Shoppers Stop pulls out from unviable projects

Raheja-owned department al store chain Shoppers Stop Limited (SSL) is pulling out of unviable new ventures and shutting loss-making stores to conserve cash for the company in the ongoing economic downturn.

The retail firm had announced on Friday that it has closed three of its book stores ‘Crossword’ – one at Mumbai Airport, and two others in Chennai and New Delhi. The company also closed its airport retail store ‘Stop & Go’ at Mumbai Airport.

“They were not profitable. We open new stores without much information but, when we close them, we have complete knowledge about operations,’’ said BS Nagesh, Managing Director of Shoppers Stop, while not specifying how many stores the company has closed in the last one year.

Shoppers Stop recently pulled out of a catalogue retailing venture with UK’s Home Retail group under the Hypercity-Argos brand. The decision to wind up operations was taken “...as the business did not meet planned performance levels, (and) to support investments required in the current economic climate,’’ Shoppers Stop had said recently.

The company has also moved out of food business after announcing that its Café Brio outlets would be replaced with Café Coffee Day outlets over the next couple of months. Another brand, Fresh Basket, has become a private label of group firm Hypercity Retail.

“We cannot say that new retail ventures do not work in the country. Crossword is a profitable venture,’’ Nagesh stressed.

In late December last year, Fitch ratings downgraded a Rs 30-crore short term debt and Rs 50-crore commercial papers of Shoppers Stop due to ongoing margin pressures resulting from slower sales growth and losses from new businesses.

“The company’s business has been impacted by slowing growth in same store sales, and the ongoing slowdown in domestic consumer spending,’’ Fitch said.

The company had reported a net loss of Rs 47 crore in the first half of FY 2009. As of 30 September 2008, SSL had a debt of Rs 220 crore as compared to Rs 207 crore in March 2008, Fitch said.

“Indian shoppers still prefer traditional forms of retailing. New formats are yet to catch up in the country,’’ said Devangshu Dutta, Chief Executive of retail consultancy Third Eyesight.

Some of the biggest retailers – such as Reliance Retail, Aditya Birla Retail, Spencer’s and Future Group – have closed down their stores and are going slow with expansion plans as consumers downtrade and defer their big ticket purchases.

While Reliance Retail has closed down 30 stores, Aditya Birla has closed 45 of its unprofitable stores in the last one year. Retail major Future Group’s CEO Kishore Biyani, who was targeting a retail space of 30 million square feet by financial year 2011, now expects to have the space by FY13.

“Retailers have closed stores which are not meeting their expectations. In the current scenario, they are being as conservative as they were being optimistic 2-3 years ago,’’ Dutta said.

Even a report from Edelweiss Securities pointed out how across the board expansion plans are being relooked at because of capital scarcity and reassessment of catchment.

“Given high debt levels and an almost dormant equity market, the capital for growth has become scarce,’’ the report said.

If Pantaloon added 0.3 million sq ft of space in the December quarter of the current financial year compared to 0.9 million it added in the corresponding quarter last fiscal, New Delhi-based Vishal Retail added only 0.2 million sq ft of space in the just-concluded quarter compared to 0.5 million sq ft it added in the year-ago period.

However, Shoppers Stop added the same amount of space in the December quarter of this year compared to last year’s corresponding quarter.