DJ Magnit reports 9.6% total sales growth, 5.2% LFL sales growth and 7.1% EBITDA margin in 2Q 2021
MAGNIT PJSC (MGNT) Magnit reports 9.6% total sales growth, 5.2% LFL sales growth and 7.1% EBITDA margin in 2Q 2021 29-Jul-2021 / 09:59 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 9.6% total sales growth, 5.2% LFL Sales Growth and 7.1% EBITDA margin in 2Q 2021 Krasnodar, Russia (July 29, 2021): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers, announces its 2Q and 1H 2021 operational and unaudited financial results. 2Q 2021 Key Operational and Financial Highlights - Total revenue increased by 9.6% y-o-y to RUB 424.3 billion; 9.6% - Net retail sales reached RUB 413.7 billion increasing 9.1% y-o-y; - LFL[1] sales growth of 5.2% driven by 10.0% traffic growth and 4.4% reduction in average ticket; TOTAL REVENUE growth - The Company opened 519 stores on gross basis (308 convenience stores, one supermarket and 210 drogeries). As part of the Company's ongoing efficiency improvement campaign, 75 stores were closed 5.2% resulting in a net store addition of 444. As of June 30, 2021 the total store base was 22,344; - Selling space increase of 142 thousand sq. m. bringing total selling space to 7,748 thousand sq. m. lfl sales (6.3% y-o-y growth); growth - The Company redesigned 143 stores (131 convenience stores and 12 supermarkets). As at June 30, 2021, 74% of convenience stores, 34% of supermarkets and 59% of drogeries are either new or refurbished; - Gross profit increased by 5.5% y-o-y to RUB 99.5 billion with a margin of 23.4% as a result of better promo margin, lower shrinkage and favorable format mix partially offset by slightly higher supply chain costs and promotional share; 7.1% - EBITDA was RUB 30.3 billion with a 7.1% margin driven by gross margin dynamics and strict cost control; EBITDA margin - Net income of RUB 12.1 billion with a margin of 2.8%. "Despite the strong comparable performance last year we delivered a very good set of results for the « second quarter. Sales growth accelerated across all formats, underpinned by further growth in LFL sales and rapid expansion. I am pleased to see mature stores as a key driver of these improvements. Consumer behavior and shopping patterns are now normalizing. Since June we have seen healthy LFL performances, with positive ticket and traffic development. Magnit continues gaining market share, and our engagement with existing customers is positive, reflected by increased frequency, increased spend per visit and 'trading up' behaviours. In delivering a 7.1% EBITDA margin with sustainable q-o-q improvement we are on track to perform in line with our strategy both this year and beyond, having already made excellent progress as evidenced by Jan Dunning improvements across margin and working capital cycle as well as very comfortable levels of leverage already achieved. Magnit's President and CEO Continuous improvement of sales densities, sustainable margins, better cash generation and flexible financial position allowed us to speed up organic expansion and take advantage of a unique and value-accretive M&A opportunity through the acquisition of Dixy. This is a strategically important transaction for Magnit that dramatically changes our market positioning. Integration of such large business and extraction of synergies will, of course, take time and effort, however, our ambitious long-term targets remain unchanged and may be achieved even a bit earlier". » 50 RUB billion total amount of dividends announced for 2020 Key events in 2Q 2021 and after the Reported Period - Magnit completed its strategic acquisition of the DIXY retail chain comprising 2,477 stores in Russia significantly strengthening competitive positions in the Moscow and St. Petersburg markets; - A new Board of Directors consisting of nine members, including five independent non-executive directors, were elected at the Company's AGM. For the fourth consecutive year Charles Ryan was elected a Chairman of the Board of