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Birla Retail's sales rise, profits elusive

Raghavendra Kamath  |  Mumbai 

Aditya Birla Retail, the retail company owned by Aditya Birla group, would take at least two more years to become profitable at the earnings before interest, tax, depreciation and ammortisation (Ebitda) level, said an executive in the know.

"Most of the stores are profitable. Now they have to take care of some overheads at the corporate level to become profitable," said the executive who did not want to be named.

Set up in 2007, Aditya Birla Retail operates 483 supermarkets and 16 hypermarkets under the 'more' brand. It was originally looking to break even in 2012-13.

"Turnover has doubled from last year and same-store sales growth has been robust," said the executive. A mail sent to the Aditya Birla Retail spokesperson went unanswered.

"They are carrying forward heavy losses. Till the time they get the format right, it is difficult to achieve profitability," said Arvind Singhal, chairman of Technopak Advisors.

Other retail chains that started during 2006-2007 or started expanding in these two years like Bharti Retail, the Tata-led Star Bazaar and Spencer's Retail are yet to achieve profitability.

Spencer's, which missed its break-even targets on a couple of occasions, is looking to slip out of the red in the next two quarters. Aditya Birla Retail's sales per sq ft and like-to-like sales had increased by 19 per cent and 15 per cent, respectively, said rating firm Crisil. The company was able to achieve break-even in over 95 per cent of its stores, Crisil said.

Crisil estimates Aditya Birla Retail's consolidated operating income and net loss at Rs 2,930 crore and Rs 548 crore, respectively, in 2014-15. This is against a consolidated operating income and net loss of Rs 2,510 crore and Rs 590 crore, respectively, in 2013-14.

Pranab Barua, business director, apparel and retail, at the Aditya Birla Group, last November said the group had transformed the company with strong double-digit like-to-like growth through improved assortment, localised merchandise, better shelf availability and customer experience. Barua said Aditya Birla Retail's outlets were profitable at the store level.

"The company has been able to achieve store-level break-even in over 95 per cent of its stores. This has been accomplished by providing the customers a wide choice of quality products under its own labels at attractive price points. In addition, Aditya Birla Retail undertakes extensive research on viability before opening new stores and has been proactive in quick closure of loss-making stores," Crisil said.

According to the agency, Aditya Birla Group has invested Rs 3,096 crore so far in the company through a combination of equity as well as optionally convertible bonds and continues to invest in it in the medium term.

LOOKING FOR PROFITS
  • Set up in 2007, Aditya Birla Retail operates 483 supermarkets and 16 hypermarkets under the 'more' brand. It was originally looking to break even in 2012-13
  • Aditya Birla Retail's sales per sq ft and like-to-like sales had increased by 19 per cent and 15 per cent, respectively. It was able to achieve break-even in over 95 per cent of its stores
  • Other retail chains that started during 2006-2007 or started expanding in these two years like Bharti Retail, the Tata-led Star Bazaar and Spencer's Retail are yet to achieve profitability

First Published: Sat, June 13 2015. 22:50 IST
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