I would not bank upon higher growth for the next few quarters,” said Govind Shrikhande, managing director of Shoppers Stop.
RPG Group-owned Spencer’s Retail, which has 25 hypermarkets in the country, shut down nine stores in Pune in December. Rajan Raheja-owned Globus Stores closed its prominent Globus store in Mumbai’s upmarket Bandra area in May.
Fitch Ratings’ India Ratings & Research, which has maintained a negative outlook on the retail sector for the second half of the year, sees higher inflation and marginal nominal wage growth to act as major deterrents to consumer spending. “Margin pressures will continue to impact credit profile of retailers,” the agency said in a recent report.
Gutted shopping complexes with poorly planned structures are no longer a thing of the past. For example, in Mumbai’s Kanjurmarg area, people throng Huma Mall primarily due to its multiplex. Says local resident Ashita Aggarwal, “Most of the brands present here are not exciting. We come here to watch a movie only if no other place has tickets available.”
“In such situations, companies have to be prudent. We are being cautious in our approach to our expansion and even in picking properties. We are not being too aggressive right now,” Trent’s chief financial officer P Venkatesullu said.
As per, Mahindra Retail that runs Mom & Me is planning to shut ten stores due to sustained losses.
Slow and steady
The top three listed retailers, Future Group, Tata Trent and Shoppers Stop, will add about 1.98 million sq ft of total space this year, 22% lower than the space they added last year. “Retailers are looking at a moderate pace for additions under 10% in FY14 as against the range of 15-30%, seen in the past two-three years,” Fitch’s India Ratings believes.
“Retailers have started to look at their business model in a sensible way. They have realised that they should consolidate their operations first, before rolling out another set of stores,” said Mohit Bahl, director, transaction services at KPMG.
Over the last one and a half years, India’s slowing economy and rising inflation have taken a toll on discretionary spending by consumers. Slow economic growth—the