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Retail chains such as Shoppers Stop, Future Retail and Pantaloons are banking on fashion to boost margins.
Margins in the apparel segment are said to be about 40 per cent; those for private labels are higher. “Basically, it is the fashion or apparel segment that is going up. Our apparel margins are much higher than non-apparels, and when the share of apparel is going up, you obviously get better margins,” Shoppers Stop Managing Director Govind Shrikhande said during a recent conference call.
For the quarter ended September, Shoppers Stop recorded an earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of 6.1 per cent, 98 basis points more than in the year-ago period.
The company expects the margin to be 6-6.5 per cent in FY15, 7-7.5 per cent in FY16 and about eight per cent after that.
During the September quarter, the share of the apparel segment in Shoppers Stop’s business rose to 67 per cent from 63.6 per cent in the corresponding period last year.
The margin of its hypermarket chain, HyperCITY, rose 140 basis points in the September quarter and the company expects this to further rise 50-80 basis points in FY16, by when the contribution of fashion to HyperCITY’s overall sales will increase to 19 per cent.
HyperCITY recorded Ebitda break-even during the September quarter.
For the quarter, Kishore Biyani-led Future Retail reported an Ebitda margin of 10.7 per cent, 157 basis points more than in the year-ago period. Rakesh Biyani, joint managing director, said this was due to a higher share of the apparel and home segments, which had higher margins.
Though Aditya Birla-owned Pantaloons is still recording losses, it posted an increase of 400 basis points in its Ebitda margin for the September quarter.
“We had a re-look at the brands that did not have good margins and customer attention, and launched new brands,” said Sushil Agarwal, chief financial officer and whole-time director, Aditya Birla Nuvo.
Arvind Singhal, chairman of Technopak Advisors said higher margins and steady growth made the fashion and apparel segment attractive. “These companies have a good understanding of the apparel segment and have good supply chains in place. If they are increasing focus on apparel, it is a good strategy.”
