Hypercity has to be profitable: Govind Shrikhande

Interview with Managing Director, Shoppers Stop

The Rahejas-owned Shoppers Stop retail chain posted the highest like-to-like growth (of stores in existence for more than a year) in many quarters during the three-month period ended December, though overall profitability was dragged down by its hypermarket chain Hypercity. Managing director Govind Shrikhande talked to Raghavendra Kamath about the company’s plans. Edited excerpts:

Coming from 12.5 per cent like-to-like (LTL) growth in the December quarter, where does it stand now?
In the fourth quarter also, we are seeing double digit numbers. I will not go by January numbers as we have preponed sales by 10 days. Things will be much clearer by March. We are expecting LTL sales growth in the 9-10 per cent region.

Since most overseas retailers are still not comfortable with government riders in foreign direct investment (FDI) in multi-brand retail, how will that impact your plans to sell stake in Hypercity?
Our plans will not be impacted. We will be chasing profitability whether FDI in multi brand retail materialises or not. Hypercity has to be a profitable format come what may.

You said Hypercity break-even will now happen by FY2016. What is the reason for the delay?
We had a three-point action plan. We wanted to right-size four stores by the end of FY 2013. We could only do one. We reduced the Amritsar store from 150,000 sq ft to 50,000 sq ft. Our plan was to have a total space of 1 million sq. ft for 12 Hypercity stores from 1.2 million sq. ft earlier. It will reduce rent and operating costs and bring in efficiencies.

We are running two to three quarters behind on this front as the process to reduce size is taking time. Second, we wanted to increase share of fashion from 7.5 per cent to 15 per cent. We achieved 10 per cent this year. We will hit the target in 24 months. It will push our margins by 150 basis points. Third is controlling operating costs. Operating costs have degrown (declined). The LTL profitability has gone up. We are on track to achieving profitability except on the first part, where we are lagging behind by two-three quarters.

What is the progress in store additions in Shoppers Stop department stores?
In 2013-14, we are likely to have more stores due to the carry forward effect.

We had targeted eight stores in 2012-13. We have opened five so far and we are likely to end the year with seven stores. Next year, we will open 11 stores due to the carry forward effect.

The share of private labels increased in the last quarter. Are you deliberately increasing the share to cater to value conscious shoppers?

No. we are making exclusive brands stronger and wider across categories. Haute Curry, which was an apparel brand earlier, has also been extended to jewellery and footwear.