IndiaRetailBiz

Spencer’s Retail, a Sanjiv Goenka-led retail arm of RPG group, which once ran a multi-format retail chain of around 400 stores, has trimmed down its operations in the last one year to bring down the number of its stores to 264.

The business, which was badly affected due to decline in demand as a consequence of global economic downturn, resulted in closure of over 100 stores in the last 12 or so months across the country. Apart from draining resources, these under performing stores were incurring huge expenses on salaries and rentals, resulting in non-viable operations.

The days of closing down of store are now behind the company and it has again begun to expand its retail network, though cautiously.

“The period of shut downs is now over. We have opened five large format stores during past three months and all have reported sales more than double the normal sales rate. So we are optimistic about revival,”  said SanjivGoenk, Vice Chairman of the Company, while speaking to reporters in New Delhi.

Although, the sales are showing signs of revival, they are still not enough to take the company “out of woods,” said Goenka. While, the company has recorded growth of 18 per cent in the same-store-sales, in the last 3 months, however, there is still a need for them to grow further. The costs should also come down substantially to make the operations profitable.

“Rentals are still very high despite dropping by an average 20 per cent or so,” said Goenka (ET report). The company has so far been able to prune rental costs by 12 per cent, according to Goenka.

Spencer’s is looking at breaking even its operations at store level within the next 6 month, while the break even at the company level, according to the report, is expected within a period of the next 12 months.

Under the circumstances, the company is cautious on expanding its network. While, the retailer has opened 5 new stores in the last 3 months, it is planning to set up another 10 during the financial year, at an investment of Rs 100 crore.

In order to raise further resources, Spencer’s is looking at diluting 10 per cent of its equity in favour of private investors. It is believed to have already begun talking with a few investors in this regard. The company will look at raising equity through IPO only after it achieve break-even. Spencer’s is also exploring induction of a multi-national retail player partner to sore up its back-end operations. The tie-up could be lines of Bharti-Walmart joint venture.