* Net profit at $88 million vs $94 million forecast
* EBITDA $250.4 million vs $288.3 million market view
* EBITDA margin at lower-than-expected 7.2 percent
* London-listed stock down 8 percent
(Writes through, adds share price, CEO, trader, analyst)
By Maria Kiselyova
MOSCOW, April 14 (Reuters) - X5 Retail Group, Russia's biggest grocer by sales, shed nearly $900 million in market value on Thursday as the cost of chasing customers over profit pulled results below expectations.
X5 posted fourth-quarter net profit of $88 million against $44 million a year ago. But analysts forecast $94.1 million on average, with estimates ranging widely from $21.4 million to $128 million.
Its London-listed stock was down 6.7 percent by 1449 GMT, having earlier been down more than 8 percent.
"The market has underestimated the margins pressure from the continuing traffic-boosting price cuts, opex (operating cost) inflation and the consolidation of (recent acquisition) Kopeika," said Nomura analyst Mikhail Terentiev, adding the results could trigger a downward re-adjustment of the market's 2011 forecasts.
The company said earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 10 percent to stand at $250.4 million, missing a $288.3 million analyst forecast.
EBITDA margin declined to 7.2 percent from 8.6 percent a year ago, below the 8.46 percent forecast, as X5 continued to invest in customer loyalty by keeping prices low.
"This approach supported strong LFL (like-for-like) growth but put pressure on gross margin and EBITDA," said Chief Executive Andrey Gusev in a statement.
FRAGILE
The results come just a month after the resignation of X5's former Chief Executive Lev Khasis, who said he was leaving to pursue "other opportunities" after five years at the helm.
His successor Gusev, promoted from the position of Khasis' deputy CEO, said he would continue to pursue a similar price-cutting strategy to his former boss.
"Real disposable incomes remain fragile... We will continue to invest in prices to support like-for-like sales," Gusev told a conference call with analysts later on Thursday.
UBS trader Andrey Yarnykh said investors were fearful about X5's ability to preserve margins as it continues its aggressive expansion plan, which is targeting 40 percent top line growth in 2011 alone.
X5 reported a 32 percent increase in net sales to $3.5 billion for the final quarter of 2010 and a 29 percent rise for the whole of last year to $11.28 billion.
X5, just under 50 percent owned by Mikhail Fridman's Alfa Group, said last week it would accelerate the integration of the Kopeika chain it bought late last year.
"Investors are reviewing the possibility that X5 may merge with another company, as in the case of Vimpelcom, which is also part owned by Alfa," UBS's Yarnykh said.
Fridman last week denied media speculation that X5 was plotting a merger with an international player, after reports that it was eyeing a deal with either Germany's Metro or Turkey's Migros Turk.
(Additional reporting by Zlata Garasyuta and Maria Plis, Editing by John Bowker and David Cowell)