Spencers losses mount Management Cautious

Spencer Retail from the RPG Group has 1.13mn sq.ft. of area over 256 stores for its various types of retail stores such as hyper markets, super stores, Daily Fresh and Express stores. The retail area is flat against FY08 retail space as Spencer has closed 150 unviable small format stores in markets like Ahemdabad, Nasik, Kanpur, etc. The same has been compensated by adding large format stores.

Spencer has reported revenues of Rs1.07bn in FY09, a growth of 32% yoy led by addition of new stores, higher same store revenues, etc. However, losses pre-exceptional items and tax was at Rs3.65bn in FY09 against Rs1.5bn in FY08, while losses post taxes were at Rs2.5bn in FY09 against Rs890mn in FY08. The losses during the year have risen as economic of the same stores deteriorates with same store showing negative growth.

Considering the large losses being borne by Spencer, the management has taken various initiatives to reduce the costs and enhance profitability. Apart from closing unviable and loss making stores, the management is rationalizing costs by strengthening its back end systems, reducing marketing spend, etc. Moreover, Spencer is also in the process of renegotiating its lease rentals to reduce the fixed costs. Spencer is also focusing on large format stores as well as high margin verticals like private labels and fashion to enhance profitability.

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