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Retail industry growing in single digits: Kabir Lumba

Q&A with MD, Lifestyle International

Antonita Madonna Bangalore

How has Lifestyle International been weathering the downturn in consumer spending?

The festive season wasn't very tepid. It was slower than expected but in hindsight, not all that bad. You cannot judge the consumption story over what happened in one quarter. During the sale things were better than expected so there is a shift towards buying more during a discount, but the fact that consumption is still important is the essential fact to note here. At an industry level, too, people have been growing at single digits.

The slowdown was mostly in the latter half of the year, do you expect that to continue?

The first half was good and the third quarter was slower than expected but the January quarter has been better. We started our end of season (EOSS) a week before last year, so that helped. But unless India's image improves, the sentiment won't. If investments don't pick up, the situation cannot improve. If GDP growth does not pick up, it will have an impact on consumption. When that will happen we can't be sure, but it is bound to happen. If the image or perception of India does not improve in the meantime, investments won't come and consumption wont lift. My estimate is, if sentiments improve in the next three to four months it will be okay.

 

Do you have a Plan B or will you choose to wait it out until the scenario gets better?

We can't control macro economic fundamentals but can surely control our business. We are looking at leaner operations, and specifically maintain an optimal headcount. Within our headcount we encourage multitasking and grow their careers and incomes rather than hire a sea of people that will take everybody down. We have 8,000 people currently on the front end of Lifestyle.

Which other quarters will you tap to reign in costs?

On the marketing side too, all of us are sensitive to the fact that generally costs are high, while there are certain challenges in the market. So, given that, you have to work backwards and be prudent in spending. Our marketing spend is lower than 5 per cent, while we make sure we don't underinvest.We believe that business about fundamentals and not about burning cash. Life is not all about a gamble. We've always been cautiously optimistic about India. We've grown as a CAGR of about 35 per cent over the last 5 years and have all our verticals have recorded a double digit like for like growth this year.

At what revenue level does Lifestyle International expect to close this year?Its a little bit better than industry which is clocking growth of single-digit like-for-like growth. Company-wide, we expect to end our year at close to Rs 4000 crore this time. We aim to grow this revenue at 20-25 per cent year on year and keep the momentum. Three years from now, we should be able to achieve a topline of between Rs 7000-Rs 8000 crore across our Lifestyle, Home Centre and Max businesses.

How much does each of your brands, Lifestyle, Max and Home Centre contribute to the topline?

We have Lifestyle as a department store, we have Home Centre as our home offering and we have Max, our value brand. Of the three, Max is seeing tremendous traction with growth of over 50 per cent in revenue year-on-year. Of course, its a lower base, but we expect it to close to over Rs 1000 crore this fiscal year. Home Centre deals with a very difficult category with a lot of challenges. The Rupee is depreciating and that puts pressure on us as most of the goods are imported. Having said that, we expect it the vertical to clock about Rs 400 crore this year. The home market is becoming very exciting and with the rise in new home buyers and with the favourable demographics in India, there is a lot left to secure from the unorganised sector. But the organised sector still has a lot of work to do.In the Lifestyle department store, most of the products are sourced domestically, so currency fluctuation does not have much of an impact. Overall, we're pretty hedged and do not depend excessively on imports . Lifestyle contributes about Rs 2300 crore.

What would be the primary focus areas in the next fiscal year, assuming the challenging times persist?

The next year is going to see growth focus, people focus and product focus. There's a lot of focus on improving the productivity of our people and improving and increasing motivation levels of our people. Third, is the product - when times get challenging, you have to value engineer and make sure that you offer a better proposition than what you're doing before. Be it a change in product mix, or just improvements in products, we need to do that without necessarily charging a premium. Besides that, Max will open 20-25 stores every year, Lifestyle will open about 6 and Home Centre about 2-3.

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First Published: Mar 11 2014 | 4:38 PM IST

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