Sales
Net profit
Employee cost as % of sales
Interest as % of net sales

Bata
Pantaloon
Rei Six Ten Retail Ltd.
Shoppers Stop
Store One Retail India Ltd.
Trent
Vishal

RETAIL EQUITY

Note:
1. All figures quoted are in Rs. (Cr.)
2. Information has been sourced from bseindia.com & moneycontrol.com.
3. Net profit figures refer to net profit after interest and taxes.
4. The data has been derived from both audited and unaudited stand alone accounts as available at the time of composing the newsletter

NET PROFIT

As a result of aggressive rental re-negotiations retail profitability is up 2.5 times for retailers listed for more than one year. For the purpose of this calculation we excluded Vishal losses since they skewed the total figures. The increase in profits is largely on account of Shoppers Stop which overcame a loss of Rs 11 crore in Q2 last year to achieve a profit of Rs 12 crore in Q2 this year. Brands listed for more than one year registered a moderate growth of 31% in terms of net profit.

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EMPLOYEE COST AS % OF NET SALES

Employee costs as a proportion of sales for the industry (retail and brands) have come down to 5.51% percent in September 2009 from 6.40% percent in the corresponding quarter a year ago. Both retailers and Brands have seen some rationalization as companies have tightened their belts, Bata being a notable exception. Recruitment in retail continues to be tightly controlled with the bulk of the new recruitments happening at an operations level.

INTEREST AS % OF NET SALES

Interest costs as a proportion of sales for the industry (brands and retail) have gone up to 3.22% percent in September 2009 from 3.09% percent in the corresponding quarter a year ago. Compared to Q 1, interest costs at Trent have doubled. Store One interest costs reflect the period of restructuring in the company during which most stores were shut down. Two new stores have recently been re-launched in Pune and Nagpur which should be reflected in next quarter’s sales.

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2.0 COMPANY WISE RESULTS

Note: All expense figures have been higlighted in blue. A negative variance % in expenses means that expenses have reduced.

2.1 BRANDS

Archies

• Sales: Rs 36.96 crores, up 4.367% from last year same quarter
• Net Profit: Rs 2.77 crores i.e. 7.50% of sales
• Interest Cost: 0.93% of sales
• Employee Cost: Rs 4.09 crores i.e. 11.06% of sales

Brand House

• Sales: Rs 188.82 crores
• Net Profit: Rs 8.55 crores i.e. 4.53% of sales
• Interest Cost: 2.31% of sales
• Employee Cost: Rs 3.37 crores i.e. 1.79% of sales

Celebrity Fashions Ltd

• Sales: Rs 80.32 crores, up 41.25% from last year same quarter
• Net Profit: Rs 0.23 crores i.e. 0.28% of sales
• Interest Cost: 9.27% of sales
• Employee Cost: Rs 12.03 crores i.e. 14.97% of sales

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Kewal Kiran Clothing

• Sales: Rs 57.53 crores, up 18.81% from last year same quarter
• Net Profit: Rs 11.47 crores i.e. 19.94% of sales
• Interest Cost: 1.04% of sales
• Employee Cost: Rs 5.73 crores i.e. 9.96% of sales

Koutons Retail India Ltd.

• Sales: Rs 347.89 crores, up 23.20% from last year same quarter
• Net Profit: Rs 23.59 crores i.e. 6.78% of sales
• Interest Cost: 6.38% of sales
• Employee Cost: Rs 3.40 crores i.e. 0.98% of sales .

Liberty Shoes Ltd

• Sales: Rs 63.19 crores, up 20.20% from last year same quarter
• Net Profit: Rs 3.02 crores i.e. 4.77% of sales
• Interest Cost: 3.45% of sales
• Employee Cost: Rs 6.80 crores i.e. 10.76% of sales

Provogue

• Sales: Rs 121.35 crores, up 9.00% from last year same quarter
• Net Profit: Rs 8.78 crores i.e. 7.24% of sales
• Interest Cost: 3.86% of sales
• Employee Cost: Rs 4.08 crores i.e. 3.36% of sales
• Expenditure declined 6.8% as lease rentals of some properties were revised downwards, which boosted operating performance.

Timex Watches Ltd.

