Russian retailer Magnit's margins slip in battle for shoppers

(Corrects attribution in lead)

MOSCOW, Oct (HKSE: 3366-OL.HK - news) 23 (Reuters) - Russia's biggest food retailer Magnit reported a slowdown in sales growth and a year-on-year drop in its core profit margin on Friday, signalling continued intense competition for consumers squeezed by an economic downturn.

Magnit, which has more than 11,300 budget convenience stores in Russia, has proved relatively resilient but has not escaped totally unscathed as shoppers have tightened their belts in the face of a weak rouble and high inflation.

Third-quarter net sales were up 21.7 percent year on year at 235.6 billion roubles ($3.8 billion), Magnit said in a statement, slowing from 27.6 percent growth in the second quarter.

The margin on earnings before interest, tax, depreciation and amortisation (EBITDA) was 11.2 percent, down from 12.4 percent in the third quarter of 2014.

The drop was mainly a result of price cuts to stay attractive for consumers, as well as accelerated expansion, said Natalya Kolupaeva, analyst at Raiffeisenbank in Moscow.

Magnit has said that it will open at least 1,350 low-price convenience stores in 2015, the company's biggest increase in a single year.

Kolupaeva reiterated a "buy" rating on Magnit stock, saying the company was on track to meet its full-year EBITDA margin forecast closer to the upper end of the 10.5-11.3 percent range.

Magnit also said its EBITDA rose 10 percent to 26.5 billion roubles ($427 million), while net profit climbed by 26 percent to 18 billion roubles. ($1 = 62.0680 roubles) (Reporting by Maria Kiselyova; Editing by David Goodman)