Fashion drives business at big retail chains

Retail chains such as Shoppers Stop, Future Retail and Pantaloons are heavily relying on fashion to boost margins and keep the registers ringing. Margins driven by the apparel segment are about 40 percent and private labels’ contribution is higher.

No wonder most apparel retailers focus on increasing the number of in-house labels, which are attracting higher footfall as well as better sales. Shoppers Stop, for instance, for the quarter ended September 2014, registered earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of 6.1 percent, 98 basis points more than in the year-ago period. The company expects the margin to be 6-6.5 percent in FY15, 7-7.5 percent in FY16 and about 8 percent, in the following quarter. And during the September quarter, the share of the apparel segment in Shoppers Stop’s business rose to 67 percent from 63.6 percent in the corresponding period last year.

Also the margin of its loss-making hypermarket chain, HyperCity, rose 140 basis points in the September quarter and the company is looking forward to a further rise 50-80 basis points in FY16, by when the contribution of fashion to HyperCity’s overall sales will increase to 19 percent. The chain recorded Ebitda break-even during the September quarter.

For the quarter, Kishore Biyani-led Future Retail too reported an Ebitda margin of 10.7 percent, 157 basis points more than in the year-ago period owing to a higher share of the apparel and home segments, which enjoyed higher margins. Even Pantaloons, now owned by Aditya Birla Group posted an increase of 400 basis points in its Ebitda margin for the September quarter despite losses.