Stocks with a consumption theme have been the darlings of the bourses in the recent bull run, even holding on to gains as broader markets fell. The stock of Provogue India, however, was a glaring exception, falling steeply over the past three years.
During the slowdown in late 2008 and early 2009, premium retailers such as Provogue were especially affected as consumers shut their wallets or traded down for value-for-money products. Provogue's stock took a sharp dive on flat revenues; FY-09 saw a sales growth of just six per cent. However, even as sales gradually recovered from the slump and Provogue began posting healthy revenue and profit growth, it was weighed down by its real estate plans.
The company planned to develop malls in smaller cities through a joint venture. The slowdown and real estate gloom delayed execution, with the first mall coming up only in late 2010. It further had to modify these plans into housing projects in a few cities on the backs of a number of malls by other players being set up there.
Meanwhile, a levy of excise duty on branded garments, high input costs and inflation biting into disposable income of consumers combined to crimp apparel sales for much of 2011. Provogue suffered two consecutive quarter of flat revenue growth, with the March and June quarters seeing growth of eight and four per cent respectively, compared to the year-ago periods.