Future Retail: Operational metrics improve in Q4

Retail business sales grow 18%, operating income rises 24%

Future Retail's March quarter numbers suggest the game's not up for Big Retail. The company has reported an improvement in operational metrics, with margins and sales showing healthy growth. The income from sales grew 18.2 per cent year-on-year and 4.4 per cent sequentially to Rs 2,773 crore. Operating margins increased 50 basis points YoY to 11 per cent, driven by lower inflation in rental and employee costs. Operating profit grew 24.3 per cent to Rs 306 crore, thanks to a 50 basis points rise in operating margins.

The net profit increased to Rs 10.3 crore from Rs 1.62 a year ago, while finance costs continue to erode most of the gains below the operating level. These remained flat at Rs 158 crore year-on-year but it continues to impact the bottom line. The  shift in strategy to higher margin products and better traction in appliances have helped the company grow top line. Over the past couple of quarters, HomeTown has done well, as store sizes have come down and productivity has increased.

Big Bazaar, too, has fared well, as a higher share of apparel in its merchandise mix helped improve sales. Same-store sales (SSS) growth also showed improvement. Big Bazaar’s SSS grew 7.6 per cent, while HomeTown and eZone grew 16 per cent each. The company added 0.54 mn sq ft to its retail space, taking the total area to 11.36 mn sq ft.

During the financial year, the company added 24 new stores of Big Bazaar, 29 eZone stores, eight FBB and four HomeTown stores. Big Bazaar is now present in 108 cities. Fashion merchandise has also helped improve margins, claim analysts. The retail chain has signed on Varun Dhawan and Katrina Kaif as brand ambassadors for their fashion brands, which has helped boost sales but increased the marketing costs.

Future Retail's three subsidiaries also turned profitable. Future Supply Chain posted sales of Rs 410 crore and profit after tax  of Rs 25 crore. Future Genrali Life and non-Life businesses, too, have turned profitable.