Magnit Profits Soar on New Outlets

Magnit, the country's second-largest supermarket chain, said Tuesday that first-half profit climbed 81 percent after expansion in smaller towns.

Net income rose to $38 million in the six months through June from $20.9 million a year earlier, the company said in a statement.
Sales increased 53 percent to $1.64 billion.

Magnit opened 116 outlets in the period, raising the total to 2,009.
The company is adding discount food stores in towns with fewer than 500,000 inhabitants as personal incomes rise outside the country's largest cities.

"We continue working on raising our business efficiency by concentrating efforts on cutting logistics costs, increasing the share of private-label items, and by improving purchasing terms for goods sold," CEO Sergei Galitsky said in the statement.

Earnings before interest, taxes, depreciation and amortization gained 71 percent to $83 million.

Selling, general and administrative expenses almost doubled to $249 million from $153 million.
Expenses as a percentage of sales rose by 1 percentage point to 15 percent. Debt climbed by $207 million to $373 million at the end of June.

"A significant part of capital expenses had to do with the new superstore format development," Galitsky said. "We hope sales at superstores will noticeably affect earnings by the third quarter of 2008."

The retailer has 20 hypermarkets under construction and plans to open at least six stores this year, its web site said.

The company increased selling space by 27 percent in the half to 570,701 square meters. The retailer owns about half of its stores, chief financial officer Alexander Prisyazhnyuk said in the statement.