The focus for Spencer's Retail is profitable growth: Shashwat Goenka

We want to ensure that the new stores we open become profitable from the first year itself and add to the bottomline, said Goenka

The retail industry is getting back on its feet from the lows of lockdown a year ago to contain the Covid-19 pandemic. In an interview, Shashwat Goenka, sector head - Retail and FMCG of the RP-Sanjiv Goenka group, tells Ishita Ayan Dutt that consumer confidence is picking up incrementally and the company is charting out growth plans. Edited excerpts:

What kind of recovery have you seen quarter-on-quarter?

We have seen recovery through the pandemic. More people are coming back to the stores, more people are stepping out, people are buying more. It’s increasing incrementally, which is a good sign. Between Q2 and Q3, we saw almost a 10 per cent increase in sales. As a country, we have done a good job of controlling the pandemic and boosting consumer confidence at the right time.

When do you see a recovery to the levels of 2018-2019?

No one had accounted for a pandemic. But when we look at micro data – daily, weekly and monthly sales – we are seeing the trend that consumers are now coming back and confidence is picking up. We will recover and bounce back very quickly post the pandemic. With vaccinations going up, the end is near.

Are mini containment zones and restrictions in the wake of rising Covid-19 cases impacting business?

The mini containment zones are mostly in Maharashtra, but in places where Nature’s Basket does not operate. What we are not seeing this time is panic purchase. Now, consumers know that things are available. Consumer confidence with regard to access to food is not a question anymore.

What would be the focus for FY22 – growth or profitability?

We will focus on both. Nature’s Basket has turned profitable (at EBITDA-level) and will continue to be profitable. We are looking to expand it. In January, we opened a store in Kolkata and we are now looking to go into Delhi and the NCR (national capital region) in the middle of April.

As for Spencer’s, around 8 Spencer’s stores were opened during the pandemic. Next year, the plan is to open between 22 and 24 stores. So, the focus is profitable growth, like I have always said.

What are you doing to ensure profitability?

We want to ensure that the new stores we open become profitable from the first year itself and add to the bottomline. Otherwise, new stores traditionally take many years to mature and start making profits. That’s the new thing we have taken on.

Retail is a tight ship with low margins. So we are always looking at the cost side and working on it every year. On the margin front, we are pushing apparel and home, which are high margin categories; home as a category has recovered and apparel is just about showing initial signs of recovery. For the whole of last year, we were not able to sell in that segment. But that’s a category that can come up significantly as people start reinvesting in it.

So it’s a combination of sales and margin increase, and cost control that we are looking at to ensure profitability is maintained.

Are acquisitions part of your growth plan?

We are looking at acquisitions in the offline space; online is not on the wish list right now.

Is it in the food and grocery segment?

Currently, we are looking at the food and grocery space.

You are also looking at selling stake in Spencer’s and Nature’s Basket, will you be offloading to a strategic player or private equity?

We are always open to partnership and discussions are on. These are minor stakes and it would be strategic.

What kind of growth have you seen in e-commerce?

We went from zero to 100 per cent last year in March. Then, it stabilised to about 40 per cent for a few months. But we feel, e-commerce will be about 4-5 per cent, which is much larger than it’s always been for us; it used to be 0.5 per cent. It’s a healthy and steady growth and that is here to stay.

How did the pandemic pan out for the group’s FMCG business?

It was a start-up when the pandemic happened and everything was new. It took us a while to get our factories up and running and then we mobilized the sales team. The first couple of months were slow unlike retail, which went into an overdrive overnight with panic buying. But then it picked up. We used this time to draw up a blueprint for our larger FMCG strategy and put a lot of those moving parts into action.