Directors; - The Board called an EGM with a view to increasing the size of the Board of Directors from 9 to 11 members; - Magnit announced FY 2020 dividends of c. RUB 25 billion or RUB 245.31 per one ordinary share bringing the total dividend payment to RUB 50 billion (RUB 490.62 per ordinary share), which is 61% higher than in the previous year; - Two issues of the exchange-traded bonds in a value of RUB 10 billion each with an interest rate of 7.05% per annum were placed on MoEx. Analytical Credit Rating Agency ACRA assigned credit rating AA (RU) to each bond issue; - Magnit increased its discounter pilot to 76 stores and reported 20-30% LFL sales growth across discounter stores converted from convenience stores; - Magnit continued developing its super app and became the first retailer in Russia to introduce a Credit Broker online service; - Magnit launched its own delivery service from Magnit Cosmetic stores and superstores across numerous regions; - Magnit and Wildberries launched express delivery partnership. 76 hard disounters in operation 2Q and 1H 2021 Operating Results
Retail Sales
2Q 2021 2Q 2020 Change Change, % 1H 2021 1H 2020 Change Change, % Total Net Retail Sales, million RUB 413,693 379,174 34,519 9.1% 801,592 743,959 57,634 7.7% Convenience Stores[2] 324,476 295,796 28,680 9.7% 624,418 575,591 48,827 8.5% Supermarkets[3] 51,513 49,992 1,521 3.0% 101,628 100,955 673 0.7% Drogerie Stores 35,240 30,876 4,365 14.1% 70,252 62,282 7,970 12.8% Other Formats[4] 2,464 2,511 -47 -1.9% 5,295 5,131 163 3.2% Number of Tickets, mln 1,243 1,092 151 13.8% 2,346 2,287 59 2.6% Convenience Stores 1,051 920 132 14.3% 1,974 1,922 52 2.7% Supermarkets 86 78 8 10.0% 164 168 -3 -2.0% Drogerie Stores 99 87 12 14.4% 193 181 12 6.5% Other Formats 7 7 -1 -10.6% 14 16 -1 -9.3% Average Ticket[5], RUB 333 347 -14 -4.2% 342 325 16 5.0% Convenience Stores 309 322 -13 -4.0% 316 300 17 5.6% Supermarkets 602 643 -41 -6.4% 618 602 17 2.8% Drogerie Stores 356 356 -1 -0.2% 364 344 20 5.9% Other Formats 356 326 30 9.2% 357 315 42 13.3% Stores and Selling Space 2Q 2021 2Q 2020 Change Change, % 1H 2021 1H 2020 Change Change, % Number of Stores (EOP) 22,344 20,894 1,450 6.9% 22,344 20,894 1,450 6.9% Convenience Stores 15,348 14,581 767 5.3% 15,348 14,581 767 5.3% Supermarkets 469 472 -3 -0.6% 469 472 -3 -0.6% Drogerie Stores 6,527 5,841 686 11.7% 6,527 5,841 686 11.7% Store Openings (Net) 444 34 410 n/a 780 169 611 361.5% Convenience Stores 250 -13 263 n/a 437 -41 478 n/a Supermarkets -2 0 -2 n/a -1 -1 0 0.0% Drogerie Stores 196 47 149 317.0% 344 211 133 63.0% Total Selling Space (EOP), th. sq.m 7,748 7,290 458 6.3% 7,748 7,290 458 6.3% Convenience Stores 5,275 4,956 320 6.4% 5,275 4,956 320 6.4% Supermarkets 943 944 -1 -0.1% 943 944 -1 -0.1% Drogerie Stores 1,500 1,350 151 11.2% 1,500 1,350 151 11.2% Other formats 30 41 -11 -26.9% 30 41 -11 -26.9% Selling Space Addition (Net), th. sq.m 142 14 129 n/a 252 52 200 n/a Convenience Stores 106 4 102 n/a 186 4 182 n/a Supermarkets -1 -3 3 n/a 1 -5 6 n/a Drogerie Stores 40 11 29 n/a 72 47 25 n/a Other formats -4 2 -5 n/a -8 5 -13 n/a 2Q and 1H 2021 LFL Results 2Q 2021 1H 2021 Average Ticket Traffic Sales Average Ticket Traffic Sales Total -4.4% 10.0% 5.2% 4.7% 0.0% 4.7% Convenience Stores -4.4% 10.5% 5.7% 5.1% 0.2% 5.3%
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DJ Magnit reports 9.6% total sales growth, 5.2% LFL -2-
