Arvind expects 35% revenue from Megamart

Textile and branded apparel maker Arvind’s value retail format chain ‘Megamart’ is expected to contribute 30-35 per cent to the company’s revenue and 20-25 per cent to the net profit by 2011-12 (Apr-Mar), J. Suresh, chief executive officer (brands and retail) of Arvind Brands, said today.

Arvind Brands is a division of Arvind. Megamart is India’s largest value retail store chain for branded apparel, accessories, and lifestyle products.

The company currently has 102 Megamart stores, including two large format stores, in India.

“We are investing a total of Rs 400 crore to scale this up to 500 Megamart stores by 2011-12,” Suresh said.

The company has already spent Rs 75 crore out of the Rs 400 crore investment target so far, he said.

According to Suresh, Arvind has consciously decided to scale up the expansion of Megamart stores following the fall in realty rentals over the past four-five months.

“We earlier had a target to set up 250 stores by FY12 (2011-2012). But with the fall in rentals and due to the popularity of our format, we have upped our target as we expect to achieve the 250-store target by end-FY10 (2009-2010) itself,” he said.

He was talking on the sidelines of an event to officially launch the international apparel and accessories brand Cherokee in India.

Realty rentals have fallen “at least” 20 per cent in Tier-II and Tier-III cities over the past four-five months, while in Tier-I cities, the fall has been around 15-20 per cent, said K.E. Venkatachalapathy, chief operating officer, Megamart.

The company currently has 100 Megamart stores spanning 3,000 sq ft, and two Megamart Outlet Centres, which are large format stores spread over 40,000-60,000 sq ft.

All Megamart stores are standalone stores, but going forward, the company intends to establish a presence in “value” malls as well.

“Since we are a discount store, it has not made sense to be part of a regular mall. But now that value malls are being set up, we plan to be in them, in fact...we will be their anchor,” said Suresh.

The company will anchor a value mall being set up in Faridabad and one in Bangalore, he said.

Arvind has signed a direct retail licensing pact with Cherokee Group under which Megamart will be the exclusive marketer of Cherokee branded apparel, accessories and lifestyle products in India.

“This is an exclusive arrangement. Under this, no other retailer in India can sell Cherokee products, which are positioned as value products,” said Mark Nawrocki, executive vice-president and managing director, brand development, The Cherokee Group.

Even Tesco, the UK retail chain that has the Cherokee marketing licence for that region, will have to source Cherokee products through Megamart in India, he said.

Tesco is planning a foray in India through a tie-up with the Tata group. In India, Cherokee products will be manufactured locally through a tie-up with eight-10 vendors, said Venkatachalapathy.