News Retail
Arcadia Group Facing Loss to Phase out 250 Stores
Arcadia Group, the owner of the Topshop, BHS, and Dorothy Perkins brands, has revealed plans to close some 250 stores over the next few years as their leases expire. The move was announced recently as the company said pre-tax profits dived 37.6% to GBP133.1m for the year ended 27 August, from GBP213.2m in the prior year.
Sales slipped 3.6% to GBP2.68bn from GBP2.78bn, while UK like-for-like sales fell 1.8% on the previous year. E-commerce sales were up 27%, while underlying retail like-for-like sales were down 4.3%. Margin slipped by 1.8%, which owner Sir Philip Green said was due to the company's decision to maintain its prices and not pass on any increases to its customers. The move cost it GBP53m, he said, adding "costs have continued to be controlled tightly".
Green said trading conditions remain "extremely challenging" with "style, quality and value at the top of our agenda and more important than ever". The warmest October and November have made autumn trading much tougher, he added. The retailer is forecasting that like-for-like sales will fall 4.4% in the first quarter, while online sales will grow 21%. Green said the group will close up to 260 stores as the leases on some 460 stores expire over the next few years.
"We have got - from my memory - 450 or 460 stores where leases expire in the next three years. And I think on our latest summary we will close more than half of those on lease expiry. So I would say, I would expect us to close 250, 260," he said. Arcadia's results underline the continuing pressure on all parts of the clothing market, said Neil Saunders, Managing Director of retail consulting firm Conlumino.
s.Oliver Surging Ahead with New Innovations
 Global apparel brand s.Oliver that entered India in 2007 has a well-chalked out plan to gradually spread retail footprint to the metros. As Kunal Pant, Head, Design and Buying, s.Oliver Fashions India explains, “The brand’s journey in India began with the opening up of a store in Delhi and another small store in Mumbai. We expanded into these markets by opening two more stores. While we were building our brand presence in Mumbai and Delhi, we were testing waters in Pune and Bangalore. By December 2011, we will have three stores in Pune and by January 2012, we’ll add a store in Bangalore.” In all, the brand is present through eight EBOs and about 14 shop-in-shops in India.
s.Oliver creates 12 collections a year, with the bulk of its business coming from northern market. So the focus is on heavy winter wear and heavy outer wear in the north, while in the west light layering works best for the brand. Elaborates Pant, “But the key trends are more or less the same. Right now you can see a lot of Nordic prints or Nordic motifs and animal influences like fake fur. Quilting is something that’s very important. Elbow patches are a concept that’s very strong this season in the market.”
But the striving ahead with their new innovation created especially for India. “We have created a super hero denim range for the Indian market. This range has been designed in Germany but specifically targets the Indian customer. Since we have a huge denim history behind us, we have taken the best of the denim in terms of fit, wash and fabric. The fabric is premium and comes from Turkey’s one of the best mills in the world. So when a human being has the best of everything he’s a super hero and when a denim pair has the best of everything, its super denim,” he explains.
FDI in Single-brand Retail will have Fresh Riders
The Government is mulling over allowing 100 per cent FDI in single-brand retail stores by introducing some new riders to appease political parties. The Cabinet’s decision of allowing 51 per cent FDI in multi-brand retail has been put on hold till it reaches a political consensus. The FM’s statement in the Lok Sabha has no connection to the FDI in single-brand retail. “The decision to permit 51 per cent FDI in multi-brand retail will be suspended till a consensus is developed through consultations with various stakeholders,” the Minister had said after the all party meeting that had been called to break the logjam in Parliament.
On the other hand, the Department of Industrial Policy and Promotion (DIPP) is in the process of finalising the decision to give effect to the November 25 cabinet decision to remove the cap of 51 per cent FDI in single-brand retail. If the move gets through, it will let foreign retailers such as Marks & Spencer and Zara completely own their Indian stores, besides facilitating the entry of others like Ikea and GAP that have been taking ‘wait and watch’ approach so far.
As of now the existing stringent conditions in the FDI norm approved by the Cabinet include foreign investors need to own the brand they intend to retail. The brand must be present in other countries and the retailer must source 30 per cent of the products to be retailed from small industry. It is understood that the Government plans to add more riders to it.
Biyani Wants FDI Only in Select Formats
Firmly believing that his large retail chain would work well despite competition from global retailers, Kishore Biyani, Chairman of the Future Group has stated that he will partner with foreign investors in certain selected formats and not across-the-board. The Group has different formats such as lifestyle, hypermarkets, home furnishings, and electronics to name a few. The company plans to attract foreign investors in some of them. It was speculated that the Group was in talks with French retail giant Carrefour for a joint venture partnership.
Biyani is neither worried about the political resistance to the FDI policy, which he feels would be sorted out eventually, nor about the possible threat from global giants waiting to capture India’s retail market. He believes that, with the 16 million sq. ft. of space across the country, strong infrastructure and the back-end in place, his group is much ahead in competition.
Turtle in Fast Forward Growth
Turtle, the brand that was launched in 1993 inspired by the absence of affordable menswear brand in cities and the growing demand in the textile sector, is now on a fast forward growth spree. What started as a small unit with a production capacity of just 20 shirts a day is today recognized as a complete menswear brand pan India. And it has already achieved a turnover of more than Rs 86 crore so far. “We are targeting a turnover of Rs 200 crore by this fiscal,” says Amit Ladsaria, Director, Turtle.
The brand has already made its presence felt in 550 cities across India. It has 52 exclusive Turtle stores and Turtle merchandise retailed through 1,600 MBOs across India. It has also entered the Middle Eastern market and is sold in Dubai, Kuwait and Bahrain. As Ladsaria puts it, “With constantly changing global fashion trends, Turtle has established itself as an honest brand that gives value for money to its customers.”
