Subhiksha to relocate stores on low demand, high rentals

Subhiksha Trading Services, a food and grocery chain, said it plans to relocate at least 10 per cent of its stores as demand slows and high rentals erode its margin.

The company, partly owned by IT czar Azim Premji’s investment arm, Premji Invest, said it is also going slow on its expansion plans, owing to an economic slowdown in the country. The company may fall 10-12 per cent short of its planned expansion target for the current quarter, said a top company executive.

“Every company is impacted by the slowdown. It is not as if we have closed down all our stores. This quarter, we are going slow on our expansion, but the next quarter, we will be normal on our expansion,” said Mohit Khattar, president, Subhiksha.

Chennai-based Subhiksha currently has around 1,650 stores across the country and plans to open another 3,000 by the end of 2010.

“In cities such as Mumbai and Delhi, where property prices have gone up sharply, we have relocated maximum stores. We are a neighbourhood format and need to look at business viability closely. We will reopen all our stores by January,’’ he said.

Subhiksha runs nearly 115 stores in Mumbai and 200 in the National Capital Region (NCR).

Denying rumours that FMCG companies have stopped supplying to Subhiksha, Khattar said: “We have deliberately slowed our supplies to implement the SAP system. By Janaury, everything will be on track,’’ he said.

The company has already deferred its consumer durables retailing plan by six months in the expectation of a further fall in rentals. The durables venture, which was set to start in January, is now expected to be launched in May or June. In an earlier interview, Subhiksha Managing Director R Subramanian had said the company had decided to defer its consumer durables expansion plan to take advantage of falling rentals.

“We are expecting a further 35 to 40 per cent crash in rentals. It makes sense to wait for some more time if you make a saving of 20 to 30 per cent on your rental costs,’’ Subramanian told Business Standard recently.

The company has also stopped selling vegetables and fruits in some cities such as Mumbai and NCR as they have turned out to be unviable.

Earlier this year, Subramanian had announced a Rs 1,200-crore expansion plan for the company’s retail and grocery format, besides plans for venturing into the consumer durables retailing business.