Magnit

Earnings Release • Jan 10, 2014

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OJSC MAGNIT - Magnit December/12M 2013 Results

PR Newswire

London, January 10

Press-releaseKrasnodarJanuary 10, 2014OJSC "Magnit" Announces 29.22% Retail Sales Growth in Rubles for 2013[1]Krasnodar, January 10, 2014: OJSC "Magnit", Russia's largestretailer (the "Company"; MICEX and LSE: MGNT) announces 29.22% retail salesgrowth in rubles for 2013.During December 2013 the Company opened (net) 173 stores. The totalstore base reached 8,093 stores (7,200 convenience stores, 161 hypermarkets,46 "Magnit Family" stores and 686 cosmetics stores).Preliminary consolidated unaudited net retail revenue (excl. VAT)in 12M 2013 increased by 29.22% in ruble terms (compared to 12M 2012) andstood at 579,528.48 million rubles.Magnit Sales Growth guidance for 2013 (28-29%) has been achievedwith full-year actual Sales Growth of 29.22%.For the month of December 2013, please note the following reasonsfor the slowdown year-to-year in the monthly Sales Growth rate:1. A decline of consumer activity of households which was reflectedin the slowdown of the average ticket growth rates in December 2013 y-o-y. Wesee a clear trend of customers refocusing towards products in lower pricesegments. This trend is representative of all product categories and socialconsumer groups. Nonetheless, it is important to note that there is no abrupttransition from the expensive to the cheap but the changes are of a smoothnature and as a rule one level lower in price category.2. A slowdown in sales growth rates for convenience stores, whichbegan on December 20th. The slowdown was due to the following factors:A. The growth in the number of large formats now operating inRussia. In the last year there were a massive number of openings, whichresulted in a transition of consumer preferences in favor of Hypermarkets andShopping Centers during the period of the New Year holidays. This fact can beseen by the growth of sales for Magnit's hypermarkets in the above-listedperiod. This trend is consumer preferences is traditional for food retailglobally and has become noticeable in Russia in 2013, in particular.B. Abnormally warm weather in the second half of December in theEuropean part of Russia (8 degrees Celsius warmer on average) resulted inhigher activity for open markets and grocery fairs compared to the previousyears.We assume that the future New Year's sales growth rate forconvenience stores should not exceed 15-17%.Magnit is pleased by the sales and efficiency results achieved in2013. Please note that on January 27th, 2014 Magnit will publish a pressrelease with its unaudited full-year "management accounts" results.[1] According to management accountsDecember 2013 Key Operating and Financial Highlights: December 2013 December 2012 Growth RateNumber of opened stores, NET 173 407 n/a convenience stores 140 293 n/a hypermarkets 9 13 n/a magnit family 12 3 n/a cosmetics stores 12 98 n/aTotal number of stores 8,093 6,884 n/a convenience stores 7,200 6,046 n/a hypermarkets 161 126 n/a magnit family 46 20 n/a cosmetics stores 686 692 n/aSelling space growth, thousand sq.m. 77.51 156.68 n/a convenience stores 38.90 89.38 n/a hypermarkets 22.82 39.13 n/a magnit family 13.24 4.00 n/a cosmetics stores 2.55 24.17 n/aSelling space, eop, thousand sq. m. 3,011.38 2,549.26 18.13% convenience stores 2,312.20 1,977.46 16.93% hypermarkets 482.88 387.62 24.58% magnit family 53.26 24.36 118.67% cosmetics stores 163.04 159.83 n/aNumber of customers, million 234.52 196.11 19.59% convenience stores 204.82 175.30 16.84% hypermarkets 20.15 15.35 31.29% magnit family 3.79 1.81 109.64% cosmetics stores 5.76 3.65 n/aNet retail sales, million RUR 63,624.03 51,779.25 22.88% convenience stores 47,132.34 39,895.20 18.14% hypermarkets 13,221.25 10,129.09 30.53% magnit family 1,640.41 732.01 124.10% cosmetics stores 1,630.03 1,022.96 n/aNet retail sales, million US$[2] 1,934.18 1,684.38 14.83% convenience stores 1,432.83 1,297.79 10.41% hypermarkets 401.93 329.50 21.98% magnit family 49.87 23.81 109.43% cosmetics stores 49.55 33.28 n/a[2] Based on the average exchange rate for December 2013 of 32.8945RUB per 1 USD, December 2012 - 30.7408 RUB per 1 USD4Q and 12M 2013 Key Operating and Financial Highlights: 4Q 2013 4Q 2012 Growth Rate 12М 2013 12М 2012 Growth RateNumber of opened stores, NET 447 765 n/a 1,209 1,575 n/a convenience stores 417 523 n/a 1,154 1,040 n/a hypermarkets 