Italian fashion brand Benetton, which entered the Indian market 26 years ago, has not been able to steal a march over its competitors despite the head start, while brands such as Levi and Gap have grown at a much faster pace.
Italian fashion brand Benetton, which entered the Indian market 26 years ago, has not been able to steal a march over its competitors despite the head start, while brands such as Levi and Gap have grown at a much faster pace. Now, Benetton is facing a tougher road ahead, with the company reporting a loss in the previous fiscal. Benetton India reported a loss of Rs 49.44 crore in FY17, compared with a profit of Rs 2.3 crore in FY16. Sales also declined 5% from a year ago to Rs 698.8 crore in FY17. The company’s performance started showing signs of slippages in FY16 when it posted a 79% drop in its profit to Rs 2.3 crore. Sundeep Kumar Chugh, managing director & CEO, Benetton India, said in the company’s MCA filing: “During the year, the company faced many challenges due to difficult market conditions, arrival of new fashion brands and pressure on cost, but the company also undertook various measures to improve its performance. The margins were adversely impacted due to introduction of excise duty during the year on garments, while sales were disrupted due to demonetisation.” Experts said that FY17 in particular witnessed higher demand for consumer durables compared to apparels. Anil Talreja, partner of Deloitte India, said, “While newer brands are expanding in the country and witnessing growth, established players and early entrants, after witnessing the initial growth, are seeing their brand presence wane and growth ebb. Also competition is getting steep with many foreign brands entering the country, impacting the profitability of the already present brands.”
Benetton India reported loss before interest, taxes, depreciation and amortisation of Rs 36.2 crore in FY17, compared to a positive EBIDTA of Rs 18.48 crore in FY16. The company said the results were also impacted as the warehouse of a partner caught fire, destroying inventory worth millions of rupees. Although stocks were insured, given the uncertainty over the time period for processing the insurance claim, as a conservative approach, it was decided by the management to provide for the full amount of receivables against the stock burnt of Rs 30 crore. As and when the amount of insurance claim is paid by the insurance company, this provision would be written back. In FY17, Benetton rationalised its network of stores, resulting in closing down of 56 stores. It opened 63 stores while it shut 119 stores in the previous fiscal to end the year with a total of 718 stores.