Value-chain fashion retailers see a blip in business in 2019 amid slowdown

While 2019 was a year of crisis for the automobile and fast-moving consumer goods segments, the value-chain fashion retail segment witnessed little or no impact of the slowdown that gripped the country. As companies struggled to sell products, affordable fashion continued to be in demand.

 

Most value-chain retail companies such as V-Mart, 1-India Family Mart and V-Bazaar saw a blip of slowdown in the second quarter which they are likely to overcome on the back of strong festive sales and the ongoing wedding season in Q3. Around 90 per cent of the products these companies sell are priced below Rs 1,000.

 

V-Mart, which is one of the biggest players in the segment with a revenue of over Rs 1,400 crore, had a muted growth of 1 per cent in Q2 but still sticks to a compound annual growth rate (CAGR) of 20 per cent for the current financial year. 

 

“Yes we see that the rural economy probably is not as good as it used to be around one and one and a half year ago but largely, we are unaffected. Even though same store growth is muted, we are opening stores and carrying on with plans of expansion,” said Samir Misra, chief operating officer, V-Mart.

 

The Gurugram-based retail chain is aiming to add around 60 new stores to the 257 stores already present in the country.

 

Rakesh Biyani, joint managing director of Future Retail, which runs the fashion venture FBB, is hopeful of closing the year with a double-digit growth in overall business. Future Group also has plans to invest Rs 350 crore to open 140 exclusive outlets in the next two years.

 

However, some smaller players such as V-Bazaar did not have a smooth ride and held back store openings to cut costs. V-Bazaar, which mostly operates in the Hindi heartland of UP and Bihar, had earmarked 30 store openings for the year but managed to open only 15 so far. Even 1-India Family Mart, which witnessed 27 per cent growth in the worst hit months of July, August, and September, has cut down the number of store openings from 40 to 27 for FY20.

 

“With the initiatives being taken by the government towards liquidity, we are hoping for a good start of 2020,” said J P Shukla, co-founder and CEO, 1-India Family Mart.

 

Experts say modern retail chains need to spread the business throughout the year and not depend only on the festival season sales in order to manage margins more consistently.

 

“With no big-bang economic stimuli domestically and a sputtering global economy, we should just get used to the idea of slow-burning oil lamps and sprinklings of flowers and colour through the year. Retailers will just have to work that much harder to keep the lamps from sputtering,” said Devangshu Dutta, founder-chief executive of Third Eyesight, in a blog.

How they fared 

1. V-Mart saw a growth of 1% in Q2 but sticks to a CAGR of 20 per cent for FY20
2. V-Bazaar earmarked 30 store openings for the year but has managed to open only 15 so far
3. 1-India Family Mart cuts down store openings from 40 to 27 for FY20