July 23, 2014 / 7:10 AM / in 3 years

UPDATE 2-Russian retailer Magnit raises forecasts, defying economic slowdown

* Now sees 2014 sales rising 26-29 pct vs 22-24 pct before

* Raises core profit margin outlook to 10.6-10.9 pct from 10.5 pct

* Shares jump 5 percent in London (Adds new guidance, updates share price)

MOSCOW, July 23 (Reuters) - Russia’s biggest food retailer Magnit raised its full-year forecasts on Wednesday after it reported strong quarterly earnings, proving resilient to Russia’s slowing economy.

Magnit has been trying to attract customers and expand its stores at the same time as an economic slowdown exacerbated by the Ukraine crisis threatens to choke consumer spending.

Yet the retailer, which has a chain of more than 8,600 neighbourhood stores, is showing little sign of being hit by the slowdown. This is partly because its size gives it the purchasing power to source products more cheaply and offer lower prices than many rivals, and because many of its customers are low-income consumers who only buy what they need, analysts say.

The company raised its 2014 sales growth rate forecast to 26-29 percent in rouble terms, from 22-24 percent previously; and its core profit margin guidance to 10.6-10.9 percent, from 10.5 percent.

Its shares in London were up by 5 percent at 1300 GMT. Its Moscow-traded stock gained 3.5 percent, outperforming the broader market index which was down 0.6 percent.

The food retailer - Russia’s No.1 by both sales and store numbers - raised its guidance after reporting a 34 percent year-on-year rise in second-quarter net profit to $356.3 million. Analysts had forecast $310 million.

Chief Executive Sergei Galitsky, who built the Magnit empire from a single shop in his home city of Krasnodar, gave a one-word comment in the news release announcing the earnings: “Enjoy.”

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 27 percent to $619 million, beating an average forecast of $567.2 million.

The company’s EBITDA margin rose to 11.7 percent from 10.9 percent a year earlier, against consensus analyst forecasts of 10.7 percent.

Store numbers rose 16 percent from the same period last year to 8,618, boosting sales which rose 18 percent to $5.3 billion, or by 31 percent in roubles. Like-for-like sales rose 13 percent. (Reporting by Olga Sichkar and Megan Davies; Writing by Maria Kiselyova; Editing by Pravin Char)

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