Mumbai, 2 February 2016
Aditya Birla Retail reported a 15% increase in its sales for the last financial year but it continues to pile up losses, according to latest available numbers.
The retail arm of the Aditya Birla Group posted Rs 2,893-crore sales for the year ended March 2015 and its losses reduced 5% year-on-year at Rs 571 crore, according to the company’s filings with the Registrar of Companies last week.
The firm’s accumulated losses stood at nearly Rs 5,320 crore
after eight years of operations.
Experts said gestation period in the highly competitive food and grocery retailing could be long and depends on expansion. “Consumers in this segment can be quite fickle and Aditya Birla Retail (ABRL) has been through several iterations in its retail model to make it work,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
“While losses have come down as a percentage of sales, they still have to find balance in terms of store location and margin mix,” he said.
ABRL closed FY15 with 482 ‘More’ branded supermarkets and 16
hypermarkets, covering about 2 million square feet of retail space.
The group entered retail space in 2007 after it acquired Trinethra Retail, which it merged with ABRL two years ago.
A year ago, the group restructured its retail business by carving
out the apparelmaking Madura Fashion and Lifestyle division from
Aditya Birla Nuvo Ltd (ABNL) and merging it with listed loss-making
Pantaloon Fashion and Retail Ltd. This created the country’s largest
branded apparel company by sales and number of stores. While it
was widely speculated that Birla would bring its loss-making supermarket
format ‘More’ under the new entity, the company said it had no
such plans. Unlike food and grocery retailing that operates on
wafer-thin margins, apparel retailing is a lucrative business
with margins as high as 30%.
However, ABRL is gradually reducing its store-level profitability.
Loss before interest, tax, depreciation and amortisation at Rs
163.96 crore during FY15 was 30% less than the previous year.
Ruchi Sally, director at retail consultancy Elargir Solutions,
pointed out that several of ‘More’ stores “are in small towns
where being profitable takes a bit longer”. Also, the market
in top cities are highly competitive with D’Mart, Reliance and
Future Group holding most of the market share, she said.
Retail baron Kishore Biyani’s Future Group last year merged its
retail business with Bharti Retail to create one of the biggest
supermarket chains with Rs 15,000 crore turnover. Mukesh Ambani’s
Reliance Retail had reported profit before depreciation interest
and taxes of Rs 784 crore last fiscal on revenues of Rs 17,640
(Published in The Economic Times)