* Budget chain Magnit saw sales growth slow, traffic down
* Sales at up-market Seventh Continent underperformed peers
* Traffic at Seventh Continent recovers after price cuts
* X5 shakes up Perekryostok management on traffic drop
By Maria Kiselyova
MOSCOW, July 14 (Reuters) - Russia's food retail sector saw the downward trend in trading deepen in the second quarter of 2009 as a budget grocer reporting slowing sales growth and a Moscow supermarket chain underperformed it low-price peers.
Russia this year entered its first recession in a decade, with retail sales falling for the fourth consecutive month in May as the crisis hit incomes and consumer sentiment.
Analysts have said that some of the world's biggest retailers, such as Wal-Mart, will reconsider expanding into Russia weigh as they weigh the negative consequences against the appeal of relative asset price weakness.
The downward trend in trading is particularly pronounced in Russia's provinces, where the bulk of manufacturing is concentrated and a 17 percent decline in industrial production has hit hardest.
Grocery store chain Magnit, which operates shops in Russia's industrial southern and northeastern regions, said on Tuesday that its first-half net retail revenue rose 33.4 percent but monthly sales growth had continued to slow.
Rival X5 last week reported a 46 percent revenue growth for the second quarter but said like-for-like sales growth slowed from the previous quarter..
UBS said that Magnit's discount chain underperformed X5's budget neighbourhood stores -- which saw sales rise 35 percent -- due to Magnit's higher exposure to small regional towns.
"X5 operates in larger cities than Magnit ... Magnit's smaller towns were hit harder by the downturn and people might opt to shop less frequently," UBS analysts said.
Magnit was largely expected to take on customers defecting from higher-price chains, but the latest figures suggested that the positive effect of the crisis on traffic in Magnit stores may have come to an end, said analysts at Rye, Man and Gor Securities.
Magnit saw traffic edge down 0.83 percent in the first half.
Analysts at Alfa-Bank said the change to a fall in traffic could have been cause by consumer migration to more traditional outlets such as open markets.
However, Magnit's high exposure to budget shops still helped it outperform the Seventh Continent supermarket chain which saw first-half sales rise 13 percent
PRICE CUTS HELP
Seventh Continent, which operates stores in Moscow, also saw like-for-like sales rise 4.8 percent in the first half, compared with a 10.2 percent growth in same-store sales at Magnit and a 12 percent increase at X5.
However, price cuts at the beginning of the second quarter helped Seventh Continent to increase its traffic by 6.4 percent against a 3.3 percent drop in the first quarter, while the total average shopping bill edged up 0.7 percent.
Retailers will also feel a certain relief in the second half of 2009 after the government decided against imposing price caps in a new law.
Supermarkets are suffering the most in the crisis as consumers turn to budget chains, prompting operators to come up with price and marketing initiatives to stop their customer numbers from declining.
On Tuesday, X5, which saw negative traffic at its Perekryostok supermarkets outside Moscow and St Petersburg, announced a management reshuffle, promoting its marketing director Mikhail Susov to the post of General Director of Supermarket Format.
X5 said the appointment of Susov, who earlier in the decade helped Russia's top wireless carrier MTS gain exposure to the mass market, was aimed at strengthening Perekryostok's leading positions in the supermarket format. (Editing by Karen Foster)