UPDATE 1-Russia's Magnit cuts prices, margin falls in Q1

Tue Apr 22, 2014 3:31am EDT

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MOSCOW, April 22 (Reuters) - Russia's biggest food retailer, Magnit, said its core profit margin fell in the first quarter compared with a year ago as it cut prices to attract customers to new stores.

The margin on the basis of earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 9.1 percent in the first quarter from 9.3 percent a year ago.

Sergei Galitsky, chief executive of Magnit, said in a statement the margin edged down because the company had started "active price investments" in the middle of the quarter in the new regions of its coverage - Moscow, St Petersburg, the Urals and Western Siberia.

He added, however, that the first-quarter margin was in line with the company's full-year 2014 guidance.

Unlike most big chains, Krasnodar-based Magnit was initially focused on opening its budget stores outside Russia's most wealthy regions, such as Moscow and St Petersburg, and benefited from a lack of competition. In recent years, it has been catching up as it also expanded to Siberia.

The company is trying to draw in customers at the same time as a sharp economic slowdown due to Moscow's involvement in the political crisis in Ukraine is threatening consumer spending.

Magnit also reported on Tuesday a 1.2-percent year-on-year fall in first-quarter net profit to $199.9 million compared with $202.4 million in the first quarter of 2013.

Dollar profit comparisons were eroded by an around 15 percent fall in the rouble against the U.S. dollar, compared with the first quarter of 2013. In rouble terms net profit rose 13.5 percent, year-on-year.

EBITDA increased 6 percent to $425.6 million on the back of an 8.7 percent rise in net sales, which totalled $4.7 billion. (Reporting by Maria Kiselyova; editing by Keiron Henderson)

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