Spencer's is ripe for listing, says Goenka

Group chairman says progress is perceptible

The RP-Sanjiv Goenka Group is focusing on ending Spencer’s Retail chain's losses.

 

The aim is to also hasten its listing on stock exchanges. Sanjiv Goenka, group chairman, said for the past six months, Spencer’s has seen positive underlying profit. Earnings per square foot of floor space had increased to Rs 1,741, against the previous year's Rs 1,500.

 

“Hopefully, this trend will continue. Spencer’s is ripe for listing,” he said.

 

For a long time, the group has been considering an Initial Public Offering of shares to take forward Spencer’s growth. Recurring losses have come in the way. In 2015-16, Spencer’s saw a nearly 12 per cent increase in revenue to Rs 1,865 crore but had a Rs 142-crore loss, primarily on higher purchase of traded goods and raw materials. Net loss in 2014-15 was Rs 152 crore. Underlying loss in FY16 was Rs 53 crore, down from a loss of Rs 67 crore a year ago.

 

Some years earlier, the group undertook a restructuring programme at Spencer’s — culling unprofitable stores, exiting Mumbai, internal restructuring of the core management team, and cost-cutting. In 2011-12, Spencer’s total store count was 182. This fell to 126 in 2014-15 and to 118 in 2015-16. It currently has 120 stores in 35 cities, with 1.1 million square feet of combined space. It plans to open 50-60 hypermarket format stores in the coming four years.

 

Apart from managerial restructuring of the company and a decision to only increase large-format stores, Spencer’s is counting on its private labels. Over the years, it had introduced private brands in the stores and this lifted its net profit. Smart Choice and Tasty Wonders were introduced in the foods section and Spencer’s Finest in the gourmet section. y, Clean Home and Maroon took over the home products portfolio, and the Care and Essentials brand came in the personal care range.

 

Recently, after introducing apparel private labels Island Monks and Asankhya, the company is launching a third one. Goenka says the apparel business yields higher margins than food, helping counter the loss from the group’s retail division. The company has recruited a team in Gurgaon to take forward the new private label. Company sources said the label would be made available in Spencer’s outlets only in the initial stages and, depending on response, could be made available in fashion and garment outlets.

 

“Apart from food, the apparel business will become the next big thing,” says Goenka. While food business contributes 80 per cent to its revenue, the apparel division accounts for only five per cent.