Reliance Retail, the retail arm of Reliance Industries Ltd (RIL), on July 23 reported Rs 962 net profit for the first quarter (Q1) of FY22, a jump of 123 percent year-on-year (YoY) as compared to Rs 431 crore reported in the corresponding period of the previous fiscal.
The company, which faced several headwinds during the quarter on account of localised restrictions around the country, delivered gross revenues of Rs 38,547 crores in Q1, a growth of 21.9 percent YoY, over Rs 31,620 crore in Q1 FY21. The company’s revenue after adjusting for the petro retailing business that was transferred out, grew at 32 percent YoY.
Reliance Retail’s EBITDA (earnings before interest, taxes, depreciation, and amortization) for the quarter stood at Rs 1,941 crore, up 80 percent YoY, as opposed to Rs 1,079 crore last year in Q1.
Its EBITDA margin for the quarter stood at 5.8 percent in comparison with 3.8 percent in Q1 of FY21.
Sequentially, however, the company reported a drop in its revenue and net profit. The company had reported Rs 2,247 crore net profit in the fourth quarter of FY21 and gross revenue of Rs 47,064 crore. The first quarter of FY21 had been impacted due to the nation-wide lockdown, however, by the fourth quarter retail businesses across the country had witnessed recovery. The onslaught of the second wave derailed this growth again.
Reliance Retail experienced significant disruptions in stores and logistical operations in Q1 due to the localised curbs across the nation and limited opening hours.
“Footfalls have dropped to 46 percent (as compared to pre-COVID), which is comparable to the same time last year when the first wave had struck and significantly lower than the 88-90 percent footfalls we saw in Q4, FY21, when business had started to see normalisation,” said Dinesh Thapar, Group CFO, Reliance Retail addressing a post-earnings briefing.
Reliance Retail operates retail chains across verticals such as grocery, consumer electronics, fashion and lifestyle and luxury. Reliance Fresh, SMART, Reliance Digital, Trends, Reliance Jewels, Project Eve, Hamleys are some of the brands in its portfolio.
Most of its business during the quarter, including that of digital, was confined to only essentials. Given the restrictions during the quarter, only 26 percent of its stores were operational, while 35 percent were partially operational.
According to Thapar, the company, however, experienced better trading conditions for fashion and lifestyle and consumer electronics this time around.
“EBITDA was at about Rs 2000 crore, up 80 percent, buoyed by fashion and lifestyle and consumer electronics,” informed Thapar.
The company’s revenue from consumer electronics increased by 1.8 times YoY in the quarter, while apparel and footwear revenue grew by three times YoY. Though the QoQ performance of its grocery business was impacted due to restrictions, it registered a double-digital growth YoY.
The second wave also hindered Reliance Retail’s expansion plans and the company could open 123 new stores in Q1 as compared to its target of 1000 stores across brands. Thapar informed that more than 700 stores are fitout ready and would be opened in Q2 as expansion resumes.
Digital to rescue
The company, which operates hyperlocal grocery platform JioMart and fashion and lifestyle website Ajio, RelianceDigital.in, accelerated its digital push during the quarter, which partially alleviated the impact on offline.
“Digital now accounts for about 20 percent of our overall sales as compared to under 5 percent in Q1 last year,” said Thapar.
Reliance Retail further extended the presence of JioMart, which is now present across 218 cities, while the orders on the platform during the quarter were up 25 percent QoQ with high repeats.
“Ajio continued to scale new heights and traffic and monthly active users and traffic on the platform were up by four times YoY; while RelianceDigital.in witnessed its highest ever quarterly sales,” informed Thapar.
Going ahead, the company plans to accelerate its new store openings, while also scaling up digital commerce and expanding category play on JioMart. It also aims to complete JustDial’s acquisition and initiate actions on business plans.
Thapar informed that with the easing of restrictions the business environment started to get better in June.
“We are encouraged to see the direction of change in July although it remains very cautious,” he added.