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Vishal Retail Megamart – Q3 Performance Review

January 25, 2009


Q3 FY09 is the first quarter when Indian businesses were influenced by the slowdown, despite the festival season. We now review the performance Vishal Retail – Megamart.

The company saw significant reduction in winter apparel sales witnessed during the quarter led by poor winter season in North India; which has resulted in an overall decline of 12-15% in the sales of the company. The app areal sales fell from 57% in Q2 to 54% in Q3 of overall sales.

Impact of seasonality coupled with low consumer sentiment owning to economic slowdown reflected across the Industry. This has resulted in the fall in average footfalls per day for the company as well. Average footfalls per day has fallen from 213,000 to 198,000.

The company currently has 181 stores and the spread is as follows,

  • 148 Megamart
  • 12 Cornermart
  • 8 Fashionmart
  • 13 Franchisees

First to reach new markets like Dimarpur (Nagaland), Bhadrak (Orissa), Faridabad & Panipat (Haryana), Jawali (HP), Sunam (Punjab), Bharatpur (Rajasthan), Mirzapur & Raibareilly (UP) and Kolhapur & Nagpur (Maharashtra) with middle income demographic profile.

How Vishal Retail Megamart is Cutting costs ?

  • Rent Reduction – Reducing area in 12 stores with existing sq ft >25,000. Regional warehouses have been abandoned; while the warehouses in the NCR are being consolidated. Total reduction in rental bill is expected to be 20%.
  • Efficient Packaging Solutions – Negotiation for barcoding and unitized packing at vendor’s end and recycling of cartons.
  • Minimal Inventory Levels – Targeting to lower inventory levels by aligning future buying and improving internal controls. Aggressive offering of discounts, promotional schemes, customized at store level.
  • Space Selling – Negotiating with distributors of FMCG products of lesser known brands to sell display space in stores
  • Start shop-in-Shop – Renting out excess space in multiple stores to independent vendors. 200,000 sq. ft. area expected to be leased out at an average realisation of Rs 200/sq ft
  • More Franchisees – Space expansion to be driven by less capital intensive franchisee model to reduce funding requirements for growth

Hopefully these measures will lead to some stability in the Net margins which dropped to less than 1% in Q3 FY09.

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