Research Notes

• The company’s leading position on the Russian retail market by the number of active retail outlets. By early March, the retain chain opened 2.219 next-door stores (the format traditional for the company) and five hypermarkets. The management is set to maintain the high pace of new store openings in 2008. This year, Magnit is to open 250 to 300 next-door stores and 16-23 hypermarkets.
• High revenue growth rates, at about 47% a year, and steadily widening profit margins, due to an effective assortment policy and stringent controls over expenses.
• Magnit is actively expanding into regions. The absence of a stiff competition in the regional markets and steady growth in personal incomes in Russian regions may serve as an upside driver for the company’s current stock valuations.
• Steady growth in the real disposable personal incomes and the low level of consolidation in the industry (the top ten retailers now hold just under 12-15% of the entire market) drive growth in the retail sector’s turnover and prop up the financials of major retail operators. According to the Economic Development and Trade Ministry (MERT), the retail turnover sped up by 17% y-o-y in February 2008.

Sergey Filchenkov

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