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  1. Reliance Retail shuts over 20 stores in effort to cut losses

Reliance Retail shuts over 20 stores in effort to cut losses

Reliance Retail, the retail arm of Reliance Industries, has shut more than 20 stores in the country in the last nine months mainly in the value (food and grocery retailing) and jewellery formats as the company is focusing to reduce losses by shutting unprofitable stores.

By: | Mumbai | Updated: March 8, 2016 12:24 AM

Reliance Retail, the retail arm of Reliance Industries, has shut more than 20 stores in the country in the last nine months mainly in the value (food and grocery retailing) and jewellery formats as the company is focusing to reduce losses by shutting unprofitable stores. Reliance Retail is also planning to launch a new format called Reliance Smart in the next few months, sources close to the development told FE.

As of December 31, the company has 597 stores operational under Reliance Fresh, Reliance Mart, Reliance Market among others. The company had 616 stores as of March 2015 in the value and other format spread across 5.42 million square feet, according to the company’s annual report. The value format is the biggest revenue generator for Reliance Retail, contributing approximately 54% to revenues of Rs 17,640 crore last fiscal. The company had shut down over 100 stores, primarily in value (food and grocery retailing) and jewellery formats in fiscal 2015.

The company declined to comment on an email query sent by FE.

However, the company has increased its overall store count from 2,857 at the end of September quarter to 3,043 stores at the end of December quarter as Reliance Retail added stores mainly in the digital and lifestyle formats.

Apart from store optimisation which has helped the company to improve its margins Reliance Retail is also contemplating to launch a new store format called Reliance Smart.

According to sources, the new format Reliance Smart will comprise clothing, accessories, among others and will start from a size of 7,000 sq ft up to 20,000 sq ft.

“It is a format which will be bigger than Reliance fresh but will be smaller than the hypermarket format Reliance Mart. Reliance Mart is the large hypermarket format above (30,000 sq ft to 50,000 sq ft) while Reliance Fresh ranges between 1,500 sq ft to 3,000 sq ft. Reliance Smart is a format which would be between these two formats as the store size of Reliance Smart will be from 7,000 sq ft to 20,000 sq ft. Reliance Fresh doesn’t have apparels, accessories, toys among others while Reliance Smart will have all these products in the stores,” said a source close to the development.

Another source close to the development said, “Reliance Retail is focusing on making the retail business profitable and has been shutting loss making stores for the last four to five years. Also the company plans to launch a new store format called Reliance Smart. Most of the existing Hypermarkets and supermarkets will be re-branded as Reliance Smart in the near-future. Also the new expansion will be under this brand name.”

The company is expected to launch the format in the next few months, the official said. At present per sq ft revenue of Reliance Fresh is around Rs 2,500 sq ft to Rs 3,000 sq ft.

Announcing the company’s third quarter results Reliance Retail said the company has optimized its network operations to enhance profitability across the grocery retailing chain. Several private label products were launched under various grocery and general merchandise categories during the quarter. Contribution of private label sales to overall sales increased to 14.6% from 8.6% in the same period last year.

The store optimisation exercise appears to have helped in improving the company’s profits before depreciation interest and taxes (PBDIT) rose 7% in the third quarter to R243 crore from a year ago.

Arvind Singhal, chairman, Technopak, said, “Reliance Retail has been consistently reporting improvement in turnover and margins for the last few years. Shutting down loss making stores and focus on expanding profitable formats has helped the company to improve its margins. The company is also well-poised to roll-out their online presence with significant number of physical stores from where they could easily deliver to the nearest localities. The growth momentum of the company is expected to continue.”

Reliance Retail has optimized its network operations to enhance profitability across the grocery retailing chain.

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