Retailers bet on established stores for future growth

Listed retailers have relied on their older stores to drive growth in recent quarters, with both Shopper's Stop and Pantaloon Retail reporting good same-store sales (stores which have been in operation for more than one year).

Cutting across segments, retailers have increased prices in categories such as food and clothing, and hope it will improve margins. Shoppers Stop, in its recent earnings call, said the retail chain saw a 22 per cent growth across formats, while department stores reported 29 per cent.

The company said customers' entry was showing strong growth at 33 per cent.

The company has 123 stores across India, including 38 department stores and nine ‘Hypercity' formats. Overall the chain saw a 10 per cent increase in average selling price and four per cent volume growth.

Pantaloon Retail (India) Ltd's overall sales grew by 17.6 per cent for the March quarter over the same period a year ago.

It managed a same-store sales growth of 10.2 per cent in lifestyle retail, while in value-retailing it was 10.3 per cent.

IIFL Institutional Equities, a brokerage firm, notes that same-store sales growth in the lifestyle format came off to10 per cent year-on-year compared with 20 per cent in the first half of the financial year 2011 for Pantaloon.

“The management attributed the slowdown in the lifestyle format to supply disruptions in the fashion segment caused by the hike in excise duty in March and steep increase in cotton prices, which necessitated price renegotiation with suppliers,” the report said.

guidance

The report said the management indicated a bounce-back in same-store sales growth in the fourth quarter of the financial year 2011, as 16 per cent price hikes have now been fully implemented and supply issues are behind. Pantaloon's space additions were aggressive at 0.7 m sq. ft in the March quarter. Pantaloon is likely to add 2.5 million sq. ft in financial year 2011 as against 1.8 m sq. ft in the last financial year.

This should result in higher growth in financial year 2012 as the stores ramp up, the report said.

Shopper's Stop said it saw overall retail space going up to 2.3 million sq. ft in the latest quarter from 2 million sq. ft in the previous quarter.

The retailer said it will add another eight lakh sq. ft this quarter, with 24 stores across formats.

According to Mr Govind Shrikhande, Managing Director, Shoppers Stop, “April has gone off well, and we are looking to high single-digit growth throughout the year. We believe the customer is ready to take some amount of price increases.”