• Sales: Rs40.31 crores, up 6.19% from last year same quarter
• Net Profit: Rs 3.26 crores i.e. 8.09% of sales
• Interest Cost: 0.05% of sales
• Employee Cost: Rs 3.77 crores i.e. 9.35% of sales

Titan

• Sales: Rs 1146.88 crores, up 5.34% from last year same quarter
• Net Profit: Rs 77.6 crores i.e. 6.77% of sales
• Interest Cost: 0.44% of sales
• Employee Cost: Rs -65.18 crores i.e.5.68% of sales

Zodiac Clothing

• Sales: Rs 73.56 crores, up 0.55% from last year same quarter
• Net Profit: Rs 8.31 crores i.e. 11.30% of sales
• Interest Cost: 0.48% of sales
• Employee Cost: Rs 11.15 crores i.e. 15.16% of sales

2.1 RETAILERS

Bata

• Sales: Rs 260.68 crores, up 15.72% from last year same quarter
• Net Profit: Rs 13.15 crores i.e. 5.04% of sales
• Interest Cost: 0.31% of sales
• Employee Cost: Rs 42.50 crores i.e. 16.30% of sales

Pantaloon Retail

• Sales: Rs 1777.02 crores, up 17.59% from last year same quarter
• Net Profit: Rs 43.82 crores i.e. 2.47% of sales
• Interest Cost: 4.89% of sales
• Employee Cost: Rs 71.81 crores i.e. 4.04% of sales
• Same-store sales for value retailing increased by around 7% and for lifestyle retailing by about 11%. Net profit increased 21% to Rs 43.82 crore, helped by other income.

Rei Six Ten Retail Ltd.

• Sales: Rs 166.13 crores
• Net Profit: Rs 8.28 crores i.e. 4.98% of sales
• Interest Cost: 0.01% of sales

• Sales: Rs 371.50 crores, up 9.63% from last year same quarter
• Net Profit: Rs 12.06 crores i.e. 3.25% of sales
• Interest Cost: 1.47% of sales
• Employee Cost: Rs 20.74 crores i.e. 5.58% of sales
• Shoppers Stop showed a revenues increased of 9%, as the number of customers entering the stores increased 5.3%. Shoppers Stop has changed its depreciation strategy. It will write off its assets in seven to 10 years, depending on the products, instead of three to five years till now, which has contributed to improving profits.

Store One Retail India Ltd.

• Sales: Rs 2.85 crores, down -93.30% from last year same quarter
• Net Loss: Rs -9.35 crores i.e. -328.58% of sales
• Interest Cost: 155.36% of sales
• Employee Cost: Rs 0.58 crores i.e. 20.49% of sales

Trent

• Sales: Rs 147.98 crores, up 10.85% from last year same quarter
• Net Profit: Rs 5.26 crores i.e. 3.55% of sales
• Interest Cost: 1.14% of sales
• Employee Cost: Rs 10.27 crores i.e. 6.94% of sales
• Total expenditure grew at a relatively slower pace of 6%, as advertising and sales promotion costs increased by just 1.8% and total raw material costs grew 4.6%.

Vishal

• Sales: Rs 284.03 crores, down -20.74% from last year same quarter
• Net Loss: Rs -95.62 crores i.e. -33.66% of sales
• Interest Cost: 7.95% of sales
• Employee Cost: Rs -22.74 crores i.e. 8.01% of sales
• Vishal Retail has been bailed out by its bankers who have put together a corporate debt-restructuring plan for the company, which has piled up a debt of Rs 700 crore.

Retailers are of the opinion that the worst is over and that going forward the sector results would improve as store expansion resumes and retailers manage to control their costs. However, availability of low-cost capital will be the key to growth. As the government continues to disallow foreign direct investment in multi-brand retailing the bigger business houses — such as Reliance, Bharti and the Tatas — may be in a position to support their retail initiatives for extended periods, till they’re on their feet, but chains like Pantaloon, which has piled up a debt of to Rs 3.800 crore, will now find it increasingly tough to grow. The cost of rolling out stores at an estimated Rs 1,800-2,000 per sq ft isn’t small and the high interest cost on the existing debt limits profits. With annual profits expected to be around Rs 250-300 crore, it’s hard to see how Pantaloon can add 2.5-3 million sq feet annually that it’s talking about. FMCG companies are also adding to the retail pressure by refusing to give retailers higher margins. Their argument is that modern retail didn’t really give them the kind of throughput needed to justify the margins. They are also upset that retailers are pushing private labels.

Net net, i t would seem that the real journey of Indian retail has just begun. The market seems full of potential, but the ability to deliver retail not just speedily but profitably is what will seperate the winners from the losers.