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| Retailers to continue with high sales |
| Raghavendra Kamath / Mumbai Feb 05, 2010, 01:26 IST |
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Kishore Biyani’s hypermarket chain, Big Bazaar, managed to rake in Rs 243 crore at its four-day shopping festival built around the Republic Day last month. That was 27 per cent higher than last year’s R-Day event, 14 per cent higher than Future Group’s internal target.
In contrast, year-on-year sales growth in the whole month of January last year (2009) was 21 per cent, though same-store sales (SSS) — considered a superior measure of sales growth — were in low single digits. SSS compares sales of stores that have been in the business for a year or more, indicating what portion of new sales has come from sales growth and what portion from opening new stores.
HomeTown, the group’s largest home retail store in the Vikhroli area of Mumbai, did a business of Rs 3 crore in the first week of its opening in January this year, almost double its target.
Pantaloon Retail, the group’s flagship firm and the country’s largest retailer, expects to continue with double-digit sales growth in the rest of the quarter, too, after a robust December quarter during which SSS in the lifestyle segment, for instance, rose 11 per cent. This was the highest in a year.
Future Group is not alone. Other major retailers like the Raheja-owned Shoppers Stop Ltd, Tata’s Trent and RPG’s Spencer’s Retail are riding on improved consumer sentiments.
Between January 23-26, Spencer’s Retail saw 20-25 per cent growth in SSS, compared with the corresponding period last year. At the stores where the special gift-back offer was run, sales went up 40-50 per cent.
Robust December quarter
The January numbers follow a quarter in which sales and margins have both seen a steady rise.
Lifestyle retailer Shoppers Stop saw its ticket size and average selling price go up 11.8 per cent and 4.5 per cent, respectively, in the December quarter.
The improved sales, combined with various cost-cutting measures taken by retailers, paid off in the form of better margins. Shoppers Stop posted a 470-basis-point increase in its operating profit margin (OPM) in the December quarter to 11.1 per cent, which was the highest for the company in the last three years.
“It is a combination of factors. We had a top line growth of 15 per cent, operating profit was up 100 per cent and overall cost went down by 330 basis points. The three-way effect led to excellent margins,” says Shoppers Stop Chief Executive Govind Shrikhande.
He expects the current quarter to be better than the last quarter. “Both December and January has been good for us. Q4 should be better than Q3,” he adds.
Trent posted a 560-basis-point increase its OPM during the quarter to 6.3 per cent, compared with 0.7 per cent in the corresponding quarter last financial year.
Pantaloon Retail posted an increase of 30 basis points in OPM at 10.7 per cent in the December quarter of 2009-10.
According to a Religare Hichens Harrison research, efficiencies in sourcing of merchandise and better cost management across the board led to margin improvement in Shoppers Stop’s case. Employee costs, sales, general and administrative expenses and other overheads of the company dropped by 90, 50 and 150 basis points respectively.
Base effect
Analysts also point to the fact that the December quarter of 2008 was one of the worst quarters for retailers, wherein they saw decline in sales, SSS and profit. “The numbers look good as the base was low in the corresponding quarter of last fiscal,” adds an analyst with a Mumbai-based brokerage.
The growth in SSS is also helping retailers.
“When your same-store sales are better, your OPM also looks better. We have seen very positive improvement in the numbers,” says a senior executive of Trent on condition of anonymity.
Though Trent does not gives SSS numbers, others have shown sharp improvement in the same. Shoppers Stop saw a 2.1 per cent growth in SSS in the December quarter, mainly aided by a growth of 10 per cent in SSS that were less than five years old. But this was pulled down by a 1.3 per cent drop in SSS in old stores.
(With inputs from Pradipta Mukherjee)
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