Tata’s retail arm Trent is undertaking a series of steps to rationalise costs at a time when the retail sector is reeling under high costs and weak consumer demand. The company is in process of amalgamating smaller subsidiaries under its fold to streamline the group’s structure, and also opting for stand-alone stores, not shopping malls, a senior executive said.
?We are looking at how operations of the smaller subsidiaries could be integrated with Westside in terms of shifting back-end operations from a city-based model to a central operation, and processing operations like merchandising, buying, accounts. We are hoping to realise these costs benefits,? company’s chief financial officer P Venkatesalu, said.
Trent is amalgamating two subsidiaries ? Fiora Link Road Properties and Trexa Private Limited ? by which both the companies will become a part of Westside. ?This will reduce the number of entities that need to be administered,? a document, on the scheme of amalgamation and arrangement, states. Trent has full ownership in both the subsidiaries.
Fiora was established to deal in properties and currently holds stake in Landmark. Trexa was incorporated to provide management consultancy to various industries including real estate projects, malls, and construction. Currently, Trent is in the process of integrating book and leisure retailer Landmark operations with Westside.
Trent’s cash and equivalent fell 10% to R269.6 crore for FY12 from R300.3 crore in the previous year. Analysts estimate a further drop of more than 10% for FY13 as industry-wide costs went up, while demand was tepid.
Trent had incurred total expenditure of R238.4 crore for the quarter ended December 31, 2012. In the previous two quarters, its expenses stood at R230 crore and R212.4 crore respectively. For the quarter ended March 31, 2012 the company incurred an expenditure of R217.5 crore.
?We are not being too aggressive. We are being cautious in our approach in picking properties and in our expansion,? another senior executive at Trent said. It is on track to open 10 Westside stores this year, although hypermarket format Starbazaar’s expansion pace remains slower as its cost of operations is higher, he said.
The company, which closed one Westside store in Gurgaon six months back, is also looking to set up stand-alone stores, particularly for Star Bazaar. ?In recent times, the common area maintenance cost in malls has become a serious problem. One cannot change maximum retail price (MRPs) based on the location. So now we are concentrating on having stand-alone stores,? the senior executive said. Rents in India account for 9-15% of retailers? revenue, higher than the global average of 4?10%, according to a report by Jones Lang LaSalle.
Many retailers have been moving their stores from shopping malls. According to property consultancy firm Jones Lang LaSalle, retail space absorption in Delhi-NCR fell 92% in the January-March quarter.