Reliance Retail, the retail arm of Reliance Industries, has shut more than 60 loss-making Reliance Fresh stores in the country in the last one year mainly in the value (food and grocery) retailing as it is focusing on reducing losses by shutting unprofitable stores, sources close to the development told FE.
According to a senior official of the company, there are around 465 value format stores operational, including Reliance Fresh and Reliance Smart, across the country after closure of more than 60 Reliance Fresh stores. The stores which have been shut were due for lease renewal. In many cases, the landlords were asking for higher rentals but since the stores were lossmaking the company didn’t find it viable to renew and opted to close them. In Mumbai, around nine Reliance Fresh stores have been shut in the last one year while only one Fresh store was added.
The company has added eight Reliance Smart stores in Mumbai, and is focusing on expanding this new format launched almost seven months ago. The new format Reliance Smart comprises clothing, accessories, among others, which fetches higher margins, ranges from a size of 7,000 sq ft to 20,000 sq ft. Reliance Fresh format stores ranges between 1,500 sq ft to 3,000 sq ft. At present, per sq ft revenue of Reliance Fresh is around R2,500/sq ft to R3,000/sq ft. The company declined to comment on an email query sent by FE.
The store optimisation exercise appears to have helped in improving the company’s profits before depreciation interest and taxes (PBDIT) which jumped 40.5% in Q3FY17 to R333 crore from Q3FY16. Reliance Retail’s turnover rose 47.22% from a year ago to R8,688 crore in Q3FY17. The company reported an Ebit margin of 2.7% in Q3FY17 compared to 2.5% in Q3FY16. Arvind Singhal, chairman, Technopak, said, “Reliance Retail has been consistently reporting improvement in turnover and margins for the last few years. Shutting down loss-making stores and focus on expanding profitable formats has helped the company to improve its margins. The growth momentum of the company is expected to continue.”
Moreover, Reliance Fresh was the first format launched by the company when they entered the retail business in 2006, and with the format launched long enough, the company is able to identify stores which has potential to be profitable while stores which are constantly lossmaking and accordingly they are taking a call to shut those, Singhal said.
Reliance Retail added 308 stores in the last nine months, taking its store count to 3,553 and an operating total of 13.25 million sq ft retail space across the country, as of December 2016, but it has also shut around 60 loss-making stores across the country in the value format. The value format is the biggest revenue generator for Reliance Retail, contributing approximately 50% of revenues at R21,612 crore in FY16.
Reliance Retail operates around 12 formats like Reliance Fresh, Reliance Smart, Reliance Trends, Reliance Market, Reliance Digital, Reliance Jewels, among others.