Fashion retailers are seeking rental rebates from high-street landlords and shopping malls as the Covid-19 pandemic continues to play havoc with their businesses. “We are in negotiations with our landlords for complete waivers on rentals for stores, where business has come to a standstill, due to the lockdown,” said Sundeep Chugh, CEO and MD, Benetton India.
For the subsequent months, too, as the lockdowns restrictions are eased, Chugh says, the company will ask for concessions on the rents.
Another player Cantabil Retail India has invoked force majeure in cities, where its stores are not operational due to the Covid-induced curbs. Out of the company’s over 300 stores only 12 stores are operational at moment
“We are also trying to get further relief for the coming months as the stores reopen,” said Shivendra Nigam, CFO, Cantabil Retail India.
Value retailers, which have a good presence in the smaller towns and hence fared better last year as compared to the metro and tier-I focussed retail chains, are also impacted this time around.
According to Vineet Jain, COO, V-Mart Retail, while the company was witnessing good recovery in the quarter-ended March, the second wave has hit their business. About 40-50 percent of its 279 stores are operational at moment, of which more than 70 percent are located in the tier III and beyond towns. Jain said that the company is mulling to seek support from its landlords if the lockdowns are extended.
Malls in a tight spot
Retailers report that though landlords at high-streets and other locations, have been more open to negotiate rentals, shopping malls are reluctant to extend relief this time around — understandably so.
“The negotiations with shopping malls are a bit tough,” shared a retailer.
According to a report released by the Shopping Centres Association of India (SCAI) in April, the industry’s revenue dropped by almost half due to local restrictions in mid-March, whereas prior to this it was clocking Rs 1500 crore revenue per month.
“We are looking at the relief packages for retailer and mulling the next course of action,” said Rima Kirtikar, CMO of Thane-based Viviana Mall. However, the industry has to realise, she added, that the malls are suffering as despite getting no business, we have ongoing expenses.
Last year, several malls had offered rental rebates to their retailers. Viviana Mall had waived off the rent for the lockdown months and then later offered discounts of up to 50 percent to the retailers. DLF malls, in the first quarter (Q1) of FY21, waived the minimum guarantee (MG) rent for its retailers, while in Q2, it gave a 70 percent rebate on MG rent for food and beverage players and 50 percent to the retailers. Inorbit Mall and Nexus Mall also had given waivers to their retailers.
Retailers incur heavy costs on rentals, especially, at high-street locations and shopping malls. Monthly rentals for a metro city-based shopping mall fall in the range of Rs 200-600 per square foot depending on the location of the shop within a mall, according to industry estimates. Though rentals at premium high street locations such as Khan Market in New Delhi and Bandra Linking Road in Mumbai have declined due to the pandemic, shows a recent report by ANAROCK Retail, the monthly rentals at these places still stand in the range of Rs 750-1100 per square foot.
Struggle for footfalls continue
Beleaguered retailers have been struggling with low footfalls since the government imposed a nation-wide lockdown in March last year as the first wave of the COVID-19 pandemic had hit the country.
As cases subsided towards the end of the year, most retailers reported 70-80 percent footfalls as compared to the pre-COVID period, which further improved between January-March, 2021.
Last week, while reporting its March-ended fourth quarter results Reliance Retail, shared that the footfalls at its stores, which stood at 88 percent of the pre-Covid levels in Q4 dropped to 35-40 percent of the pre-COVID levels in April. Reliance Retail, the retail arm of Reliance Industries, operates stores in grocery, fashion and lifestyle and electronics categories.
Malls suffered a similar fate. As of February, malls were on the verge of recovery and according to SCAI, were witnessing 75 percent of pre-Covid (before March, 2020) footfalls. The business though, SCAI revealed, had seen a 90 percent recovery in the recent months. However, as state governments impose a fresh set of curbs and lockdowns to battle the second wave of COVID-19, shopping malls are back to square one.
Given the uncertainty of the situation as reports of a third wave emerge, stalwarts say that the industry will have to work together to find a way out.
“With over 6 million stores in the country which sell non-essentials, this second wave will require retail industry participants to work together for each other's survival,” Kumar Rajagopalan CEO, Retailers Association of India (RAI).