Meghna Maiti, Financial Chronicle
Mumbai,13 August 2012
Even as Pantaloon Retail India (PRIL) continues its expansion drive, post its deal to sell controlling stake in the Pantaloons format to the AV Birla group, Kishore Biyani CEO at Future group has embarked on a restructuring exercise to ride through the downturn.
PRIL increased its space under management by 0.55 million square
feet of retail space, during the quarter ending June, compared
with the year-ago period, the flagship of India’s largest
listed organised retailer has shut down two stores of its electronics
retail chain eZone and 10 stores of its core format Food Bazaar,
the company told analysts in a presentation last week.
Food Bazaar the supermarket format is a key component of Future Value Retail that brings in the lion’s share of the company’s revenues.
“Fresh food and grocery is a challenging format for most retailers. Biyani is trying to reduce the company’s losses by shutting down non-profitable stores,” said Harminder Sahni, managing director of Wazir Advisors.
In an analyst presentation, PRIL at the end of June quarter had a total operational retail space of 16.71 million square feet. “The company believes that in such challenging times, the focus has to be on areas like better inventory management, prudent cost management and more efficient store operations,” PRIL said in its quarterly result statement.
Devangshu Dutta, chief executive at Third Eyesight said that retailers should shut down stores located in wrong catchments, customers. “In such cases, the company should try to reform the stores. It’s sign of a healthy business,” he added.
Biyani’s eZone competes with Tata owned Croma and Videocon owned Next Retail, among others. The Food Bazaar unit has been facing increased competition from the Raheja owned HyperCITY; Reliance owned Reliance Mart and Super department stores amongst others.
Retailers in India have traditionally struggled to make a profit in the low margin food and grocery business as the fresh fruit and vegetables section has been their Achilles heel.
“During this period, the company focused as much on opening new stores in key locations as on improving store efficiencies. At a number of locations that weren’t performing up to the mark, the company decided to rationalise spaces either through shutting down non-performing sections of the store, conversion of lifestyle formats to value formats or full closure of stores,” said PRIL in the commentary of its results for its fourth quarter results announced last week.
PRIL’s gross space addition in the past 12 months was 2.37 million sq ft.