Return on sales of the Russian largest retail chains

Information agency Credinform prepared the ranking of the largest food chains in Russia.

The enterprises, taken for the ranking, are the largest by annual revenues volume in the last available in the Statistical register financial period (2014). They were ranked in descending order of the return on sales values.

Return on sales (%) shows the share of the operational profit in company’s sales result. 

The ratio designates the effectiveness of the industrial and commercial activity and shows the amount of the company’s net profit on sale of RUB 1. In other words, the amount of assets after covering the products cost, payments of interests on credits and tax payments. Return on sales indicator designates the most important activity aspect – sale of basic products. Besides, it makes it possible to estimate the prime cost share in sales. 

Return on sales is an indicator of the company’s price policy and its ability to control the outlays. The differences in the competitive strategies and product ranges generate significant variety of return on sales values in several companies. It is frequently used for the assessment of the company’s operating efficiency. However, the return on sale of the two firms might differ a lot under the equal values of the revenue indicator, operating expenses and profit before tax, due to influence of interest payments volume on the net profit margin.

In order to get the fullest and the fairest picture of the company’s financial situation, it is necessary to pay attention not only to the mean indicator values in the industry, but to all submitted financial indicators and ratios of the company. 

Return on sales of the largest food chains (Top-10) varies from 8,9% (ООО Giperglobus, Globus chain) to -0.7%  (ООО O'key).

The negative return on sales in the O'key chain is an important signal to company’s management. It shows the interest of the manufacture or sales unprofitableness for each invested ruble in the product: the prime cost of products is higher than its sales profit, and the price isn’t high enough to defray all the outlays.  The higher the indicator of the negative return on sales in the absolute relation is, the more the price level diverges from its effective balanced value. Moreover, the negative return on sales gives evidence that the company occupies its assets inefficiently.

According to the last published financial accounts (2014), the annual revenue of the Top-10 leaders amounted to RUB 2532,1 billion, which is higher than the indicator of the previous period by 28,4%.  The revenue growth appeared to be significantly greater than the GDP growth and country’s inflation indicator for the same period.

Return on sales of the food retail market leader – ZAO Tander (Magnit chain) is higher than the nearest competitor ZAO Perekrestok has: 2,2% and 1,3% respectively.

«Magnit» is a leading retail chain in Russia by quantity of the food stores and their geographical coverage. As of June 30th, 2015 the company included 10 728 stores, of which: 8890 convenience shops, 201 hypermarkets, 110 “Magnit Family” stores and 1527 “Magnit Cosmetic” stores.

“Magnit” retail chain operates in 2233 locations in Russia. The majority of stores are located in Southern, North Caucasian, Central and Volga Federal Districts. Approximately two-thirds of stores are located in towns with the population less than 500 000 people. 

The company has developed the distribution network of 29 distribution centers for more effective storage of goods and optimization of their transportation to the stores. It also owns the large fleet of 5926 vehicles which ensures an on-time goods delivery to all stores. 

«Perekrestok» is a federal retail chain and one of the first city supermarket chains. This year the company celebrates a twentieth anniversary from the moment of the first store opening in Moscow in September, 1995.

The company is a leader on the Russian sale market in the supermarket format. As of September 30, 2015 the chain included 451 retail facilities, situated in 108 towns and locations in Russia.

The shopping floor space of the “Perekrestok” supermarkets numbers from 400 to 2000 square meters. The assortment amounts to 15 000 articles, including not only everyday goods, but also the luxury food from all over the world.

Nowadays the retail chain is actively at work on updating its supermarkets. The new concept of the “Perekrestok” development is intended to create conditions for the comfortable shopping environment by means of effective arrangement of the trading floor and its zoning, light and color decoration on the basis of the customers’ preferences.

These and other members of the represented ranking Top-10 of the largest food chains were assigned the high solvency index. This circumstance points at ability of the enterprises to meet the debt obligations timely and in full, the risk of nonfulfillment of which is minimal.