HyperCity to stop consumer durables sales, resize stores

Nachiket Kelkar
moneycontrol.com

Shoppers Stop owned HyperCity will stop selling consumer durables and IT (information technology) products and even cut the size of some stores, in a bid to achieve its target to break-even by the end of calendar year 2015. HyperCity started off as a big box hypermarket chain selling everything from food and grocery to apparel, consumer durables and home products spread over 1 lakh square feet space. But now the company opens stores only in the 50,000-70,000 square feet range. It has recently opened a 30,000 square feet outlet in Bangalore, and if that format works well, then new HyperCity outlets could very well be of that size going ahead, Govind Shrikhande, MD, Shoppers Stop, told moneycontrol.com on Wednesday. "Last year itself we said that all new stores will be 50,000 square feet average, 70,000 max if we feel the potential of the catchment is large. But 50,000 is currently the benchmark and maybe 30,000 will be the new benchmark," he said. A 30,000 square feet HyperCity is expected to breakeven in 12-14 months, unlike the 18-24 months breakeven target at a typical HyperCity outlet. The company closed HyperCity outlet in Ludhiana last quarter and over the next two quarters is "rightsizing" two stores in Hyderabad and Vashi in Navi Mumbai. It might also resize one of the two stores in Thane, Shrikhande added. "We have already discontinued consumer durables and IT products in two stores, which actually frees up 15,000-20,000 square feet of space. So when you look at a 50,000-70,000 (size) model, and knock-off consumer durables and IT products and reduce further, say furniture and other categories, you can actually operate a proper mini-hypermarket in a 30,000 square feet, which is food and apparel," he said. The exit from consumer durables and IT products will be completed across its outlets over the next 12-15 months and that will automatically lead to rightsizing of stores and improve efficiency, he says. "If you can return the space your efficiency improves dramatically, margins improve dramatically. Consumer durables and IT products segment is anyways a lowest margin giver. In some cases if you are not able to return, then you can increase the fashion category and home category further," Elsewhere, fine jewellery sales are also down at Shoppers Stop outlets, inline with the overall industry, although that has been offset by growth in apparel sales. Shrikhande says watches and sun glasses, which are seeing strong sales could very well replace fine jewellery counters as it reworks its space in some of the stores. EXPANSION AHEAD OF PLAN Despite the overall uncertainties in the economic environment, Shoppers Stop is not slowing down its expansion. In fact, the company will achieve its full year expansion target in the first half itself. The company had earlier planned to open 8 Shoppers Stop outlets this year, but in the first half itself it will have 9 outlets open and may add some more in the second half. HyperCity too could be adding 2 more stores to its earlier target. "In first half itself we will beat our annual number. So we are likely to exceed by a large number. But I would wait till Q3 to really see how many more are coming up for fit-out," Shrikhande said. GROWTH TARGET MAINTAINED Shoppers Stop's first quarter standalone net profit trebled year-on-year to Rs 1.64 crore and total income rose 20 percent from a year ago Rs 537 crore.  On a consolidated basis, it reported a loss of Rs 1.1 crore. HyperCity's net loss last quarter widened to near Rs 25 crore from Rs 21 crore, due to a Rs 3 crore write-off for the closure of the Ludhiana outlet. What was positive though was that the department store operator's same-store sales rose 12 percent in April-June. Same-store sales or like-to-like sales measure sales at stores that are open for at least one year and doesn't take into account sales from new stores that may have been launched. "We continued to activate. We upped the stock level in the business. The inventory going up is directly helping tackle consumer demand and meet his needs. We have also been changing some brands that are not performing and getting some (high performing) brands like US Polo Association, LP and Celio to ensure their availability is higher," Shrikhande said. The company, though, has maintained its same-store sales growth target of 8 percent for the current financial year. "The outlook is still 7-8 percent, because frankly, I still don't know how much the economy is going to struggle," he said, adding, there is still a lot of action that has to be seen from the government to drive the economy. Shoppers Stop shares were trading up 3.4 percent at Rs 363 on NSE in afternoon trade on Wednesday. The stock is down 12.5 percent so far this financial year. Also Read: Focus now on under-penetrated infra services: HCL Tech nachiket.kelkar@network18online.com