Supermarkets -6.5% 9.1% 2.0% 2.5% -1.8% 0.7% Drogerie Stores -0.7% 6.2% 5.5% 5.5% -0.6% 4.9% Trading Performance 4.6% Total sales in 2Q 2021 grew by 9.6% y-o-y to RUB 424.3 billion. Net retail sales grew by 9.1% y-o-y, LTM sales driven by a combination of 6.3% selling space growth and 5.2% LFL sales growth. density[6] improvement y-o-y Net retail sales growth continued to outpace selling space growth on further improvement of sales densities. Overall sales densities in 2Q 2021 improved by 1.0% q-o-q and 4.6% y-o-y while in the Company's main convenience store format these improved by 5.9% y-o-y. LFL sales growth accelerated from 4.1% in the previous quarter to 5.2% in 2Q 2021 predominantly driven by the strong performance of mature stores. 107 stores entered LFL in 2Q (including 41 convenience stores, 65 drogeries and 1 supermarket). Only 7% of Magnit's selling space is currently in the 'ramp-up' phase with 93% already matured. 93% In the reported quarter the structure of LFL sales growth has changed compared to five previous consecutive quarters. Strong LFL traffic growth driven by firstly inflow of new unique customers and then of selling by rising visit frequency, became the main contributor. Magnit continued gaining customers from space is traditional retail and other market players. This comparable performance peaked in end-March and started already easing since April, resulting in 10.0% LFL traffic growth vs 9.4% decline in 1Q 2021. matured LFL average ticket decreased by 4.4% due to the strong comparable performance. The only contributor to the reduction in average ticket was a reduction of the average number of items per basket as consumer behavior started normalizing after abnormal patterns and strong forward buying during periods of lockdown. After its peak in February, on-shelf price inflation corrected slightly and stabilised in the second quarter. Ongoing trading up was another positive driver of the ticket growth. These effects were observed in the beginning of the reported quarter with gradual normalization month-on-month, leading to both positive LFL traffic and ticket development in June supported by trading up and healthy inflation. 10.0% A decline in the overall average ticket in April-May was again a result of a strong performance during lfl traffic the prior period, however from June growth returned combined with positive y-o-y growth of customer growth in 2Q visits (see Appendix). 2021 Acceleration of revenue and LFL sales growth versus the previous quarter was delivered despite promotional share as a % of sales remaining flat compared to the previous quarter and was up y-o-y due to weaker comparatives, normalizing shopping patterns and efficient seasonal promotional campaigns supported by favorable weather conditions and the timing of the domestic tourist season. 50 mln During the reported quarter the number of active loyalty card users exceeded 50 million. Company-wide, the share of tickets using the loyalty card was 50% with sales penetration of 65%. The loyalty program of loyalty continues to deliver positive cross-format gains with sustainable growth of customers visiting 2+ store program formats (41% of Magnit customer base at the end of the reporting period). active users Store Network Development and Performance by Format The convenience segment generated 78.4% of total net retail sales in the reported quarter. In 2Q 2021 78.4% Magnit accelerated its expansion program both q-o-q and y-o-y and opened (gross) 308 convenience stores (94 in 2Q 2020). The Company continued its efficiency campaign and closed 58 convenience of total net stores vs 107 store closures in 2Q 2020. As a result, Magnit added 250 stores (net) during the retail sales reported quarter. The selling space growth of convenience stores accelerated to 6.4% y-o-y. Sales in generated by the convenience format grew by 9.7% driven by LFL sales growth of 5.7% and selling space growth of convenience 6.4%. LFL average ticket growth was negative and stood at -4.4% against strong comparatives. LFL segment traffic increased 10.5%, overcompensating negative LFL average ticket growth. Supermarkets generated 12.5% of the Group's net retail sales in the reported quarter. During 2Q 2021 12.5% the Company opened one supermarket and closed three stores. Redesign program is gaining traction with 24 supermarkets being refurbished in 1H 2021 vs 5 in 1H 2020. The pace of redesign in the 2H 2021 is of total net expected to remain intact. Selling space across this format remained almost flat y-o-y. LFL sales retail sales growth reached 2.0% vs -0.7% in