Quick commerce and the rise of home-grown boutique supermarkets such as Ratnadeep have taken their toll on RP-Sanjiv Goenka Group’s Spencer’s hypermarket in Hyderabad, which is shutting down.
The first of the group’s hypermarkets in the country, set up 23 years ago, is among the 50-odd stores that Spencer’s has decided to shut down this month, in a bid to improve profitability.
A large number of customers are flocking to the Musheerabad outlet to grab the shop-closure discounts. “After the proliferation of quick commerce, online grocery stores and mushrooming of homegrown supermarkets such as Ratnadeep, footfalls have fallen significantly. There was a significant drop in the numbers after the Covid pandemic,” a Spencer’s executive said.
The company has been downing shutters in several southern States. It closed 19 ‘non-performing’ stores across the South, including key locations like Chennai, Kerala, and Hyderabad, in the last financial year. More are on the anvil.
Focus on Eastern India
Addressing Spencer’s investor call after the first quarter results, Anuj Singh, Chief Executive Officer and Managing Director of Spencer’s Retail Ltd said that the 49 stores that were being closed contributed 22 per cent to the company’s turnover. “They accounted for losses to the tune of ₹56 crore,” he said.
While the exit will impact the top-line in the short term, it is expected to double store EBITDA and pave the way for EBITDA breakeven in the next 6-9 months.
“The exit aims to improve profitability by focusing on regions such as Eastern India and Uttar Pradesh with stronger brand presence and operational performance. The company plans to optimise its distribution and support structures, targeting a 20 per cent reduction in overhead costs,” he said.
Post the closure of 49 stores, the trading area of Spencer’s comes down to 8 lakh sq ft from 13 lakh sq ft. The company’s decision followed after it continued to incur losses. It posted a loss of ₹43.43 crore for the first quarter of this fiscal, and its current liabilities, including current borrowings, exceed current assets by ₹655.79 crore as of June 30, 2024.
The company is planning to add 8-10 stores annually in the new focus regions. However, there are no store closures planned for Nature’s Basket.
The company said it is focussing on the improvement of margins through the discontinuance of loss-making/low-margin stores, and cost reduction initiatives.
“We strongly believe this move allows the business to focus and expand in its core, profitable & higher growth geographies of East and North and accelerate its journey toward profitability,” Shashwat Goenka, Chairman of the company, said.
Iconic name
For consumers in Chennai, Spencer’s is a nostalgic name as the iconic Spencer Plaza built in 1863–1864, established by Charles Durant and JW Spencer in Anna Salai is thought to be India’s first shopping mall. It slowly lost its charm when Express Avenue (EA) came just 500 m across the road. It gradually lost footfalls too to spacious malls like EA, Phoenix Marketcity and RR Mall.
(with inputs from TE Raja Simhan in Chennai)