Arvind shifts exports focus to retail

The Ahmedabad-based Arvind Mills will shift its focus from denim exports to branded retail after its profit dipped 75 per cent in the last quarter owing to falling margins in the cyclical global denimwear market.

The company is one of the largest denim manufacturers in the world. During the quarter ended March 31, net profit fell to Rs 5.4 crore from the corresponding quarter's Rs 21.47 crore, while net sales grew 35 per cent to Rs 483 crore.

Managing Director Sanjay Lalbhai said he expected Arvind brands to contribute 50 per cent to the company's business by 2010-end from the current 35 per cent.

Arvind has over 14 brands. While it has licensing agreements to retail international brands such as Arrow, Lee, Wrangler, Kipling, Nautica and Jansport in India, it has formed joint ventures to retail brands like Tommy Hilfiger and Diesel. Arvind's homegrown brands include Excalibur, Flying Machine, Ruf & Tuf and Newport.

To drive sales, Arvind recently repositioned Arrow, Excalibur and Flying Machine. It has also roped in actors Milind Soman and Abhishek Bachchan to promote these brands. "If sales have to increase, we need to tell people what is in vogue, and that can happen only if a celebrity, our customer identifies with, endorses our product. Our budgets for advertising is in the range of Rs 35-40 crore," Lalbhai said.

Arvind has also lined up aggressive expansion plans for all its brands. The company said it would take the number of Excalibur stores to 200 by the end of this financial year from the present 140. The total number of Arrow stores would go up from 50 to 75 and Flying machine from five to 50. The company has earmarked an investment of Rs 125 crore for the expansion of these three brands over three years.

The company is also eyeing foreign markets with its brands. "While Arrow is already present in West Asia and Africa, Excalibur is present in West Asia and we might take it to Africa," COO Suresh J said.

It also plans to launch its denimwear brand Flying Machine in the US and Europe in the coming months. "We will be launching the brand in the US and Europe after six months because we believe this is a brand, which will do well everywhere," Suresh said.

While the company sees bigger growth from its retail operations in the years to come, it is also going to alter its export strategy by focusing on value-added exports. The company exports both fabric and readymade apparels to top-of-the-line brands like Armani, Ralph Lauren, Levi Strauss and GAP.

While most of its exports are to the US and the EU, it also said it was looking at entering newer territories like Japan and Korea although these markets are quite difficult to crack.