Mukesh Ambani, who brought in a new team of expats to head his retail business in the second management shakeup in almost a year, has given the new team three years to turn around the business, said at least two top company officials familiar with the development.
“All formats which had completed a year of operations as on April 1 have been given a three- year time frame to get into the black,” said one top Reliance official.
Reliance Retail has named Rob Cissell, former chief operating officer of Walmart China, as CEO. Shawn Gray, vice-president in-charge of store operations of the same company, will join the Ambani firm as COO.
The two executives from Walmart China will join Reliance Retail in September.
Another senior Reliance Retail official told Financial Chronicle, “Our chairman’s target for turnaround is very aggressive. His focus is on the group’s retail business because he wants to balance RIL’s portfolio of industries and de-risk its core business. We are focused on growth, expansion and profits this year,” said another top company official.
Reliance Retail is now the largest food retailer in India and has the highest geographical footprint with over 1,000 stores across 86 cities. It also has the most diversified portfolio in terms of formats among all retailers in the country.
“All specialty formats, including electronics and apparel, are poised to attain market leadership position in the next two years. Reliance Retail’s customers will increase multi-fold in the years to come on the back of aggressive investment planned to grow the value format,” Ambani, chairman at Reliance Industries, the parent of Reliance Retail, told the recent annual general body meeting of shareholders.
Harminder Sahni, MD – retail sector consultancy firm Wazir Advisors, said, “Reliance Retail can make a profit in three years. However, if they continue to focus on store-expansion and doubling the number of stores in three years they will not be able to contain losses and make a profit.”
In its fresh fruit and vegetables business called Reliance Fresh, the company aims to reduce the total shrinkage — that is, pilferage and spoilage — to 2 per cent. A logistics expert who has worked with the retail industry said, “Given the design of many Reliance Fresh stores and their location it will be rather difficult to achieve these targets. More importantly Reliance needs to increase its share of higher margin non-fresh food and grocery items if it is to wipe the red off its balance sheet.”
The group’s retail business reported losses in excess of Rs 351.41 crore in 2010-2011. Reliance Retail, a subsidiary of the NSE-listed RIL, had in 2009-10 recorded a profit after tax of Rs 18.22 crore. In 2010-2011, it showed a loss of Rs 24.07 crore on a turnover of Rs 592 crore. Reliance Fresh saw its losses in 2010-2011 increase to Rs 159.94 crore from Rs 135 crore in the previous year, even though sales rose to Rs 2,513.59 crore from Rs 2,083.99 crore.
“Reliance Retail is now at the inflection point of a new paradigm. We are positioning Reliance Retail to be the undisputed leader in retailing in India. By adopting a multi- format retail model, Reliance Retail is able to successfully create a large number of retailing opportunities that are individually driven to create leadership position in respective categories,” Ambani had said at the meeting.
Source : Financial Chronicle