In the December quarter, Pantaloon Retail, the country’s largest listed retail chain, showed its lowest same-store sales growth figures in two years, signalling a continued slowing in consumer spending and economic growth.
Same-store sales (SSS) show growth through stores in the business for more than a year. The Kishore Biyani-promoted company posted SSS growth of 3.2 per cent in value retail and 5.3 per cent in lifestyle retail. The home segment was down 3.2 per cent.
“Owing to the weak sentiment, customers across the formats seem to have postponed their purchase decisions,” Pantaloon said in the December quarter investor update. Biyani did not respond to calls on the subject.
Pantaloon is not alone. The Raheja-owned Shoppers Stop Ltd posted a one per cent decline in like to like sales growth in department stores during the third quarter. Govind Shrikhande, managing director, says high apparel prices, economic slowdown and self-cannibalisation led to this. Apparel prices have seen an increase of 18 to 20 per cent which led to a 11 per cent decline in customer entry and nine per cent drop in volumes of Shoppers Stop department stores.
“All these factors led to negative same-store sales growth,” Shrikha-nde said. “We added multiple stores in Chennai and Pune. This led to self-cannibalisation and negative same store sales.”
He expects the next two quarters to also be a weak one on sales growth. “Price points were a problem for all retailers. It was a double whammy, whether you maintain margins and see inventory pile up or give discounts and take a hit on margins,” says Abhishek Rangana-than, equity analyst at MF Global Sify Securities.
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However, promotions boosted the sales of retailers in January, consultants and retailers say. Pantaloon said it prepared early for the promotion season, securing the right merchandise and best deals for customers for various suppliers.
This seems to have worked and the company said in January 2012 alone it had achieved 40 per cent more turnover than during the entire December quarter. “With apparel prices expected to fall in the new season and improving customer sentiments, the company expects to get back to higher SSS growth within the short term,” it said.
However, given the slowdown in the economy, Hemant Kalbag, partner and head of consumer industries and retail practice at management consultancy AT Kearney believes the next financial year is going to be flat on sales growth for most retailers.
“Though retailers continue to open stores, the question is whether they can achieve double-digit growth in SSS, like in the past,” Kalbag adds.