Hypercity aims to breakeven in FY15 with high margin biz

Business may not have been hyper so far for Hypercity, the Shoppers Stop-owned hypermarket chain. The company has now adopted a multi-pronged strategy to ensure it breaks even in 2015, reports CNBC-TV18's Farah Bookwala.

A net loss of Rs 88 crore in FY12 notwithstanding Hypercity's management is confident that it will break even in FY15. This confidence stems from the company's first quarter performance this fiscal where, despite waning consumer sentiment, higher costs its retail sales grew 15% y-o-y and its net loss declined to Rs 21 crore from Rs 24 crore in Q1 FY12.
To keep the momentum going Hypercity's management is rejigging its in-store product mix by scaling down low-margin categories such as electronics to focus on high-margin ones such as apparel.
Mark Ashman, chief executive officer, Hypercity Retail says, "If you look at the last quarter, our growth in apparel has been 22% and we have moved the contribution of apparel from 7% to 9%. We aim to double the apparel penetration in the next couple of years and increase its contribution to 15% of our business."
 
To drive volumes, Hypercity is looking to increase the contribution of its private label offerings and will be launching 10-15 new FMCG products such as washing powder and noodles under its private label banner going ahead.
On its expansion front it is looking to open only three stores a year in tier-I cities, which will measure 55,000-60,000 square feet each down from the 70,000 square feet format opted for a year ago. Moreover, it is also experimenting with smaller store formats.
"At the moment we are looking to open a 28,000 square foot store. We did like to see if we can get that opened within the next year. If that's successful, that gives us opportunities to get more such stores in cities like Mumbai, Hyderabad, Bangalore," says Ashman.
Although it is not going to be a smooth road ahead, expansion plans have already hit roadblocks in some areas as two malls including one in Mumbai, where Hypercity stores were set to open this year are delayed till FY14 due to slowdown in the real estate sector. A bigger concern is if the macro scenario worsens, consumer sentiment and purchasing power could get impacted further.