The Macroeconomic Landscape
India is no exception to the global economic slowdown caused by the pandemic. Manyindustries witnessed tepid demand with periods of supply chain disruption. This was due tolocalised Government lockdowns limited operating hours of malls & stores andrestrictions on selling Non-Food. However the scenario improved during the second half ofthe year with overall economy opening up and improved consumer sentiment.
Changing Retail Dynamics
The sector performance mirrored the economic slowdown in the first two quarters of2020-21 followed by a robust recovery from the Q3. However it was impacted again inlatter part of Q4 due to the resurgence in COVID-19 cases. The Food and Grocery segmentswere the first to recover. The Apparel and General Merchandise category on the otherhand remained under pressure and faced headwinds even during the second wave in the lastquarter. Consumer lifestyles have undergone a massive change leading to emergence of newerarticles of consumption even as the importance of some other diminished.
Rising prominence of E-commerce is creating opportunities for every retailer and thistrend is likely to continue. Retailers could leverage digital channels (E-commerce)enabling them to reach out to more consumers. The long-term outlook for the industry lookspositive supported by rising income favourable demographics and increasing urbanisation.
During the pandemic the first priority was to minimise the short term impact. Ourbusiness responded with agility to significantly reengineer its cost structure. Many ofthese cost initiatives will also continue to benefit us in the near future. Our mitigationstrategies includes increase in the share of high margin categories renegotiating costsand opening profitable stores at new locations while also rationalised loss-making stores.
While working on minimising the impact through actions mentioned above we continuewith our strategy to focus on higher margin Non-Food categories. Though these wereimpacted sharply during the year they are crucial for pivoting the business model tosignificant profitability.
Apart from our focus on higher margin Non-Food items the second piece of our strategyis to build a significant Out-of-Store business. We also made investments tostrengthen our mobile application and technology. We increased our local consumer connectusing Stores as hubs and via hyper local approach for ourOut-of-Store business.
Our E-commerce business witnessed 6.5x GMV growth from 2018-19. There is hugeopportunity not only through the current model which is achieving rapid growth but it canalso scale up much further by adding multiple products markets and new geographies.
This year we saw the benefits of the rapid and robust integration of Natures Basketwith Spencer's ecosystem. Natures Basket has benefited from synergies which include lean& efficient operations cross leveraging products and significant cost savings. Thebusiness margins have strengthened by 521 bps which bodes well for the future. We alsolaunched The Gift Studio (TGS) a bespoke and one-stop gifting destination forevery occasion.
Responsible Corporate Citizen
Spencer's as a responsible corporate citizen is committed towards ESG (EnvironmentalSocial & Governance). Our various initiatives include installation of energy-efficientdevices such as solar panels at our stores E-invoicing proper waste management andreduction in use of plastic bags. We also strengthened our governance practice byimplementing Legal Compliance and Insider Trading Management Tools.
At Spencer's we've lived by our responsibility of trying to make essentials availableduring lockdowns. We delivered on our duties and expectations while always prioritisingthe health and safety of all our stakeholders. I am also happy to share that a largenumber of our employees have been vaccinated and the drive continues.
Vote of Thanks
This message would be incomplete without acknowledging the tremendous contributions ofour various stakeholders. I would like to thank them all including the Board theShareholders the Customers the Investors Suppliers and many others for trusting usthrough these tough times. I would also specifically like to acknowledge and applaud theundying and continuing efforts of our frontline warriors i.e. our employees for theirsheer commitment and dedication. We are devoted to building a vibrant organisation as wegear towards building a better tomorrow.
|Dr. Sanjiv Goenka |