Pantaloon, the country's largest retailer in terms of market value, posted a 22 per cent increase in same-store sales (SSS) in the lifestyle segment in the September quarter, one of the highest in the past three years. It indicated higher consumer spending on clothes and accessories.
Same-store sales compares sales of stores that have been in the business for a year or more. The measure allows investors to determine what portion of new sales came from sales growth and what portion from opening new stores.
In 2009-10, Pantaloon had an SSS growth of 9.5 per cent. Only in 2006-07 did it have a comparative SSS growth, of 21 per cent, in the lifestyle segment. The company's financial year ends on June 30.
Early indications suggest the wallet share of customers that was moving towards mobile and electronics is showing a reversal and customers are increasingly spending more on fashion compared to previous years. The fashion category across the value and lifestyle business is growing between 30 and 40 per cent, the company said in an investor's update released today.
It posted SSS growth of 15.1 per cent and 12.5 per cent in the home and value segments, respectively, in the September quarter.
“Apart from the base effect, consumer spending has increased significantly during the last quarter. All the lifestyle retailers are delivering good numbers,” said said Abhishek Ranganathan, research analyst with MF Global.
Shoppers Stop, the lifestyle retail chain of the Raheja Group, posted a 13 per cent SSS growth in the September quarter, in which stores older than five years had an SSS growth of eight per cent growth and those less than five years had 25 per cent growth.
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Pantaloon also said its home business was showing steady growth and the company had acquired large institutional orders from developers and was also growing the retail business. The home segment was the lacklustre division in the past: SSS fell 30 per cent in 2008-09.
Despite good SSS and top line, analysts say profitability is a major concern. The gross margins fell 120 basis points in the September quarter, at 8.2 per cent, as compared to 9.4 per cent in the corresponding quarter.
“They are playing the volume game. Cotton prices have gone up (but) they have decided not to transfer the price rise to customers. Since they are big on private labels, it is hurting the margins,'' said Ranganathan.
The company's profit after tax went up 65 per cent in the September quarter, at Rs 43 crore compared to the Rs 26 crore in the corresponding quarter of 2009-10. Sales went up 32 per cent at Rs 2,581 crore in the first quarter of 2010-11, as compared to Rs 1,954 crore in the corresponding quarter of 2009-10.
The stock fell 3.4 per cent today, to close the day at Rs 435.50.