Aditya Birla Fashion downsizes Forever21

With dipping sales in fast fashion brand Forever 21, Aditya Birla Fashion and Retail (ABFRL), the licensee of American fast fashion brand is now downsizing stores and cutting costs. ABFRL reported a loss of Rs 23 crore in fast fashion business during the quarter ended December 2017, even as sales from the business declined 14 per cent from a year earlier to Rs 114 crore (net sales value, or NSV). Losses widened because Forever21 took a one-time inventory hit, Ashish Dikshit, MD, ABFRL’s Madura Lifestyle Business. However, NSV comparisons were also affected by changes in GST rates.

ABFRL has reduced the size of its oldest stores and will now focus on opening new but smaller stores. Most of these are stores opened by the brand before ABFRL acquired the licence for Forever21 from previous partners DLF Brands and Diana Retail.

ABFRL is expecting its fast fashion business to turn around by next quarter, driven by high double digit like to like sales growth. The firm has been focusing on cost cutting to help boost margins, primarily through renegotiating rents and reducing store sizes wherever possible including for Pantaloons, the firm’s departmental store chain.

Fast fashion brands like Zara and H&M usually operate stores of 25,000-50,000 sq. ft around the world and in India. ABFRL did not specify how small the new stores will be. Meanwhile Zara closed FY16-17 with Rs 1,023 crore in sales and 20 stores, according to the latest data. Parent Inditex SA operates Zara stores in a joint venture with Tata’s Trent. Zara also launched its own e-commerce website in India in October last year.