Page 128 - RusRPTAug21

profit made from key products like bread, milk, and chicken. The merger should be finalized by August.
Magnit 2Q21 IFRS results review: Better-than-expected revenue, margins in line; positive
Magnit published an expectedly solid set of 2Q21 trading and financial results yesterday, 29 July. The retailer’s revenue growth of c. 9.6% y/y outperformed the consensus forecast, while margins were in line with expectations. We believe the retailer is well positioned to surpass our sales forecast (+8% y/y) and deliver an EBITDA margin of 7.2% for FY21. However, the consolidation of Dixy in 2H21 should give a massive boost to Magnit’s revenue growth and have a somewhat dilutive effect on profitability. We have a BUY on the stock.
Revenue was up 9.6% in 2Q21, 100bps above consensus. The growth in Magnit’s monthly retail revenue expectedly accelerated during 2Q21 from 8.4% in April to 9.3% in May to 9.6% in June. Drogeries showed the fastest growth rate (+14.1% y/y in 2Q21). Convenience stores reported a top-line growth of 9.7% y/y, whereas supermarket revenue was up 3% y/y.
The store rollout gathered pace. Space growth picked up to 6.3% y/y in 2Q21 vs. 4.5% y/y in 1Q21 and 3.6% y/y as of YE20. The retailer opened 444 stores on a net basis in 2Q21 (including 250 convenience stores), marking an acceleration from the 336 and 34 openings reported in 1Q21 and 2Q20, respectively.
Sales per square meter were up 3.5% y/y in 2Q21, on our calculations. This marked a pickup from the 1Q21 pace of 2.2% despite the very strong comparison base (+6.7% y/y in 2Q20).
Strong ticket but poor traffic. The average ticket fell 4.2% y/y in 2Q21, while traffic was up 13.8% y/y. This reflected the abnormal base of 2Q20, when COVID-19-related restrictions caused a sharp drop in the frequency of visits, although this was offset by the significant increase in the average basket size.
LfL sales growth was solely driven by traffic. LfL sales were up 5.2% vs. 4.1% in 1Q21. A 10% growth in traffic offset a 4.4% decline in ticket, a reversal of the pattern seen in 2Q20 during that quarter’s very few store visits and abnormally high basket (ticket growth of 25% and 14% decline in traffic). Magnit’s core convenience format drove the growth, with LfL sales up 5.7%. Supermarkets turned in a 2% growth, which is still an improvement compared to the 0.7% decline in 1Q21.
The gross margin matched our forecast. Magnit’s gross margin was 23.4% in 2Q21, coming in flat q/q and in line with our expectation. The 100bps y/y decline was attributable to the normalized sales mix (with a lower share of dry food), higher promo activity and growing penetration by the loyalty program (65% of sales). This offset the positive effects from the 26bps y/y reduction in shrinkage and the growing share of Magnit’s high-margin cosmetics business.
128 RUSSIA Country Report August 2021 www.intellinews.com