Vishal Retail, the Delhi-based value retailer, which yesterday announced incurring net loss of Rs 114.72 crore in the last quarter (Q4) of FY 2008-09, compared to net profit of Rs 10.40 crore in (Q4) of 2007-08, has identified unrestrained expansion of its retail network as one of the main causes of its present problems.
“Unbridled expansion coupled with the economic recession created a mess resulting in this huge loss,” said Ambeek Khemka, Group President, Vishal Retail.
As such, apart from taking other measures to bring operations back on track, the retailer has decided to consolidate its operations by closing down up to 10 non-performing stores out of 170 stores being currently operated by the company. These stores are expected to be closed down in the coming months.
“We are looking to consolidate our business and close down unviable stores,” said Ambeek Khemka. “Now we are identifying unviable stores and within months we will close down up to 10 of them,” he added.
Vishal, which reported a net negative (loss) EPS (earning per share) of Rs 51.22 for Q4 (2008-09), compared to nett EPS of Rs 4.61 for Q4 (2007-08), was once during the year operating over 180 hypermarket (megastore) format stores and occupying nearly 3 million sq ft of space, across the country. 20 of the presently operated stores in the retail chain are franchisee managed.
Apart from closing down non-performing stores, the company has also taken measures to save money on payroll expenses. It has already reduced manpower strength from 14,500 employees during the peak boom time to around 8,800 employees at present.
Vishal Retail, according to Khemka, is also busy restructuring its ballooning debt of Rs 740 crore.
“We are talking with our lenders to reschedule our debts, which are worth around Rs 740 crore,” added Khemka.
The debt for the Vishal Retail during the year has increased by nearly 40 per cent, which has resulted in the company becoming one of the most leveraged companies in retail business.
The company, which was operating through a network of Distribution Centres (cental godowns) across the country, has also closed down all of them except the one being operated from Gurgaon near Delhi in Haryana.
“We have already centralised our warehousing operations,” said Khemka.
Vishal Retail also took several initiatives like reducing real estate expenses by renegotiating lease rents with property owners, renting out space for shop-in-shop counters to local/regional brands, and creating display space for national brands, for improving its cash flows during the year.
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3 responses so far ↓
Dharnendra Doshi // Jul 27, 2009 at 9:27 am
At least the management has been frank enough to admit the area of mistake. Mindless land grabbing was the highlight of last year and most of the modern retailers were guilty of this. The fight was for Sqfts rather than customer retention.
Hope all retailers bring out changes in their policies making customers the centre point for all descisions.
Nishu Kr Gupta // Jul 30, 2009 at 10:54 am
Arising due to an oversight of the nuances of retail business and a grossly unbelievable over-estimation of scalability plans. Retail in India has been shifting to extremes as far as last two years are concerned. In the first year, companies went on an overdrive acquiring properties, hiring people, and constructing big expansion plans without really comprehending the stage at which India’s retail sectors is in. Now companies are at the other extreme, closing down unviable stores, Laying off people and restraining any expansion plans till the sector looks up.
Sapna.Suru // Aug 29, 2009 at 7:47 pm
Well not only laying of people, Vishal Retail need to improve its HR polices and give some power to its HR , unwanted penalty on employees, no bonus, actually no motivation factor at all, over all vishal retail is running on Formats , formats and formats and nothing else , sales is not the main concern the main concern is erasing of unwanted formats from the system, there people who are just sitting and taking huge perks just to make formats and doing the courier job, but actually end of the results are zero, words like doli, kehla, super which are main buzz words in HR and people are ready to leave the company on low salary, but due to the recent recession opportunities ae less,and companies like vishal are taking the full benefit.
the company need to under stand the human value which actually runs the whole system and get rid of unwanted formats .
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