September 26, 2018 / 3:50 PM / in 8 months

Russian retailer Magnit to shun 'big-box' stores

MOSCOW, Sept 26 (Reuters) - Russia’s second-biggest food retailer Magnit said on Wednesday it would not open any more hypermarkets and would focus on smaller stores to capitalise on customers’ growing preference for neighbourhood shops.

Hypermarkets traditionally struggle in an economic downturn as consumers tighten their belts and turn to smaller shops and discounters.

In Russia, retail sales have been hit by a fall in real disposable incomes as the rouble has weakened, forcing retailers to rethink their strategies as well as tackle increasing competition.

Olga Naumova, the chief executive officer of Magnit, said the company would not open stores larger than 4,500 square metres and would turn existing “big boxes” into shopping malls by subletting space.

Magnit only has about seven hypermarkets and its main format is neighbourhood convenience shops.

Ranked second to X5 Retail Group, Magnit confirmed in a presentation plans to open 1,500 convenience stores, 700 cosmetics stores and 20 supermarkets in 2018 and said it would present targets for 2019 in January.

By 2023, the company plans to have 22,800 convenience stores compared with 13,400 this year and aims at growing its market share to 15 percent from the current 9 percent.

Its sales in July-August were up 8.8 percent year on year, compared to growth of 6.5 percent in the second quarter, while like-for-like sales fell 2.1 percent after a 5.2 percent decline in April-June.

Separately, Magnit’s board said it supported negotiations on a possible acquisition of pharmaceutical distributor SIA Group, adding it could be beneficial for the company’s cosmetics and pharmacy business lines.

Reporting by Olga Sichkar and Maria Kiselyova. Editing by Jane Merriman

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