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Shoppers Stop Open To Partnerships With Foreign Firms

28 July, 2011

Retailer Shoppers Stop will look to explore partnerships with overseas firms once foreign direct investment is permitted in multi-brand retail, a top official told Reuters.

Shoppers Stop runs its food business under its Hypercity brand and also owns speciality stores and operates franchises under the brands Crossword, Mothercare, and MAC, among others.

“We are interested for partnerships especially on the food side. On the apparel side we are not interested,” Govind Shrikhande told Reuters in an interview late Wednesday.

Asia’s third-largest economy does not allow foreign ownership in multi-brand retail, and foreign ownership of single-brand retail is capped at 51 per cent. Overseas investment in multi-brand operations is confined to wholesale businesses.

However, India took a step towards opening the sector, which is dominated by small firms, after a government committee agreed to recommend to the cabinet allowing foreign firms to take a 51 per cent stake in multibrand firms.

The world’s four largest retailers — Wal-Mart Stores, Carrefour, Tesco and Metro AG — and many others are seeking to expand in India to tap rapidly growing spending power.

“The Indian organised market is still very small and with the increasing market size, there is scope for everyone to battle it out. Also it will help retailers who are in need for funds, to raise them and expand,” Shrikhande said.

Earlier this week, the company, part of the diversified K. Raheja Group, posted a consolidated loss of Rs 15.2 million in the June quarter from a profit of Rs 92.9 million in the same period a year ago.

Many larger Indian retailers are loss-making, with tight product margins, rising wages and high rents squeezing earnings.

“The loss was on account of the consolidation of Hypercity which happened in the second quarter last year. This is the last quarter in which the impact will be visible,” Shrikhande said.

ypercity which is currently loss-making at the operational level may see a turnaround in the next 18-24 months, he added.

Shoppers Stop runs 10 Hypercity stores and has plans to open two more this fiscal year and three more in the following year.

“For this format to break even we need a base build up of 15-17 stores,” Shrikhande said.

For Shoppers Stop, its flagship apparel and accessories department store brand, the company plans to open 8-10 stores in the current fiscal year.

The retailer expects same-store sales growth, a key measure for retailers, to remain in single digits in this fiscal year from 17 per cent in the year that ended in March. In the June quarter its same store sales clocked a 7 percent rise from 24 per cent in the first quarter of last year.

“The (cricket) World Cup and the IPL (Indian Premier League) matches impacted sales. Also overall I think the economy is slower than last year because of inflation and concerns of higher interest rates in the minds of consumers,” he said.

The company, squeezed by high prices of cotton and an excise duty hike for apparel, hopes for a partial rollback of the excise duty from the finance ministry soon, which would help maintain margins of its department store business.

Shares of the firm have risen 16 per cent this year compared to an 11 per cent fall in the main index.

 


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Shoppers Stop Open To Partnerships With Foreign Firms

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