(Recasts with comments on dividends, adds 2018 guidance, details)
MOSCOW, Jan 26 (Reuters) - Russian food retailer Magnit said on Friday it was unlikely to pay dividends in 2018, for the first time in a decade, as it tries to turn around a struggling business in a climate of stiff competition.
Magnit’s discount stores target lower income consumers but it has struggled to win shoppers in the economic downturn, losing ground to its closest rival X5.
Last year, sales at Magnit rose 6.4 percent to 1.1 trillion roubles ($19.7 billion), below its 8-10 percent target, while X5 boosted turnover 25 percent to 1.3 trillion roubles, regaining the top spot among Russian food retailers after losing it to Magnit in 2013.
In the fourth quarter of last year Magnit’s net profit tumbled 42 percent from a year earlier to 7.86 billion roubles, it said on Friday, as tough competition forced it to cut prices.
Its share price fell more than 8 percent after the results.
Like-for-like sales at Magnit fell 3.4 percent in 2017 as traffic dropped 3.2 percent.
The company expects total sales to rise 7-9 percent in 2018, it said in a statement, even though it will likely open fewer new stores.
The new approach, aimed at avoiding opening inefficient stores, meant the company missed out on its own expansion targets for 2017, adding 1,604 convenience stores instead of the planned 2,000 on a net basis, Chief Financial Officer Khachatur Pombukhchan said.
In 2018, Magnit plans to add around 1,500 convenience stores and refurbish 1,200 outlets, and its capital expenditure is likely to decline to 55 billion roubles from around 90 billion roubles in 2017.
Pombukhchan said the company was unlikely to pay dividends in 2018 but would rethink the issue in the second half of the year.
Shares in Magnit were down 8.6 percent by 1456 GMT on the Moscow Exchange at 5,637 roubles.
Magnit said earlier on Friday its fourth-quarter net sales grew 6.2 percent after rising 6.5 percent in the third quarter, while like-for-like sales fell 4.17 percent.
Pombukhchan said the company expected zero like-for-like sales growth in the second half of 2018.
Magnit said its fourth-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) fell 18.9 percent to 22.3 billion roubles.
The firm’s EBITDA margin slid to 7.38 percent in the fourth quarter, from 9.67 percent a year earlier, it said.
X5 reported this week a 23.4 percent jump in fourth-quarter sales and a 3.5 percent increase in like-for-like sales, driven by low-cost Pyaterochka stores. ($1 = 55.9288 roubles) (Reporting by Maria Kiselyova and Olga Sichkar; Editing by Susan Fenton)