13 21 n/a 35 36 n/a magnit family 16 9 n/a 26 17 n/a cosmetics stores 1 212 n/a (6) 482 n/aTotal number of stores 8,093 6,884 n/a 8,093 6,884 n/a convenience stores 7,200 6,046 n/a 7,200 6,046 n/a hypermarkets 161 126 n/a 161 126 n/a magnit family 46 20 n/a 46 20 n/a cosmetics stores 686 692 n/a 686 692 n/aSelling space growth, th. sq.m. 169.99 288.38 n/a 462.12 579.09 n/a convenience stores 116.46 164.03 n/a 334.74 339.63 n/a hypermarkets 34.43 62.93 n/a 95.26 109.17 n/a magnit family 17.83 10.73 n/a 28.91 20.56 n/a cosmetics stores 1.27 50.68 n/a 3.21 109.74 n/aSelling space, eop, th. sq. m. 3,011.38 2,549.26 18.13% 3,011.38 2,549.26 18.13% convenience stores 2,312.20 1,977.46 16.93% 2,312.20 1,977.46 16.93% hypermarkets 482.88 387.62 24.58% 482.88 387.62 24.58% magnit family 53.26 24.36 118.67% 53.26 24.36 118.67% cosmetics stores 163.04 159.83 n/a 163.04 159.83 n/aNumber of customers, million 656.92 549.44 19.56% 2,465.05 2,033.43 21.23% convenience stores 579.17 497.07 16.52% 2,193.87 1,863.62 17.72% hypermarkets 53.45 39.47 35.42% 193.06 137.69 40.21% magnit family 9.57 4.34 120.63% 29.60 8.87 233.84% cosmetics stores 14.73 8.56 n/a 48.52 23.25 n/aNet retail sales, million RUR 162,467.00 129,153.84 25.79% 579,528.48 448,486.20 29.22% convenience stores 123,796.88 102,481.13 20.80% 450,801.48 364,236.40 23.77% hypermarkets 31,180.71 22,881.23 36.27% 106,175.58 75,418.70 40.78% magnit family 3,695.40 1,583.85 133.32% 10,678.07 3,098.58 244.61% cosmetics stores 3,794.01 2,207.63 n/a 11,873.35 5,732.51 n/aNet retail sales, million US$[3] 4,993.85 4,155.97 20.16% 18,196.70 14,424.02 26.16% convenience stores 3,805.22 3,297.68 15.39% 14,154.78 11,714.42 20.83% hypermarkets 958.42 736.28 30.17% 3,333.82 2,425.58 37.44% magnit family 113.59 50.97 122.87% 335.28 99.66 236.44% cosmetics stores 116.62 71.04 n/a 372.81 184.37 n/a[3] Based on the average exchange rate for 4Q 2013 - 32.5334 RUBper 1 USD, 4Q 2012 - 31.0767 RUB per 1 USD, 12M 2013 - 31.8480 RUB per 1 USD,12M 2012 - 31.0930 RUB per 1 USDLFL ResultsLFL growth 4Q 2013 - 4Q 2012[4] Convenience stores Hypermarkets Magnit Family Cosmetics stores TotalAverage ticket (excl. VAT), RUR 4.21% 2.13% 1.77% 4.92% 4.29%Traffic (2.03)% 1.75% (2.78)% 26.69% (1.52)%Revenue, RUR 2.09% 3.92% (1.06)% 32.92% 2.71%LFL growth 12М 2013 - 12М 2012[5] Convenience stores Hypermarkets Magnit Family Cosmetics stores TotalAverage ticket (excl. VAT), RUR 5.35% 2.04% 5.01% 3.72% 5.22%Traffic (1.57)% 2.52% 7.41% 10.54% (1.28)%Revenue, RUR 3.70% 4.61% 12.80% 14.65% 3.88%For further information, please contact:Timothy Post Director, Investor Relations Email: post@gw.tander.ru Office: +7-861-277-4554 x7600 Mobile: +7-961-511-7678 Direct Line: +7-861-277-4562Dina Svishcheva Deputy Director, Investor Relations Email: Chistyak@gw.tander.ru Office: +7-861-277-45-54 x5101 Mobile: +7-961-511-0202 Direct Line: +7-861-277-4562[4] Based on 4,734 convenience stores and 217 cosmetics storeswhich were opened by April 1, 2012, and 90 hypermarkets and 3 Magnit Familywhich were opened by February 1, 2012, i.e. based on the result of theconvenience stores that had been operating for not less than six months andhypermarkets that had been operating for not less than eight months and haveachieved a mature level of sales.[5] Based on 3,487 convenience stores and 18 cosmetics stores whichwere opened by July 1, 2011, and 60 hypermarkets and 1 Magnit Family whichwere opened by May 1, 2011, i.e. based on the result of the convenience storesthat had been operating for not less than six months and hypermarkets that hadbeen operating for not less than eight months and have achieved a mature levelof salesCompany description:Magnit is Russia's largest retailer. Founded in 1994, the companyis headquartered in the southern Russian city of Krasnodar. As of December 31,2013, Magnit operated 22 distribution centers and over 8,000 stores (7,200convenience, 207 hypermarkets, and 686 cosmetics) in more than 1,868 citiesand towns throughout 7 federal regions of the Russian Federation.In accordance with its reviewed IFRS consolidated financialstatements, Magnit had 1H 2013 revenues of $8.7 billion USD and an EBITDA of$890 million USD. Magnit's local shares are traded on the Moscow StockExchange (MICEX: MGNT) and its GDRs on the London Stock Exchange (LSE: MGNT)and it has a credit rating from Standard & Poor's of BB. Measured by marketcapitalization, Magnit is now Europe's 2nd largest food retailer.