If there is one reason as to why apparel retail companies have seen healthier bottomline this year, it is because of their 'like-to-like' (LTL) sales growth from their stores. In other words, led by right product mix and location, sales from each of their stores have shown considerable growth in fiscal 2011-12 as compared to last year, with the likes of Arvind and Raymond leading the pack.
Registering the highest like-to-like sales growth was Arvind at 18 per cent for its exclusive stores, followed by Raymond, K-Lounge (of Kewal Kiran Clothing Ltd.) and Shoppers Stop who saw same store growth of 15 per cent, 15 per cent, and seven per cent, respectively in the fiscal 2011-12. The exclusive stores of Arvind included brands like Arrow, Gant, USPA & Flying Machine.
According to industry experts, apart from favourable consumer demand and right mix of products, it was also store location selection that played well for the apparel retail players. "Apparel retail companies like Arvind and Raymond did well last in terms of LTL sales growth because they never went berserk in their growth. They never opened stores in every nook and corner of the country. They deal in products which are of a particular segment of consumer who has much better spending power," said Piyush Sinha, retail and supply chain expert at the Indian Institute of Management, Ahmedabad (IIM-A).
However, the growth came despite high inventory costs taking some sheen off the apparel retailers' books. Announcing the financial results earlier, Gautam Hari Singhania, CMD, Raymond Ltd. said, "Our pioneering strategies in branded fabric and apparel retailing has made it possible to withstand the downturn by providing access to our innovative products and dressing solutions to consumers across India's large and small towns." For Raymond, the store count as on March 31, 2012 stood at 853 across formats, including 39 stores in Middle East and SAARC region covering over 1.6 million sq ft of retail space.
Here, said Sinha, the sales in each store increased due to playing with product prices. "Also, all their products don't have MRP regulation and hence they can determine prices store-to-store," he adds.
According to apparel retail analyst and former president - apparel and retail, SKNL Group, Ashesh Amin, the companies' store sales also grew on the back of the malls where they were located. "Even the malls where stores of apparel retail firms are located have learnt the right product mix. Add to that, some of their foreign brands also fueled this LTL sales growth," he said.
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Stating reasons for Arvind's LTL growth, Jayesh Shah, director and CFO said, "We achieved growth mainly due to the following three reasons, namely our continuous efforts to train and upgrade the quality of the sales team in the stores, quality of merchandise which we constantly strive to improve, and good investment towards both above the line and below the line activities." What's more, the company's LTL sales growth rate for exclusive brands stores saw a rise from 15 per cent in 2009-10 to 16 per cent in 2010-11 and 18 per cent in 2011-12.
On the other hand, K-Lounge, which owns and markets brands like Killer, Integriti and Lawman, had seen little or no sales growth from each of its stores till last year. "We saw 15% LTL growth after a de-growth since last two years. For instance, we didn't have any LTL growth in 2010. In FY'12 growth happened because market stability was good. East region, led by Bihar and North East saw the highest LTL growth, while South and North little or no growth. This is also because our number of stores in the east region also increased tremendously," said Ashish Barodia, head - retail, K-Lounge.
Similarly, in terms of regions, the north saw the highest LTL growth for Arvind followed by the south, east and west. In terms of location of stores, out of 550 stores, Arvind has 30 per cent stores located in the north, 30 per cent in south, 35 per cent in west and five per cent in east.
Meanwhile, apparel retailers are wary about similar growth in the current fiscal. "The key challenge today is the overall market sentiment and consumer sentiment which is not as good as it was last year and the year before," said Shah. Similarly, according to Barodia, consumers may become conservative in buying this year due to poor market sentiments.
"The only thing that will work against like-to-like store sales growth will be unnecessary discounting of brands," Sinha added.