Delhi-based apparel retailer Cantabil Retail India has started a restructuring exercise that includes shutting down non-profitable outlets, slower expansion and gradually doing away with its sales strategy of offering 80 per cent flat discount throughout the year.
Cantabil Retail Managing Director Vijay Bansal said the company’s sales have dropped almost 20 per cent in the last 6-7 months due to rising raw material costs, levy of excise duty and continued inflation that has impacted the middle class’ buying power.
“So, instead of expanding aggressively, we are focusing on repositioning the brand and sustaining current profit margins,” he said. The company has shut more than 150 loss-making stores of its casual men’s wear brand Lafanso, which led to a loss of Rs 30 crore last year. It now operates only 45 stores of the brand. The company has also discontinued its production and doing away with excess inventory by selling the brand at heavy discount.
“Retail location and competition took a toll on the brand. Once inventory level reaches the minimum, we will start selling Lafanso in limited quantities through Cantabil stores,” Bansal said. The company also closed around 10 unprofitable stores of Cantabil and relocated some. It runs 300 stores of Cantabil now.
The company is gradually doing away with 80 per cent flat discount strategy, a key revenue driver at one point in time, and has started selling new stock at maximum retail price . This is because the imposition of excise duty, which is based on the MRP, has hit the discount model. “There was a time when everyone was getting into the business of discount retail to grab a large share of the market. But this system is feasible only in initial years of operations and not sustainable in the long run,” Bansal says.
The company clocked a net profit of Rs.12.5 crore on a turnover of Rs.186 crore in 2010-11. It got listed on the Bombay Stock Exchange in September last year after raising Rs.105 crore through an initial public offer. It had a total debt of Rs.50 crore on its books as on March’11.
It recently launched a premium men’s wear brand Kaneston, which is being sold through Cantabil stores.
Source : Economic Times