Gross margin development and innovation

The management of M.video constantly focuses on ways to increase retail margins. One of the main achievements of 2011 became the improvement of the gross margin by 0.4% or 40 basis points. This improvement has been based largely on the outstanding over performance in some of the main product categories.

Total Flat TV category growth of more than 40% was mainly driven by increasing sales of the LED TV devices by 3.5 times. At the same time the overall share of the innovative 3D technology grew 25% in 2011.

DSLR Photo cameras sales increased by more than 90% despite the strong product supply restrictions in the market caused by dramatic earthquake in Japan in the spring of 2011.

Smartphone category grew by 50% bringing the share of the smartphones up to 70% of total Company’s mobile handsets sales.

Record sales of Large Home Appliances were primarily driven by the growth of Cooling appliances above 40%, and especially remarkable growth of Combi refrigerators by 50%.

The total growth of Small Home Appliances category by 40% was lead by the extraordinary positive development of the Coffee makers group of more than 70%.

Growth in accessories was essentially driven by volume growth in other categories with low price deflation in the category. The leading groups were the accessories for laptops, media, TVs and DVDs and kitchen appliances.

In 2011 M.video increased its Average Basket by 11.2% as a reflection of our successful strategy to focus on brand and product mix improvement.

Despite of intensive price erosion of the Consumer Electronics and digital business and the pressure on the market prices coming from the Internet, M.video intensified the strategy to concentrate on exclusive brands and differentiated assortment.

We also paid attention to our exclusive assortment, the selection of premium brands and early adoption of innovations in our stores.