Retailers keep up sales growth

    Retailers keep up sales growth

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    The September quarter results of retailers show a continued recovery in consumer spending.

    Sales of listed retailers increased by a good 12 per cent in the September 2009 quarter compared with the same period in 2008, a bigger gain than the 8.2 per cent posted in the June 2009 quarter. However, this is yet a far cry from the 53.7 per cent increase in sales the sector saw in the September 2008 quarter over the same period in 2007, indicating that while consumers have loosened their purse strings, they are still treading cautiously.

    Growth across formats

    The key trend this quarter was the pick-up in sales for and premium retailers. Unlike the previous quarter that had seen value retailers such as and Pantaloon leading sales recovery, this time around, all retailers barring Raymonds and the troubled Vishal Retail have shown a growth in sales. Two out of every three retailers managed an increase of at least 10 per cent, compared to about one in three in the June quarter.

    Premium players such as Shoppers’ Stop and clocked strong growth of 11 and 31.7 per cent respectively. Shoppers’ Stop, in fact, saw same-store sales growth move back into positive territory at 1.8 per cent.

    Growth in Sept’09 quarter over Sept’08 quarter
    CompanySales (%)Net Profit (%)
    Brandhouse Ret.12.521.6
    Celebrity Fash.41.2*
    Kewal Kiran18.7109.7
    Koutouns Ret.23.020.5
    Pantaloon Ret.17.621.1
    Provogue10.112.0
    Shoppers’ Stop11.1*
    5.949.0
    Vishal Ret.-20.7
    Zodiac Cloth.2.12.2
    *Losses in Sept’08 quarter

    Trent, owner of and retail chains, posted a 5.9 per cent growth in sales, after sales declines for the past three quarters. Celebrity Fashions, which owns the brand Indian Terrian, too posted a whopping 41 per cent growth, showing a sustained recovery from the declines in earlier quarters. All the same, value retailers did manage higher growth rates than their premium counterparts, suggesting that recovery in lifestyle retail is only just tentative and that consumers still prefer ‘value’.

    Cost controls

    Muted sales spurred retailers to control costs to maintain margins and profitability. Employee costs of Koutons, Vishal Retail and Shoppers’ Stop have seen sustained declines. Other expenses saw a low 2 per cent growth in the September quarter compared to the 10 per cent plus growth rates of the earlier quarters.

    These measures saw operating profit margins move up steadily to 9.93 per cent, almost a 122 percentage point improvement since the December ’08 quarter. Margins remained a tad lower than the 10.2 per cent in the September quarter last year.

    Debt-funded store expansion in earlier years led to interest costs ballooning 57 per cent in the June ’09 quarter, having doubled in the quarter before that. But the rise in interest costs appears to have stemmed in the September quarter, increasing 26.8 per cent when compared to the same quarter in 2008.

    Net profit margins therefore bounced back to 4.2 per cent versus the low of 2.7 per cent hit last December. Players such as Shoppers’ Stop, Kewal Kiran and have seen substantial gains in both operating and net profit margins.

    Source: The Hindu Business Line