Aditya Birla Nuvo, a part of the Aditya Birla group, plans to rejig its apparel business by opening 150 new stores at city centres, where footfall is higher, after closing 30 unviable stores, a top company official has said.
The company's move comes after its net loss widened to Rs 141.2 crore (Rs 1.41 billion) in the March-ended quarter, owing to mounting losses in apparels. The loss was Rs 82.2 crore (Rs 822 million) in the apparel business, against a loss of Rs 4.44 crore (Rs 44.4 million) in the corresponding quarter of the previous financial year.
Revenue from sale of garments fell 1 per cent to Rs 273.3 crore (Rs 2.73 billion) during the period, when consumers responded to the financial downturn by tightening their purse strings.
"In the current quarter, we plan to close 30 stores where sales per square feet have dropped significantly. We expect to save Rs 10 crore (Rs 100 million) annually with the closure of these unprofitable stores," said Pranab Barua, whole-time director of Aditya Birla Nuvo and chief executive of the textile and apparel business, Aditya Birla Group.
The apparel business arm of the company, which has Madura Garments Lifestyle & Retail and Peter England Fashions & Retail, runs 340 stores in the country.
Madura Garments has brands such as Louis Phillippe, Van Heusen and Allen Solly and a tie-up with fashion brand Esprit.
The company is also taking other cost cutting measures in apparels which are expected to save it Rs 100 crore (Rs 1 billion) in fiscal year 2010, he says.
"We will align all growing businesses and close the loss-making stores. Moreover, we have a plan to reduce the store area in some cases," he added.
The company also plans to revive the Allen Solley brand to boost revenues and improve visibility. "Van Heusen, Louise Phillippe and Peter England were doing very well when Allen Solly sales was falling," he said.
Aditya Birla Retail, another group company which runs supermarkets and hypermarkets, has closed 70 unviable stores of its More chain to improve profitability. Almost all retailers, such as the Future group, Reliance Retail and others, have scaled down expansion as shoppers defer purchases and downtrade to beat the slowing economy.
Analysts cited high leverage positions and rising debt to equity ratios as reasons for the slower expansion of retailers. 'Across the board, expansion plans are being relooked, due to capital scarcity and catchment reassessment. Given high debt levels and an almost dormant equity market, the capital for growth has become scarce,' says a report from Edelweiss Securities.