Arvind Limited is in the process of restructuring its strategy for its Megamart retail chain and has shut around 30 loss-making outlets in October-December. The company is likely to shut another 50 loss-making stores in the next couple of years, according to sources close to the development.
About 95 company stores are at present operational. Arvind has also created a new value department chain branded Unlimited by converting large stores of Megamart that has been struggling to shed its discount format image and sell premium brands without discount. The Ahmedabad-based firm has already re-branded nearly 25 Megamart outlets, which are more than 10,000 square feet each as Unlimited and plans to have 125 stores under the new format in five years.
Arvind will sell premium brands such as Arrow and US Polo at Unlimited stores but will focus more on mass-priced franchise brands such as Geoffrey Beene and Cherokee. The company plans to focus on women and kids-wear too.
A source close to the development told FE, that another 50 Megamart stores are likely to be closed in the next couple of years while the company will keep adding 15-20 larger-format stores every year.
The company didn’t respond to an email query sent by FE.
Over the last three years, Arvind has been optimising the Megamart chain in an effort to improve its profitability and the store count has come down from 216 in FY12 to 140 in FY15. By the end of December quarter the company has 95 stores operational.
Profit’s of the company in the quarter ending December was also down 5.5% from a year ago to Rs 103.30 crore mainly due to Megamart store closures, analysts said.“Arvind’s consolidated revenue stood at Rs 2,157 crore was marginally below our estimates. While brands and retail grew 12% year-on-year, it was offset by de-growth in retail due to Megamart store closures,” said Kashyap Pujari, executive director midcaps, Axis Capital in a report.
According to a Motilal Oswal report, in the quarter ending December, brands and retail grew 12% was led by 22% growth in the brands segment excluding Megamart.
Megamart de-grew by 16% on account of store closures. Same store sales growth for brands stood at 1.7% while for Megamart it was down 13.9%. Power brands grew by 15%.
Megamart is part of the company’s entry-price strategy and besides selling third-party brands, it sells its own brands such as Newport and Excalibur exclusively through this chain. Megamart also sells brands like Ruggers, Colt, Bay Island among others.
In 2013, Megamart decided to change its business model by dropping the discount tag. The Bangalore-headquartered retail chain began witnessing a lull in its business during 2013-14 financial year, impacting margins and growth plans, which led them to restructure the business model.