Discount Retail Chain My Price (owned by Magnit PJSC, MOEX and LSE: MGNT), one of Russia's leading retailers, showed a 30% uplift in like-for-like sales versus convenience stores that previously occupied the premises. This was announced by Ruslan Ismailov, Magnit's Deputy CEO and Director of Retail Chain Management, during the Company's investor call. The increased sales performance is largely due to the uptick in traffic. Today, Magnit has 76 My Price discounters.
In the last two months, the Company opened 25 pilot stores. According to Ismailov, by the end of the year, Magnit plans to bring the number of discounters up to 200, including 50 completely new stores to be built from the ground up, and will become the largest discounter store operator among the public federal retailers. At this time, the pilot format meets all of the Company's expectations.
All discounters show positive EBITDA and net income after ramp-up. They have higher sales densities compared to convenience stores that previously occupied the premises and significantly lower operational expenses, primarily due to lower personnel costs-an average My Price discounter has 5 employees, compared to 11 people in a convenience store. Discounters also benefit from lower lease costs versus convenience stores, since they require less space and are more flexible in terms of location.
Moreover, Magnit's discounters have a 30%-40% faster stock rotation versus comparable convenience stores, while requiring 40% less capital expenditures compared to the latter, which ensures an attractive return on investment. Magnit plans on continuing to develop the format and believes that it may become a substantial business segment within the Company's ecosystem.
In the nearest future, Magnit will start using a distinct design for its new discounter openings, whereas existing stores mostly utilize a combination of visual elements borrowed from convenience stores. The Company will continue improving the format's assortment, aiming to eliminate similar SKUs within the same price tier and expand the range of non-food items and private labels. In addition to that, Magnit is also preparing to establish separate commercial and operations teams for the discounter format, which is today managed by employees responsible for convenience stores.
Ruslan Ismailov "Over the last few years, we have seen a growing customer demand for a store format that would offer a Magnit's Deputy CEO and basic assortment of affordable products, private Retail Chain labels and high level of service. In our opinion, Price discounters are a perfect fit to capture this demand. Given the scale of our business, including our own production capabilities, Magnit is best positioned to build a truly competitive format that may potentially become a substantial segment of our business. Today, we work on improving the CVP and continue expanding the pilot, with the final decision on roll-out coming sometime next year."
Magnit began piloting My Price discounters in July 2020. This format is aimed at price-sensitive consumers. The stores have a total area of 150-250 square meters and carry a range of around 2,000 articles, with 65% of the assortment belonging to the lower price segments, and 20% represented by Magnit's private labels. The focus is on fast-moving consumer goods in value packs: vegetables, fruits, dry foods, dairy products, meat gastronomy, poultry, preserved foods, confections, baby food, drinks, pet food, household chemicals, etc. The discounters follow simple zoning principles and have only a basic equipment setup. This, however, does not affect the level of customer service, which remains high and meets all the requirements to a modern store.