Press Release | Krasnodar | September 24, 2020
Magnit expands discounter pilot
Krasnodar, Russia (September 24, 2020): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers, announces the opening of two new stores under the Moya Tsena ["My Price"] banner in Lipetsk and in Nekrasovskaya village in Krasnodar region. By the end of the year, Magnit plans to expand the pilot to 10 stores.
The first three stores in the new experimental format opened their doors in July 2020 in Samara and Kamyshin in Volgograd region and Staraya Kulatka village in Ulyanovsk region. These discounters replaced existing Magnit convenience stores that did not fully meet CVP requirements but fit well for the discounter concept. In three months since the start of the pilot, two discounters-the ones in Staraya Kulatka and Samara-have demonstrated a sales increase of 8% and 5% respectively driven mainly by traffic uplift of 17% and 11% respectively[1]. A lower average ticket compared to a convenience store is due to a narrower assortment predominantly featuring first price products. The third store is currently in the ramp-up stage and is also showing improved performance.
Operating results of the trial stores indicate that in the short time after opening, Moya Tsena discounters have become one of the most visited stores in their catchment areas among various store formats operated by other companies. The key drivers of the growing consumer interest to discounters are highly attractive pricing policy, focus on the most in-demand products, and quality of customer service, as well as unique format features in their location. The biggest impact on sales comes from the dry foods category. The pilot stores demonstrate higher inventory turnover (by 30-40%) and lower shrinkage (by 3.5 p.p. on average compared to results before reformatting).
By the end of 2020, in addition to the five existing stores, Magnit plans to open another five Moya Tsena discounters in different locations, including cities with over 1 million population. The Company will closely monitor customer feedback during next several months of the pilot. If the results are positive, Magnit will finalize CVP for the format and decide on whether to scale it.
Magnit discounter concept implies a store with a selling space of up to 300 sq. m offering limited assortment (around 1,800 items) of primarily of first price products, private labels and economy packs. At the same time, the Company maintains its focus on offering high-quality fresh products demanded by customers. The format policy is based on offering customers everyday low prices ("EDLP") without promotions. The pilot stores follow simple zoning principles and have only basic equipment setup. This, however, does not affect the level of customer service, which remains high and meets all the requirements to a modern affordable store. The concept also implies an optimized staffing level compared to the convenience store, and requires much less capital expenditures for opening.
"The initial performance of our discounters tells us that we're moving in the right direction, and that our new offer is very attractive for the customer. It's too early to speak about the overall efficiency of the format, as three stores is too small of a sample to judge. That's why we're currently looking for suitable locations for new openings based both on our existing stores and in new facilities,"-commented Jan Dunning, Magnit's President and CEO.
For further information, please contact:
Dmitry Kovalenko
Director for Investor Relations
Email: dmitry_kovalenko@magnit.ru
Office: +7 (861) 210-48-80
Dina Chistyak
Director for Investor Relations
Email: dina_chistyak@magnit.ru
Office: +7 (861) 210-9810 x 15101
Media Inquiries
Email: press@magnit.ru
Note to editors:
Public Joint Stock Company "Magnit" is one of Russia's leading retailers. Founded in 1994, the company is headquartered in the southern Russian city of Krasnodar. As of June 30, 2020, Magnit operated 38 distribution centres and 20,894 stores (14,581 convenience, 472 supermarkets and 5,841 drogerie stores) in 3,710 cities and towns throughout 7 federal regions of the Russian Federation.
In accordance with the reviewed IFRS 16 management accounts results for 1H 2020, Magnit had revenues of RUB 763.4 billion and an EBITDA of RUB 86.9 billion. Magnit's local shares are traded on the Moscow Exchange (MOEX: MGNT) and its GDRs on the London Stock Exchange (LSE: MGNT) and it has a credit rating from Standard & Poor's of BB.
Forward-looking statements:
This document contains forward-looking statements that may or may not prove accurate. For example, statements regarding expected sales growth rate and store openings are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to Magnit as of the date of the statement. All written or oral forward-looking statements attributable to Magnit are qualified by this caution. Magnit does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.
