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Informist, Friday, Nov. 8, 2024

By Jahanvi Kothari

MUMBAI - Aditya Birla Fashion and Retail Ltd. said it aims to open 20-25 large stores in the metro cities, mini-metro cities, and tier-one cities in the current financial year. This follows the lower-than-expected performance of the lower end of the market, the company's management said in a post-earnings analysts' conference call on Friday. Smaller cities make up the lower end of the markets for the company's Pantaloons division, with the stores spread across many cities and towns. The company said it will be guarded in expanding into small towns now onwards and will focus on expanding footprint in metro and tier-one cities only.

The company said the overall demand environment remained subdued in Jul-Sept, consistent with the trend seen in the previous quarters. This largely affected the operational performance in the September quarter, the management said in the conference call. But going forward, in Oct-Mar, it expects to see better demand on the back of festive spending and wedding-related shopping. Based on the past trend where occasion-led shopping boosted the sales of certain lifestyle brands, the company expects improved conditions in the second half of the current financial year.

In the case of Pantaloons, the December quarter has started off on a subdued note, the company said. Pantaloons sales growth was in low single digit during the Durga Puja, the company said. 

Aditya Birla Fashion and Retail Thursday posted a net loss for the fifth consecutive quarter in Jul-Sept. The company's consolidated net loss for the quarter was INR 1.86 billion compared to a loss of INR 1.79 billion a year ago. The company reported revenues of INR 36.44 billion, up 15% from INR 32.36 billion in the previous year.

The smaller markets continue to underperform due to the low demand environment and will likely be slow to recover, the company said. The focus would continue on product innovation, casualisation, and markdown management. The discounts will be kept tight, and the company will also focus on product cost engineering, the management said. 

As of Sept. 30, the company's net debt was INR 37.59 billion, up 31% from INR 28.62 billion at the end of the March quarter. The company said it expects the debt to decline by INR 4 billion-INR 5 billion in Oct-Mar as it expects retail sales to pick up. The management said much of its portfolio is also heavily skewed towards wedding and festival-related periods.

The management said the September quarter bottom line of the company was also impacted due to higher depreciation and amortisation for brand and retail assets and the higher interest costs on account of elevated borrowings. The company's consolidated earnings before interest, taxes, depreciation, and amortisation rose 11% on year to INR 4.10 billion. The EBITDA margin for the quarter was 11.2%.

On a question about the rapid increase in other expenses, the company said this was due to costs incurred by acquired business. In Jul-Sept, the other expenses rose 26% on year to INR 9.65 billion. Removing the costs that came with the acquisitions, the rise in other expenses is about 6-7%, the management said. On Friday, shares of Aditya Birla Fashion ended at INR 297.15 on the National Stock Exchange, up 0.1% from the previous close.  End

Edited by Vandana Hingorani

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