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Reliance Retail is rationalising and streamlining its store footprint to improve margins by judicious store closures. In the June quarter it closed around 230 stores with the aim of tightening its operations and improve performance metrics as it seeks to raise funds from investors and eventually take the company public.
In the first quarter of FY25, the company gross added 331 stores, but the net addition was 82. According to sources some parts of the closures were due to the overlapping of stores it had obtained from the Future Group when it had taken over the leases. The rest of the closures were more strategic either because they were making losses or to consolidate or because they were low margin formats.
A hint of this was given in the results presentation where it has mentioned ‘streamlining of operations with focus on improving margins.’ Apart from closing non-profitable stores the company has also been scaling its premium formats as a way to influence operating margins.
Sources said the retailer has been consciously closing down smaller stores in many places and expanding the floorplates of its outlets in order to give customers a better experience. From Q1 of FY24 onwards the company has drastically reduced its store additions as it consolidates its operations.
Operational focus
In the June quarter Reliance Retail’s performance was soft with flat profit growth and 7 per cent growth in revenue, partly due to the subdued demand in the fashion and lifestyle segment and weak growth in the Metro business, where it is consolidating operations.
Revenue per square feet also fell 8 per cent on year and this could be one of the reasons for the company to reduce its network. In fact per square feet revenue has been on a declining trend since the third quarter of FY22 when it reached a high of ₹9,956 per square foot. In the June quarter it was ₹6,039 per square feet. While not strictly comparable since Reliance Retail operates across a range of formats, Avenue Supermarts had a higher revenue per square feet at ₹32,941 in FY24.
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