Hypercity Retail, which began operations in 2006, expects to break even by financial year 2012-13 as the retailer looks to resize its stores to reduce operational costs and increase share of private labels for higher margins.
Mark Ashman, CEO, Hypercity told FE, “Our like-to-like growth has been 22% in the last fiscal. Some stores are profitable but the business is yet to turn cash-positive. We’re confident of breaking even in the next fiscal.” The company is the only loss-making venture of K Raheja-operated Shoppers Stop (SSL). SSL had a net profit of Rs 27.86 crore on revenues of Rs 459 crore for the third quarter of FY2010-11.
“Most hypermarkets in the West break even within 3-5 years of operations,” said Arvind Singhal, chairman, Technopak Advisors. “They have good resources and a different retail format. In India, where modern retail is just about finding its foothold, 4-7 years is the ideal time to turn profitable in this format. In that respect, Hypercity is on track.”
Re-sizing of stores has seen the retailer do away with the one lakh st ft format. Ashman said, “Every store we open will be boxes of 70,000-75,000 or 50,000-55,000 square feet, depending on the location. We’ve done away with the 1 lakh sq ft format, to bring down our cost of operation.”
The hypermarket also plans to increase share of private labels from 22% to 30% for better margins. In the apparel segment, which forms 7-10% of total sales, the share of private labels in menswear and women’s ethnic wear will be 90%, while that in kidswear will be increased to 70%. Ashman said, “We see a big opportunity in apparel and general merchandise. Margins from this segment will allow us to become very competitive.”
The company also intends to expand its current presence of 9 hypermarkets to 35, in the next 3-4 years. Ashman said.
Source : Financial Express