Press-Release | Krasnodar | July 21, 2020
Magnit Starts Piloting Discounters
The Company has launched the first three stores under the new format to assess its performance and decide on potential full-scale roll-out. Magnit's discounter concept implies a store with an area of up to 300 sq. m operating in a predominantly residential area and offering a high-demand assortment of around 1,800 SKUs with a strong focus on private labels and low regular prices.
Кrasnodar, July 21, 2020: Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers, continues to pilot additional store formats to cover the maximum number of the most relevant shopping missions. The discounter concept is aimed at price-sensitive consumers who frequently make minor purchases of traditional goods or stock up on products.
The three pilot stores were opened in Samara, Kamyshin in Volgograd region and Staraya Kulatka village in Ulyanovsk region, replacing three convenience stores in the locations that fit the new concept. The newly "reformatted" outlets have a comparatively limited assortment of around 1,800 high-demand SKUs with a dominant share of the entry price segment (around 65% of total assortment), private labels (around 18% of total assortment), and value packs: fruits, vegetables, dry foods, dairy, confections, baby food, drinks, pet food, household chemicals, and others.
The format will follow "EDLP" ("everyday low price") policy providing its customers low regular prices even without any promotions. The new stores aim to have the best customer attractiveness within a particular catchment area in terms of pricing, exhibiting all characteristics of a discounter. In addition to that, they follow fairly simple zoning principles and have only a basic equipment setup. At the same time, customer service remains at high level and meets all the requirements of a modern affordable store.
The concept of the format implies an optimized staffing level compared to the convenience stores, and will require significantly less capital expenditures for opening, including investments into repairs and refurbishment. As part of the pilot that will last for several months, Magnit plans to closely examine customer feedback with regard to the assortment and service. If the results are positive, the Company will then plan to fine-tune the CVP for the format and decide on potential roll-out.
"As we have seen over the last years, there is a growing customer demand for the convenience concept with limited assortment of quality private labels and entry price articles at low regular prices. Here, discounters are a perfect fit in order to satisfy the basic needs for fast-moving consumer goods. I believe, given our competitive strengths, including own production capabilities, Magnit is the best positioned to capture this customer demand, while achieving acceptable returns on investments"- said Ruslan Ismailov, Magnit Deputy CEO and Retail Chain Director.
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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 March 31, 2020, Magnit operated 38 distribution centres and 20,860 stores (14,594 convenience, 472 supermarkets and 5,794 drogerie stores) in 3,718 cities and towns throughout 7 federal regions of the Russian Federation.
In accordance with the audited IFRS results for FY 2019, Magnit had revenues of RUB 1,369 billion and an EBITDA of RUB 147 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.