million 3,257 3,472 215 6.6%
Convenience stores 2,755 2,940 185 6.7%
Supermarkets 295 284 -11 -3.6%
Drogerie Stores 206 243 37 17.9%
Average ticket[6], RUB 273 281 8 2.9%
Convenience stores 244 255 11 4.4%
Supermarkets 513 515 2 0.4%
Drogerie Stores 315 323 7 2.3%
LFL results
3Q 2019
LFL composition, % Average Ticket Traffic Sales
Total 2.8% -3.4% -0.7%
Convenience stores 3.6% -3.4% 0.1%
Supermarkets 1.6% -7.4% -6.0%
Drogerie Stores 2.1% 1.6% 3.7%
9M 2019
LFL composition, % Average Ticket Traffic Sales
Total 3.7% -3.0% 0.5%
Convenience stores 4.4% -3.0% 1.3%
Supermarkets 1.6% -5.8% -4.3%
Drogerie Stores 3.2% 0.4% 3.6%
Total net retail sales for the 3Q 2019 was RUB 333.0 billion or 9.1% growth
YoY (10.1% growth YoY including VAT) driven by a combination of selling
space growth of 17.2% and negative LFL sales growth of 0.7%.
LFL sales growth declined from 1.7% in 2Q 2019 to -0.7% in 3Q 2019 on the
back of (1) abnormally cold weather, (2) decelerating inflation, (3)
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