After Today, Tomorrow Bright for Future Retail
ET Intelligence Group: Thingsseemto have started falling in place for Kishore Biyani owned Future Retail as the company is expected to report a gradual turnaround in its performance after a series of dismal performance in the past few years. Earnings for the December quarter grew 37% compared with the Septemberquarter,drivenbyhigherfootfalls — 12.5% same store sales growth (SSG). This beat analysts’ expectations causing its stock to gain 17% after the results announcement on Tuesday. The company expects this momentum to continue. Overall sales will be further boostedbyadditionof storesandconsolidation of retail stores of Heritage Foods. “We expect our sales to grow by 20% annually,” said the company spokesperson.
Future Retail’s financials cannot be compared yearon-year as the current fiscal numbers include figures of Easyday, a small format retail chain it acquired last year and merged only in the beginning of the current fiscal. This makes SSG an important parameter in evaluating the performance of a
retailer. For FRL, SSG was 12.5% and for Big Bazaar, it was even higher at 15.5%, which is a large format store.
Through the acquisition of Easyday, Heritage Retail and Nilgiri, the company intends to create a neighbourhood store concept. By end of FY18, FRL will have 250 Big Bazaar stores and over 750 neighbourhood stores. Given smaller area, Easyday earns ₹ 25,500 in revenue per square feet, as much as DMart. For Big Bazaar, it is ₹ 13,500. With increasing share of neighbourhood stores, FRL’s margin is expectedtoimprove.Revenuesfromneighbourhood stores is around 10% of the December quarter’s revenue, which will touch around 25% in FY18.