Talking about the brand’s success mantra, Ladsaria, says, “We are a complete menswear brand with wide range of apparel and accessories. We constantly aim at improvising our products by adding innovative styles and design elements with complementing color palettes to be at par with the changing global fashion trends.”
The latest winter collection by Turtle is an extension of last year’s retro theme. Marino wool, cotton and acrylic are the dominant materials used in pullovers, while regular cotton, techno fabrics and checks have been used for jackets and windcheaters. The collection also comprises of suit jackets and is suitable for any occasion whether formal, casual or party-wear. “Last year, our winter wear collections comprised of a wide range of apparel to suit the myriad moods of the party season. The response was overwhelming. This year, with new themes and designs we are optimistic about better response,” Ladsaria opines.
Ladsaria is upbeat about the current market situation. “The reasons are quite a few and somewhat evident. Our positioning as a brand that offers excellent value for money has worked. We have not wavered from this for the past 18 years. The introduction of excise duty this fiscal has forced a strategy re-think for many discount brands. All these factors have contributed to a healthy growth for us this year,” Ladsaria concludes on a positive note.
Indian Retailers in a Catch-22 Situation on FDI in Retail
Amid growing opposition to its decision of allowing foreign direct investment (FDI) in retail sector, the UPA Government has decided to put the issue on the back burner. The much awaited approval to 51 per cent FDI in multi-brand retail was approved by the Cabinet recently. In fact industry majors like the Future Group, Bharti Retail, Spencer’s Retail and Next were jubilant since their expansion plans were to get the long-awaited foreign capital funding. But now their plans have to wait since the Government has decided to put the FDI policy on hold till the political consensus on the matter reaches conclusive end. Sources say, the Government is reworking on its policy on allowing FDI in retail, amid opposition from not just the opposition parties but also from its allies - the DMK and the Trinamool Congress.
The sudden decision to postpone allowing FDI in retail by the Government’s has now put the retail majors in a fix since they had already initiated fresh talks for liaison with foreign retailers, with the hope that they would soon be able to bring the much required funds. For instance, the Future Group’s growth, which is currently at 25-30 per cent, would have registered growth rate to 40-50 per cent with the foreign investment. The Group is reportedly in talks with multiple partners, including Carrefour.
RP-Sanjiv Goenka Group, which runs the 230-plus Spencer’s Retail stores across India, was banking upon the foreign investment too since it would have helped them in achieving the planned retail expansion. Group’s Chairman Sanjiv Goenka had reiterated the same feelings. The group’s retailing business logged revenues of Rs 1,056 crore and a loss of Rs 286 crore in 2010-11. Sumantra Banerjee, President (Retail) at RP-Sanjiv Goenka Group, points out FDI in retail is a must as the sector needed fresh funds. "Foreign investment in the business would have accelerated Spencer’s expansion plans." Spencer’s is banking on retail FDI to attract funds to grow and break even by attracting investment in the back-end operations.
Bharti Retail too is looking at taking their alliance with Wal-Mart to the next level by setting up multi-brand stores in India. Videocon Group, owner of Next, with more than 600 stores, is reportedly in talks with large electronic retailers, including the $50-billion consumer electronics retail giant Best Buy.
But now the question mark over implementation of the FDI policy will have to indefinitely wait for an answer. Foreign retail giants, equally keen on capturing the pie in India’s Rs. 20 lakh crore retail market are keeping track of the latest developments on the matter. Industry is now expecting the Government to initially open the sector to foreign investors and private equity funds, if not the retailers, till political consensus is reached. The much talked about FDI policy, which was applauded as the bold move of the Indian government to bring in reforms… is for now lying in the cold storage.
Aditya Birla Retail to Invest Rs 1,500 cr on Expansion
 Aditya Birla Retail has decided to invest about Rs 1,500 crores in the next five years to expand its hypermarket and supermarket stores. The company that runs hypermarkets under the ‘More Megastore’ brand is looking to open 12 stores each year, while adding around 150 outlets every year to its ‘More’ chain of supermarkets. The average store size of the ‘More Megastore’ hypermarket will be around 60,000-70,000 sq. ft. Currently, the company has 12 hypermarkets and 590 supermarkets. To deal with issues like high rentals, the company has decided to either build its own sites or is tying up with developers. It has not witnessed low demand for basic necessity items like food and grocery due to rising inflation.
Retail FDI will Benefit All : Says CII Study
Terming the decision to invite foreign direct Investment(FDI) into the retail sector as a major reform measure, leading industry body CII said it will greatly improve investment sentiment. "At a time when declining investments have led to slower GDP growth, the entry of foreign funds in retail as envisaged by the government would go a long way in boosting confidence," Confederation of Indian Industry (CII) president B Muthuraman said .
FDI in multi-brand retail will give a boost to the organised retail sector, which positively impacts several stakeholders, including farmers, consumers, MSMEs and hence, the overall economy, he said. "The CII hopes to see an early consensus on the issue among the political leadership. It is in the national interest and, therefore, we are hopeful that all significant political stakeholders would converge on the subject soon," he added.
Opening up of retail to FDI can increase the organised retail market size to USD 260 billion by 2020, as per a recently released CII study. This would result in an aggregate increase in income of USD 35-45 billion per year for all producers combined, 3-4 million new direct jobs and around 4-6 million new indirect jobs in the logistics sector, contract labour in the distribution and repackaging centres, housekeeping and security staff in the stores, it added. The Government also stands to gain by this move and can be expected to receive an additional income of USD 25-30 billion by way of increased tax collection and reduction of tax slippages.
|
