The Footfalls are back

The organised retail sector, which bounced back somewhat in the three months to September 2009, posting double-digit topline growth, should turn in an even better performance in the quarter ended December 2009. After all, economic growth was gathering momentum, there had enough liquidity in the banking system, stock markets were on a roll and companies had started hiring once again. As such, consumers had regained confidence and were willing to spend; the festive season, which set in earlier than usual last year, had seen spends go up.



Most retailers, therefore, should manage a high double-digit topline growth for the December 2009 quarter. The good news is that operating margins could improve further with companies having kept a check on costs. As a rule, retailers have been shutting down unviable stores across formats, bringing down the expenditure on rentals. Of course, they have also been adding some outlets in new locations.

Pantaloon has seen a double-digit growth in same-store-sales during the December 2009 quarter. The value segment saw a growth of 25%, 28% and 30% in October, November and December 2009, respectively. The lifestyle space didn’t do too badly, either. It grew by 6% in October 2009, 8% in November and touched double-digits in December. Kishore Biyani, CEO, Pantaloon Retail, believes there is a change in the sentiment and consumer spends are higher across categories such as apparel, fashion accessories, cosmetics and white goods. With the economy recovering, the retailer, who has around 10 million sq ft of space, should grow faster now than it did in the year up to June 2009 when revenues increased by 25.6% to Rs 6,342 crore (stand-alone).

With the value retailing growing faster and now fetching approximately 70% of revenues, gross margins could be under pressure. However, the company is making attempts to contain costs and so, operating margins could improve with better operating efficiencies and operating leverage. Given its wide range of formats and the aggression to build scale, Pantaloon is well-poised to cash in on the rising consumer spends in organised retail chains. Since October 2009, footfalls at Big Bazaar and Pantaloon have seen an estimated increase of 20-25% and a fair share of customers are buying products.

Shoppers Stop, too, is recovering from the downturn. Same store sales, which had fallen by about 7% in the June quarter, rebounded in the September quarter with a growth of 1.8%...