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Retail

Magnit Increases Spending on Land Plots for Stores Amid Crisis

By Steve Wynne-Jones
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Magnit Increases Spending on Land Plots for Stores Amid Crisis

Magnit, Russia’s largest retailer, raised its capital spending budget for this year by 23 per cent as it buys more land to develop stores and capitalize on the country’s economic crisis.

The company will spend 80 billion rubles ($1.5 billion), up from a previously planned 65 billion rubles, Chief Financial Officer Khachatur Pombukhchan said on a conference call Wednesday. The additional spending will be directed toward purchasing land plots and real estate, Pombukhchan said.

Russia’s largest food retailers are adding new stores as their scale enables them to secure better deals with suppliers and keep sales growing amid falling consumption. Magnit said in January it plans to open 1,200 convenience stores, 800 cosmetics stores and 90 hypermarkets, accelerating expansion.

The retailer is “trying to take advantage of the Russian economic slowdown to buy land plots and premises at reduced prices now to lay foundations for future growth,” said Natalya Kolupaeva, an analyst at ZAO Raiffeisenbank in Moscow.

Magnit, based in Krasnodar, southern Russia, reported first-quarter earnings before interest, taxes, depreciation and amortization of 20.4 billion rubles, beating analyst estimates. Revenue rose 33 per cent to 219 billion rubles, while the Ebitda margin widened from a year earlier to 9.3 per cent of sales.

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The company raised its full-year sales growth target to at least 28 percent from 26 percent, billionaire Chief Executive Officer Sergey Galitskiy said on the call. The first-half Ebitda margin will likely be unchanged at 10.5 percent, he said.

Bloomberg News, edited by ESM

 

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