Magnet Intends to Sell Off Large Supermarkets, Leaving Only Smaller Shops Operational
Tired of dealing with big-box retail, Magnit - Russia's second-largest retailer - is eyeing the sale of their hypermarkets. According to Kommersant, this decision aligns with Magnit's focus on smaller-format stores, which have been thriving in recent years [1].
Insiders have tipped that Magnit may completely cut ties with all large-format stores - including both hypermarkets and supermarkets - keeping only "neighborhood" stores and small outlets up to 100 sq.m. [1]
At present, the network comprises 251 "Magnit Extra" hypermarkets and 195 "Magnit Semyeiny" supermarkets with a combined area of 922,600 sq.m. - a minuscule share of Magnit's total 30,000 stores. The estimated value of these large-format objects amounts to approximately 100 billion rubles, according to NF Group partner Stanislav Bibik [1].
With retailers finding it increasingly tough to maintain foot traffic in large shopping centers as buyers flock to online purchases, Magnit has already decommissioned more than 40 large stores within the past 1.5 years [1]. This trend may see a further slowdown in the growth rate of the hypermarket segment, with a predicted 2 percentage point decrease this year [1].
Amid the shakeup, Lenta, another significant supermarket chain in Russia, is rumored to be the potential buyer for Magnit's hypermarkets [1]. Despite the slowdown in the growth rate of the entire segment, Lenta has showcased competence in managing hypermarkets [1]. According to Alexei Vanchugov, managing partner of "Vanchugov and Partners", acquiring Magnit's hypermarkets could provide customers with a broader selection [1].
It's worth noting that both networks hold sizable shares among Russian retailers and are engaged in portfolio diversification. In May, Magnit (founded by Sergei Galitsky and currently owned by the Marathon Group) announced the acquisition of 81.55% of LLC "Gorodskoy Supermarket", which runs the "Azbuka Vkusa" network [1]. Meanwhile, "Severgroup" of Alexei Mordashov (owning "Lenta") was among the candidates aiming to purchase premium supermarkets [1].
Hot rumors suggest that "Severgroup" structures may soon pick up a stake in the Obi network of the "Sindika" group, as reported by DK.RU.
Meanwhile, Magnit has disposed of its agribusiness "Moscow on the Don", known for growing beets, cabbage, potatoes, and carrots in open fields [1]. Magnit representatives have revealed that the corporation intends to concentrate on developing more reliable greenhouse farming, and will purchase "soup set" vegetables from external agricultural producers under agri-contracts [1].
Implications for the Russian Retail Market:
- Market Shakeup: If Lenta acquires Magnit's hypermarkets, the Russian retail landscape may experience significant shakeups, with Lenta augmenting its market presence without incurring fresh construction costs.
- Market Share Remodel: Such a deal could impact the market holdings of both Magnit and Lenta. Magnit currently takes a 13.2% share of the Russian retail market, while acquiring these hypermarkets might strengthen Lenta's clout.
- Financial Projections: The sale and potential acquisition have stirred stock movements, with Lenta's shares shooting up by as much as 5% following the news, hinting at investor enthusiasm about the prospective deal [1].
Current Market Landscape:
Retailers in Russia in general and Magnit and Lenta in particular are adjusting to changing consumer tastes and market situations. The tilt towards smaller-format stores is part of a bigger trend worldwide where convenience and efficiency are top priorities for consumers [1].
As for Magnit's departing hypermarkets, all eyes are on Lenta to see if they can stomach the challenge and if the deal will go ahead. Only time will tell if this is the start of a new era in the Russian retail market.
[1] Various sources from the enrichment data.
In the ever-evolving Russian retail market, Magnit's decision to sell their hypermarkets aligns with a shift towards smaller-format stores, mirroring global trends that prioritize convenience and efficiency [1]. As Magnit considers divesting all large-format stores, there is speculation that other players in the industry, such as Lenta, may take advantage of the opportunity to broaden their selection and strengthen their market presence [1]. This potential acquisition could potentially result in a significant reshaping of the market shares among major retailers, with potential financial implications for both companies and the broader finance sector [1].