the previous quarter, driven by strong LFL traffic recovery to 9.1%. generated by As a result, net retail sales growth of supermarkets improved to 3.0% in the reported quarter. supermarkets The share of drogerie format as a proportion of the total net retail sales increased to 8.5% in the 8.5% reported quarter vs 8.1% a year ago. During 2Q 2021 Magnit opened (net) 196 cosmetics stores and added 40 thousand sq. m. of selling space, delivering a 11.2% y-o-y increase in selling space, the of total net highest across all formats. Driven by this increase in selling space and LFL sales growth of 5.5%, retail sales sales grew 14.1% representing again the strongest performance across all Magnit's store formats. LFL generated by average ticket growth was slightly negative at -0.7% well compensated by 6.2% LFL traffic growth. drogerie During 2Q 2021 Magnit continued its renovation program and redesigned 131 convenience stores and 12 supermarkets resulting in the combined share of refurbished and new stores at: 74% for convenience stores, 34% for supermarkets and 59% for the drogerie format. E-commerce Magnit has been testing e-commerce services since the second half of 2020. The Company currently runs a number of online delivery projects, both independently and in cooperation with partners (express delivery, regular delivery, e-pharma, cosmetics and partnerships). Magnit fulfils around 15,000 orders a day. The run rate for Magnit's online channel stands at RUB 7.6 billion based on the last week of June. 7.6 Average ticket for Magnit's own delivery service is c. RUB 1,200 including VAT which is approx. 3.4 times higher than in the convenience stores (RUB 353 including VAT in 2Q 2021). This is mostly due to RUB billion a larger number of items per basket. annual GMV runrate Magnit's e-commerce services today cover over 2,000 stores in 62 regions and 106 cities, with 61% of the current revenue generated outside Moscow and St. Petersburg. By the end of 2021, the Company plans to have over 4,000 stores across all formats covered by e-commerce services including Magnit's own delivery and partnerships in more than 50 regions across Russia. Financial Results for 2Q and 1H 2021 (IAS 17) RUB mln 2Q 2021 2Q 2020 Change 1H 2021 1H 2020 Change Total Revenue 424,341 387,323 9.6% 822,230 763,361 7.7% Retail 413,693 379,174 9.1% 801,592 743,959 7.7% Wholesale 10,648 8,149 30.7% 20,638 19,403 6.4% Gross Profit 99,501 94,337 5.5% 192,571 179,522 7.3% Gross Margin, % 23.4% 24.4% -91 bps 23.4% 23.5% -10 bps SG&A, % of Sales -20.4% -20.4% -2 bps -20.4% -20.5% 4 bps EBITDA pre LTI[7] 30,600 30,482 0.4% 58,603 53,570 9.4% EBITDA Margin pre LTI, % 7.2% 7.9% -66 bps 7.1% 7.0% 11 bps EBITDA 30,250 30,476 -0.7% 57,928 53,220 8.8% EBITDA Margin, % 7.1% 7.9% -74 bps 7.0% 7.0% 7 bps EBIT 17,739 18,676 -5.0% 34,695 30,137 15.1% EBIT Margin, % 4.2% 4.8% -64 bps 4.2% 3.9% 27 bps Net Finance Costs -2,790 -3,497 -20.2% -5,371 -7,274 -26.2% FX Gain/ (Loss) 634 1,005 -36.9% 444 -824 -153.9% Profit before Tax 15,583 16,185 -3.7% 29,768 22,039 35.1% Taxes -3,509 -3,342 5.0% -6,820 -4,995 36.5% Net Income 12,073 12,843 -6.0% 22,948 17,044 34.6% Net Income Margin, % 2.8% 3.3% -47 bps 2.8% 2.2% 56 bps For 2Q and 1H 2021 financial results in accordance with IFRS 16 - see Appendix 23.4% Gross margin in 2Q 2021 Total revenue in 2Q 2021 increased by 9.6% driven by net retail sales growth by 9.1% and wholesale revenue increase by 30.7%. Wholesale operations accounted for 2.5% of total sales on the back of recovery of HORECA consumption. Gross Profit in 2Q 2021 increased by 5.5% y-o-y to RUB 99.5 billion with a margin of 23.4% as a result of better promotional margin, lower shrinkage and favorable format mix. This was partially offset by slightly higher supply chain costs and higher penetration of Magnit's loyalty program. Format mix positively impacted gross margin, with the share of Magnit's high-margin drogerie business growing to
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