HyperCity rightsizes retail formats for profitability

Written by Kirtika Suneja | New Delhi | Updated: Feb 15 2014, 10:39am hrs
To make its hypermarket venture profitable, the K Raheja-owned chain HyperCity has downsized its Amritsar and Hyderabad stores.

In Amritsar, the company did away with almost half the space while it let go over 30,000 square feet retail space at its store in Hyderabad.

According to Mark Ashman, chief executive officer of Hypercity Retail, the company aims to return around 2 lakh square feet across its 15 existing stores to reduce rent and operating costs and bring in efficiencies.

Besides, HyperCity has identified two formats for the stores going ahead about 45,000-50,000 square feet for the large stores and 25,000-30,000 square feet compact format for the smaller stores.

There are currently 15 HyperCity stores, spread over an area of 12.86 lakh square feet. The company reduced the Amritsar store from 1.5 lakh square feet to 50,000 square feet.

The Amritsar store carried a range of over 45,000 branded products catering to the needs of the entire family along with merchandise across categories such as food, grocery items, home appliances, clothing, childrens toys, games and sports goods.

Downsizing has a significant impact on profitability. We have rightsized two stores and will downsize two more, Ashman said.

In the third quarter ended December 31, Shoppers Stop -the umbrella brand including HyperCity, HomeStop, Mothercare, Crossword and MAC posted a 5.5% like-to-like growth slower than the double-digit growth in the earlier two quarters (15.5% in the September quarter and 12% in the June quarter).

The companys stand-alone net profit for the quarter stood at R17.34 crore, a jump of 1.5% year-on-year. The firms finance costs are increasing on account of higher debt.

On a consolidated basis, net profit was way lower at R5 crore, again affected on account of losses of its subsidiary HyperCity.

Though the sales growth from HyperCity stores rose 15%, the like-to-like sales growth of stores less than five years, declined 2%.

By downsizing larger stores or setting up small individual stores, the retailer plans to reduce costs on staffing, rental, electricity and maintenance.

As for the new store concept, these smaller HyperCity stores include setting up of smaller hyper markets, occupying an area of 30,000 square feet, across the country.

Unlike its larger siblings, which stack everything from food products, clothing, toys, accessories, sports equipment, furniture and electronics among others, the compact store will stack merchandise on a smaller scale without furniture and electronics.

The compact stores, the company believes, will help it secure better profits.