Future Retail: Home retail sales continue to decline

Moneycontrol Bureau

Future Retail's (formerly Pantaloon Retail) value formats continue to see strong growth, but lifestyle, home retail same-store sales declined in Jan-March. Home retail business in particular has continued to be a drag on the overall growth, with sales declining now for the last four quarters. Same-store sales growth (sales at stores that are open for at least one year) at its lifestyle format, which includes Central, Brand Factory and Planet Sports, declined to 9.6 percent last quarter from 12.7 percent in Oct-Dec. Same-store sales at its home retail format, which includes eZone consumer durables outles and Home Town, declined 4.1 percent in Jan-March, compared with a 3.4 percent decline in Oct-Dec, 3.4 percent fall in Aug-Sep and 0.9 percent slip in Apr-June. Same-store sales at its value retail formats Big Bazaar, Food Bazaar and FBB (Fashion at Big Bazaar) outlets grew 8.1 percent in Q1, compared with 5.1 percent in the fourth quarter of 2012. Overall for the quarter, Kishore Biyani-led Future Retail's standalone net profit declined to Rs 2 crore from Rs 5 crore a year ago, while net sales were down 18 percent to Rs 911 crore.      Its gross margins slipped from 36 percent to 34 percent and EBITDA margin was at 11 precent, compared with 12 percent in the year ago quarter. The results are not really comparable since the results don't include Pantaloons and Pantaloon Factory outlet format, which were demerged in April. In the first quarter, Future Retail added nearly 0.33 million square feet of retail space, which included Big Bazaar, FBB, Brand Factory and eZone outlets. "Revenue growth has been challenging with weak macro and some store closures in recent quarters. Inventory days at 110-115 days have not seen any significant improvement too. We believe sustained pick-up in discretionary spending and more financial prudence would be needed to help improve cash flow generation," said Latika Chopra of JP Morgan.  Chopra maintained an "underweight" rating on the stock and cut its target price to Rs 150 from Rs 215.  Future Retail shares were down 1.3 percent at Rs 151.55 on NSE in morning trade on Thursday.