Biyani to raise apparel prices by 18% to improve margins

Pantaloon Retail, the country's largest retailer, is looking at increasing the prices of its apparel products up to 18 per cent, to improve margins in the coming quarters, said a top group executive.

Gross margins have come down by 220 basis points in second quarter of financial year 2011 due to increase in input costs of apparel and general merchandise.

"There is an increase of 80 to 90 per cent in raw material prices. Almost all brands have increased prices by 30 per cent to offset the increase in costs," said Kishore Biyani, managing director, Pantaloon Retail.

About 80-90 per cent of apparel sold by the company in its stores comes from its private brands, which include DJ&C, Knighthood, AFL for men and women, Shrishti, DJ&C and Haute n Spicy for women.

Even other apparel retailers such as Shoppers' Stop said they would expect increase in apparel prices in the next quarter. "We see a strong pressure on prices in the next quarter, and the bigger pressure would be in the first quarter of next year because of the rise in cotton prices. We should see an impact on MRPs (maximum retail price) across all apparel between 10 per cent to 15 per cent next year," said Govind Shrikhande, managing director of Shoppers Stop in a recent conference call.

Unlike Pantaloon, nearly 85 per cent of Shoppers Stop's sale comes from national and international brands due to its positioning. While apparels carry margins of 20-30 per cent, those in private brands get up to 50 per cent.

"We are a branded player. If brands decide to increase the price, we do not have any option," said Shrikhande in a conversation with Business Standard earlier.

Pantaloon recently said it would hive off its electronics business Ezone into a separate company as continued promotions and increased competition hurt its margins. The new entity is expected to get strategic investors in the next couple of months.

Recently, Pantaloon's parent Future Group withheld purchases from fast moving consumer goods major Reckitt Benckiser as the latter annouced two per cent margin cuts for modern retailers to offset rise in input costs.