May 25, 2018 / 10:59 AM / a month ago

Russia's Magnit eyes expansion at thousands of post offices: CEO

ST PETERSBURG (Reuters) - Russia’s second-biggest food retailer Magnit (MGNT.MM) plans to expand its reach by opening shops in thousands of Russian Post offices, eyeing efficiency gains from sharing transport infrastructure, Magnit’s chief executive told Reuters.

FILE PHOTO: A woman walks past a grocery store owned by Russian retailer Magnit in Moscow, Russia November 15, 2017. REUTERS/Tatyana Makeyeva/File Photo

Magnit announced plans to cooperate with Russian Post, a state-run postal operator which has 42,000 branches across the country, in February. On Thursday, the company said the first stores would open at the end of June.

CEO Khachatur Pombukhchan said Magnit could potentially open several thousand stores in post offices a year if the pilot project succeeds.

“While we open stores in municipalities with populations of at least 2,000-3,000 people, the Post has branches even where there are less than 500 people,” Pombukhchan said in an interview on the sidelines of the St Petersburg economic forum.

“This gives us the possibility of getting into areas where we would not have gone on our own because it’s not economically viable,” he said.

The trial will run until November when the company will decide on developing the project further. Once expanded, it will also result in sizeable savings on transport costs through the joint use of logistics infrastructure, Pombukhchan said.

“Fundamental investments” in the project will not begin until 2019, he added.

Pombukhchan also said the company would fine-tune its dividend policy to align it with the new strategy the company plans to adopt this summer.

The new dividend policy envisages a payout of at least 40 percent of net profit but dividends could be made contingent on investment and development plans, he said.

Magnit’s stores, which target consumers on lower incomes, have struggled to compete against aggressive discounting by rival X5 (PJPq.L). Last month, the group reported a 3.65 percent fall in like-for-like sales in the first quarter.

Pombukhchan said the management was working hard to deliver on its promise to reverse declines in like-for-like sales by year end.

Reporting by Katya Golubkova; additional reporting by Olga Sichkar; writing by Maria Kiselyova; Editing by Adrian Croft

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