WRAPUP 1-Russian grocer sales growth slacken in Q2

* Budget chain Magnit saw sales growth slow, traffic down

* Sales at up-market Seventh Continent underperformed peers

* Traffic at Seventh Continent recovers after price cuts

* X5 shakes up Perekryostok management on traffic drop

By Maria Kiselyova

MOSCOW, July 14 (Reuters) - Russia's food retail sector saw the downward trend in trading deepen in the second quarter of 2009 as a budget grocer reporting slowing sales growth and a Moscow supermarket chain underperformed it low-price peers.

Russia this year entered its first recession in a decade, with retail sales falling for the fourth consecutive month in May as the crisis hit incomes and consumer sentiment.

Analysts have said that some of the world's biggest retailers, such as Wal-Mart, (WMT.N) will reconsider expanding into Russia weigh as they weigh the negative consequences against the appeal of relative asset price weakness.

The downward trend in trading is particularly pronounced in Russia's provinces, where the bulk of manufacturing is concentrated and a 17 percent decline in industrial production has hit hardest.

Grocery store chain Magnit (MGNTq.L), which operates shops in Russia's industrial southern and northeastern regions, said on Tuesday that its first-half net retail revenue rose 33.4 percent but monthly sales growth had continued to slow. [nLE533698]

Rival X5 (PJPq.L) last week reported a 46 percent revenue growth for the second quarter but said like-for-like sales growth slowed from the previous quarter. [nLA351395].

UBS said that Magnit's discount chain underperformed X5's budget neighbourhood stores -- which saw sales rise 35 percent

-- due to Magnit's higher exposure to small regional towns. -- due to Magnit's higher exposure to small regional towns.

"X5 operates in larger cities than Magnit ... Magnit's smaller towns were hit harder by the downturn and people might opt to shop less frequently," UBS analysts said.

Magnit was largely expected to take on customers defecting from higher-price chains, but the latest figures suggested that the positive effect of the crisis on traffic in Magnit stores may have come to an end, said analysts at Rye, Man and Gor Securities.