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Madura Fashion + Pantaloon = Aditya Birla Fashion & Retail

February 1, 2016


Aditya Birla Retail Aditya Birla Fashion & Retail has an impressive bouquet of brands at its disposal Madura is the owner/perpetual licensor of India’s leading menswear offering – Louis Philippe, Van Heusen, Allen Solly, Peter England; the portfolio approach enables it to straddle the price-pyramid and capture opportunities across the board. The branded menswear segment, a US$16bn market of which only c.30% is organised at present, is a decadal double-digit growth opportunity. The Pantaloons business would act as a top up to this growth through its bouquet of offerings in the even-faster growing womens wear and kidswear segments plugging the existing gap portfolio.

Madura has a strong presence in the formal menswear segment with its portfolio of 4 power brands viz. Louis Philippe, Van Heusen, Allen Solly and Peter England, each of which clocks a turnover in excess of Rs 10bn at MRP level. Louis Philippe and Van Heusen are positioned in the premium formal-wear segment, Allen Solly is a smart casual brand and Peter England is positioned as a mid-priced brand in the sub-premium value segment.

Madura’s Exclusive retail presence through its EBOs (Exclusive Brand Outlets) spans across a network of 1,797 stores (covering c.2.6mn sq ft of retail area – as at Sep15). EBOs, excluding the ones run by buy-and-sell franchisees, together account for c.44% of the divisions revenues. EBOs apart, Madura has also been aggressively ramping up its distribution footprints in the MBO/LFS channels (Multi-Brand Outlets/Large Format Stores) to drive higher volume offtake for its products.

Pantaloons acquisition by the Aditya Birla Group was from the point of view of it being a good strategic fit with Madura Fashion & Lifestyle given the latter’s rather limited presence in the fast-growing womens wear segment – just about 5% of revenue for the business currently (through the Allen Solly brand and a sub-brand under Van Heusen). Womenswear is a more profitable segment vs menswear on a gross profit per square foot basis, i.e. higher throughput which leads to better profitability per square feet. The higher relevance and importance of designs in womens wear helps increase the propensity of brand-owners to price-up these apparels, which also helps boost their margin profile, we believe.

Pantaloons has been quite successful in creating and scaling up some of its exclusive womens wear brands like Akkriti, Trishaa, Rang Manch in the ethnic wear segment, and Annabelle, Candies in the western-wear segment. It has also developed/licensed quite a few new brands post its acquisition by the Aditya Birla Group.

Both Madura and Pantaloons have invested heavily in expanding their store network in recent years. Madura has grown its EBO network by 20% p.a. over the past 5 years while Pantaloons has upped its store-counts by more than 50% since it was acquired by the Aditya Birla Group in 2012. Investment in scaling-up retail network has had an adverse impact on the operating margin for both parts of the business.

In tune with the current trend, the business has also set up its own online portal (www.trendin.com) to tap e-commerce opportunities (targeting Rs 1bn turnover in FY16). At the same time, the company is also rolling out its omni channel initiatives across stores that aims to offer a seamless shopping experience to the consumer, whether shopping online (desktop or mobile device), by phone or in a brick-and-mortar store.

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