Pantaloon's sales grow for second month

Kishore Biyani-owned Pantaloon Retail’s same-store sales grew for a second month in a row, after dipping in December, indicating a subtle revival in spending. Indicative figures for the first 12 days in March were even better, its chief said.

Pantaloon’s February sales in the retailing segment grew by 5.32 per cent and by 4.44 per cent in the lifestyle segment. Total sales for the month rose to Rs 418.71 crore.

The steady growth in sales for the two consecutive months came after the country’s biggest retailer witnessed a drop in value and lifestyle retailing in December.

Same-store sales in value retailing climbed 4 per cent in January, after a 4 per cent drop in December. Lifestyle sales grew 12 per cent in the month, after falling 14 per cent in December.

“Food, fashion and general merchandise are all looking up. People are not buying Basmati, but they are definitely purchasing goods that they perceive offer value for money,” said Kishore Biyani, managing director, Pantaloon Retail. “The first 12 days in March have been even better.’’

Same-store sales, a common metric in the retail industry, compares sales of stores that have been in the business for a year or more. The measure allows investors to determine what portion of new sales has come from growth and from opening new stores. The figures are usually released by retail companies every month.

“Higher February sales are a result of aggressive pricing and promotional efforts from the company. Also, more credit is available for consumers as interest rates have softened,’’ said Anand Raghuraman, director, Boston Consultancy Group.

Because of the ongoing slowdown, retailers have been struggling to clear inventories in the past few months to free cash and shorten working capital cycles. Some are keeping less stock than earlier.

“I think consumers like to visit stores that are well stocked and keep goods of their choice,” said Biyani.

However, Pantaloon’s home retailing sales for February registered a 10.17 per cent fall as consumers deferred purchases of new homes.

“Last year, we grew substantially, so this year’s drop should be seen in that light. Also, year to date, we are positive,’’ said Biyani.

While there isn’t enough data to indicate a long-term trend, say analysts, the steady growth indicates continued spending by consumers.

“Consumer sentiments have not been impacted as badly as was believed earlier,’’ said Nikhil Vora, an analyst with IDFC-SSKI. “While the growth rates are not staggering, the numbers are still encouraging.’’

Some others covering the company’s stock say the future growth for Pantaloon will continue to be range-bound and may be contained at Rs 500 crore a month as discount sales will have to taper off to protect margins.

“In the coming months, the demand will fluctuate, as the current demand was created through discount offers which the company cannot continue to offer for long,” said Raghuraman.

Pantaloon’s gross margin declined 31 basis points in the second quarter ending December 31, while the net profit margin fell 38 basis points, year-on-year, to 2.2 per cent.

To conserve cash, Biyani has already delayed his expansion splans by two years. The retailer, which was targeting 30 million sq ft space by fiscal year ending 2011, now expects to reach this level only by 2013.