To close unviable stores; expansion to be funded from internal accruals, debt and possible equity.
Department store chain Shoppers Stop plans to open 12 more outlets with a total area of 650,000 sq ft in the next three years by taking advantage of the fall in mall rentals, reversal of service tax thereon and possible revival in the economy, a top company official has said.
The company required a capex of Rs 91 crore on the store openings (Rs 1,400 a square feet) and Rs 32.50 crore on the inventory (Rs 400-500 a square feet) for these 12 stores, the official said.
The company was planning to fund the expansion from internal accruals, debt and possible equity infusion, the official said.
The company plans to open four stores this fiscal, in Bangalore, Ahmedabad and Hyderabad, and four each in the next two fiscals, each store measuring around 55,000 sq ft. Mall rentals have fallen 35 to 40 per cent in some cities from their peak in the past couple of years.
“Property rates make it lucrative to expand. We also have undrawn limits of Rs 90 crore,” Govind Shrikhande, chief executive of Shoppers Stop, said during a conference call today.
While expanding their network, retailers have shut unprofitable stores and unviable ventures to save cash during the downturn. Shoppers Stop closed down over a dozen unviable stores in FY 2009.
Shoppers Stop recently pulled out of a catalogue retailing venture with UK’s Home Retail group under the Hypercity-Argos brand. It also moved out of the food business after announcing that its Café Brio outlets would be replaced with Café Coffee Day outlets over the next couple of months.
“We have taken a call to close those ventures which are taking a longer time to break even,” said BS Nagesh, managing director, at the call.
In March, the company closed three of its ‘Crossword’ book stores – one at the Mumbai airport and two in Chennai and New Delhi. The company also closed its airport retail store, ‘Stop & Go’, at Mumbai airport.
Most big retailers have shut stores to remain profitable. While Aditya Birla Retail has closed 75 stores so far, Reliance Retail has shut 45.
“The last fiscal was one of the toughest for retailers and we feel the first quarter will also be difficult. We expect things to pick up after Diwali this year and a good year thereafter,” Shrikhande said.
Besides 26 Shoppers Stop stores, the company runs speciality formats such as Home Store, Mother Care, Crossword and Arcelia, among others, and an airport retailing venture with Nuance, a European firm.
However, the company does not have plan to expand its speciality business in a big way this fiscal, according to Nagesh.
The company’s stock went up by 3.73 per cent to close at Rs 115.50 on Monday.