Krasnodar, Russia (29 October, 2019): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia’s leading retailers, announces its 3Q 2019 operating and unaudited financial results.

3Q 2019 key operating and financial highlights:

Total revenue increased by 10.5% to RUB 342.6 billion.
Net retail sales reached RUB 333.0 billion representing 9.1% growth YoY.
Wholesale revenue increased by 97.8% to RUB 9.6 billion primarily driven by distribution of pharmaceutical products.
LFL¹ sales growth stood at −0.7% on 2.8% average ticket growth and 3.4% traffic decline.
The Company opened 613 stores² on net basis (276 convenience stores, 1 supermarket and 336 drogerie stores). Total store base as of September 30, 2019 reached 20,497 stores.
Addition of selling space amounted to 207 thousand sq. m. (or 17.2% growth YoY).
The Company redesigned 424 convenience stores and 214 drogerie stores. As of September 30, 2019 the share of refurbished and new stores reached 67% and 48% respectively.
Gross Profit³ stood at RUB 76.6 billion with margin of 22.4%. The impact of the inventory sell-off held in July-August on gross margin was 144 bps. Adjusted for this one-off factor, gross margin was 23.8% — 31 bps higher YoY due to better commercial terms.
EBITDA was RUB 19.8 billion with 5.8% margin down 124 bps YoY on passive inventory sell-off, LTI provisions and operating expense partially offset by improvements in commercial terms.
Net income decreased by 57.3% YoY and stood at RUB 3.3 billion. Net income margin decreased by 151 bps YoY to 0.9%.

Jan Dunning, President and CEO of Magnit, commented:

“I see clear signs of improvement in our business. Our convenience and drogerie formats continue to show positive LFL Sales. LFL Traffic, although still negative, is recovering with LFL Basket continuing its positive trend. In the third quarter we took a strategic decision to sell more than half of our passive matrix stock. It had a one-off negative effect on our EBITDA margin and LFL Sales but allowed us to clear up crucial space for our new assortment, a key component of our CVP. During the reporting period we achieved significant assortment improvements, launched the category management function and raised availability. These developments have not yet been evident in the LFL numbers but I am looking to the coming quarters with growing confidence.”

¹ LFL calculation base includes stores, which have been opened for 12 months since its first day of sales. LFL sales growth and average ticket growth are calculated based on sales turnover including VAT.

² The number of stores does not include pharmacies.

³ During 2018 and 1H 2019 the Company extended list of expenses related to cost of sales, including expenses for the processing of goods at distribution centres (payroll, utilities, etc.). The Company applied changes retrospectively and recalculated comparable data for 2018.

Key events in 3Q and after the reported period:

In 3Q Magnit sold more than half (RUB ~16.7 billion) of its passive matrix inventory, effecting EBITDA margin 144 bps and LFL sales 117 bps. EBITDA margin adjusted⁴ pre sell-off was 7.4% and LFL Sales 0.49%.
During 3Q 2019 Magnit appointed two members to its senior leadership team: Anna Bobrova as its HR Director and Andrey Bodrov as its Chief Investment Officer.
Analytical Credit Rating Agency (ACRA) assigned credit rating AA (RU) to PJSC “Magnit” and its securities. The rating outlook is Stable.
Magnit started to roll-out its unique multi-format loyalty program across Russia after the successful launch in three pilot regions in 2Q 2019. As of today, the Company has over 6 million active card users. In the pilot regions the share of tickets with the use of the loyalty card was 46% with penetration in sales reaching 64%.
Magnit launched a confectionary factory in its Industrial Park Krasnodar — Konditer Kubani — the largest confectionary enterprise in the South of Russia.
Magnit started to pilot its new store format — Magnit Vecherniy (Magnit Evening) offering wide range of liquor and low-alcoholic beverages and Private Label products.
In September Magnit opened a revamped Cash&Carry store with the updated pricing model and new services for customers.
Magnit launched its fruit and vegetables private label — Magnit Freshness. Most of the SKUs are produced by Magnit greenhouses located in the South of Russia.
Exchange-traded bonds in a value of RUB 10 billion with an interest rate of 6.9% per annum and 2.5-year duration will be placed on MoEx on November 5^th, 2019.

Magnit reports 10.5% sales growth in 3Q 2019