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This week in retail: As COVID-19 pandemic impacts footfalls, retailers project recovery in Q2FY22

Department store chain Shoppers Stop and apparel retailing major ABFRL have reported a decline in sales from March-end onwards.

May 30, 2021 / 01:02 PM IST
Retail Sector | Representative Image (PC-Shutterstock)

Retail Sector | Representative Image (PC-Shutterstock)

Retailers are staring at a bleak first quarter in FY22 even as states like Delhi ease lockdown restrictions. Grappling with low footfalls and waning demand, the industry is hopeful to witness recovery from the second quarter onwards with the onset of the festive season. Though the retailers had witnessed recovery in the fourth quarter of FY21, the recent set of restrictions have again derailed this growth.

Losses narrow in Q4

Shoppers Stop posted its best quarterly result of FY21 in the March quarter as COVID cases subsided and footfalls improved in stores. Its sales recovered to 90 percent of the Q4FY20 levels. The company narrowed down its losses to Rs 24 crore in Q4 as compared to Rs 127 crore in Q4 FY20. Its net sales declined 6.1 percent in Q4 to Rs 680.46 crore from Rs 724.38 crore in Q4 of FY20.

Earlier this week, Aditya Birla Fashion and Retail (ABFRL) registered a 51 percent jump in its earnings before interest, tax, depreciation, and amortisation (EBITDA) at Rs 253 crore for the fourth quarter ended March (Q4) as against Rs 167 crore in the corresponding period last year. The company’s revenue in Q4 stood at Rs 1822 crore, marginally below Rs 1832 crore from a year ago. Its net loss stood at Rs 196 crore in Q4 as compared to Rs 147 crore net loss during the corresponding period last year. The company informed this included a one-time tax impact of about Rs 109 crore.

Footwear player Relaxo Footwears registered over a 97 percent jump in its profits in Q4 at Rs 102 crore as compared to Rs 51.80 crore in the corresponding period last year. Its revenue from operations climbed by over 38 percent during the period to Rs 747.68 crore as opposed to Rs 540.58 crore in Q4, FY21.


Recovery derailed

However, with the recent curbs, these retailers are back to square one. According to ABFRL, only 15 percent of its total network of 3212 stores are operating at the moment. Ramesh Kumar Dua, MD, Relaxo Footwears informed that the company has closed five out of its eight production facilities given that over 85 percent market is closed down due to curbs. (Read here: Only 15% of market operations at the moment, says Relaxo Footwears MD Ramesh Kumar Dua)

This will impact the growth of the retailers in the first quarter of the financial year 2021 but they expect the festive season might bring in relief.

Venugopal Nair, CEO, and MD, Shoppers Stop, addressing investors at a post-earnings call on Monday said that the company expects the recovery to start from Q2 and progressively get better in Q3 and Q4.

"This year, Diwali and Dussehra are early, so this would also help in bringing back the business on track,” he said. (Read here: Hit hard by second wave, Shoppers Stop expects a recovery in Q2FY22)

Urgent plea for relief

Meanwhile, the Retailers Association of India (RAI) and the Shopping Centres Association of India (SCAI) have pleaded with the government to introduce relief measures such as an extension on the moratorium on their loans to deal with the crisis.

RAI has also asked for an extension on the renewal of existing permits, licences, no-objection certificates (NOCs); and permissions including shops and establishments’ licences, trade licences, food licences, fire NOCs, signage licences and others required by malls, shopping centres, retail stores, restaurants, and pubs, for one year. It also wants a relaxation in compliance requirements of retailers to pay MSME suppliers in 45 days’ time till March 2022.

While SCAI has urged the state governments to allow the reopening of the mall in the second phase of unlocking. According to the association, the industry has incurred losses to the tune of Rs 3000 crore in the past eight weeks since the lockdowns were imposed by various state governments including Delhi and Maharashtra.

RAI has also released a survey report which indicates the magnitude of the lockdown on retailers in the country. As per the survey, retailers across the country have witnessed 49 percent sales degrowth in April, 2021, as compared to the same period in 2019.

The associations have been repeatedly urging the government to come to their rescue but to no avail so far.

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Moneycontrol News
first published: May 30, 2021 01:02 pm
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