"Magnit" lagged behind its main competitor

The second largest Russian retailer by turnover, Magnit, published its results for the third quarter of 2019, showing a slowdown in total sales growth and a drop in like-for-like sales and traffic. In terms of the dynamics of both key indicators, Magnit lags behind the leader of Russian retail - X5 Retail Group, which reported last week.

Read also X5's profit fell after abandoning the development of hypermarkets

• Magnit's revenue increased by 10.5%, to 342.6 billion rubles. Growth was slower than in the second quarter (+11.4%).
• Comparable sales for the third quarter decreased by 0.7% and traffic decreased by 3.4%. All store formats, except for cosmetics and household chemicals stores, lost customers, Vedomosti notes .
• Magnit suffered significant losses from promotional sales of out-of-season and stale goods (“passive stock”) amounting to 16.7 billion rubles. “In the third quarter, we made a strategically important decision to sell off more than half of the passive matrix inventory, which had a one-time negative impact on EBITDA margin and LFL sales, but opened the way for a new range to hit the shelves,” explained company CEO Jan Dunning.
• Magnit will slow down its chain growth to focus on restoring sales in operating stores. Initially, it was planned to open 1,500 convenience stores in a year, now only 1,200.
• Magnit's EBITDA decreased by 9%, to 19.78 billion rubles, the profitability of the indicator was 5.8%. This is below analysts' forecasts and competitor's indicators. Magnit's quotes dropped by 1% after the report was released, then grew again.

To learn more. In the summer, Magnit’s general director Olga Naumova announced her resignation, with whose arrival a year ago hopes were pinned for the company’s return to leadership in the Russian market. This caused the retailer's quotes to rise, and we explained why. Excerpts from an interview with Naumova after leaving can be read here .