DIXY boosts expenses and ups profits

Russian food retailer DIXY has increased profits despite added costs due to the acquisition and re-branding of the Victoria retail chain and its budget format Kvartal.

The group ended the first 9 months with 850 million roubles net profit compared to net loss of 37 million roubles in the same period last year. The group reported Selling, General & Administrative Expenses (SG&A) increased 60.1% year-on-year. DIXY attributed the largest part of extra costs to “the higher share of expenses in the revenue of the Victoria Group, which is, in its turn, related to the lower rate of revenue growth for the Victoria Group due to the re-branding of all Kvartal stores in the Northwest region.”The company also reports staff salaries have been increased due to social tax increases and indexation in some business units.The retailer says that marketing initiatives contributed to improvement in certain segments. “Optimization of assortment and floor space, re-branding and customer focus with the support from marketing program have led to an 8.0% increase in like-for-like sales for DIXY stores, and to a 10.5% increase in the average sale.”RMG analysts say “The results exceeded forecasts , the consolidated gross margin exceeded our expectations while SG&A was predictably higher q-o-q due to the Victoria integration process, and partially offset the increase in gross margin. However, EBITDA margin was above our forecast and consensus.”