Business

Future Lifestyle Fashions Moves Past Shoppers Stop In Retail Sales

Four years ago, Kishore Biyani was shunted out by both K Raheja Corp and Landmark Group when he approached them to merge his department store chain Central with Shoppers Stop and Lifestyle. The most embarrassing part, however, was when bankers refused to reveal the valuation that both retailers had quoted for Central. All they told Biyani was it was too low and insulting. The same year, he managed to find a suitor in Aditya Birla Group, but for his flagship chain Pantaloon. Biyani is now back with a vengeance as Future Lifestyle Fashions (FLF), for the first time ever, has surpassed the country's largest department chain Shoppers Stop in retail sales. FLF, which runs Central, Brand Factory & more than a dozen brands including Indigo Nation and Lee Cooper, had sales of Rs 803 crore during the June quarter.

In comparison, K Raheja's Shoppers Stop with an eponymous department chain, home format Home Stop and specialty beauty formats such as Estee Lauder and Mac posted sales at Rs 772 crore. However, SSL's consolidated revenue - including grocery format Hyper-City and book and music chain Crossword - was higher at Rs 1,151 crore.

"Most of our brands are coming of age. There was an increased focus on lifestyle business with specific target for each brand and return on capital employed. That's what has paid off," said Biyani, CEO, Future Group. However, for FY16, FLF posted net sales of Rs 3,300 crore, compared to Shoppers Stop that had revenues of Rs 3,413 crore.

While the company has added nearly 1.5 million sq ft in the past three years, growth is mainly driven by stronger same-stores sales growth at about 10% for both Central and Brand Factory despite aggression by online rivals. With 366 stores covering 5 million square feet across formats, FLF is twice as large as Lifestyle International and a tad bigger than Shoppers Stop for fashion and lifestyle businesses.

"Despite high sales, the company's market cap is very low. If it can monetise some of the brands by selling their stake, it will boost profitability and call for a re-rating," said Abneesh Roy, senior vice president at Edelweiss Securities. While FLF has divested its stake in Biba, AND and Celio over the past few years, FLF still owns significant shares in brands such as Clarks, Tresmode, Giovani, Holi among others and could divest some of these to raise capital.

This is gradually reflecting in FLF's stock performance, too - with its shares rising 85% against Shoppers Stop that remained flat and Aditya Birla Fashion & Retail (ABFRL) which saw a 19% decline in a year. FLF's market cap is Rs 2,362 crore compared with Shoppers Stop at Rs 3,140 crore, and ABFRL's Rs 11,601crore. FLF's standalone business does not include over dozen brands such as Clarks, Giovani, Mother Earth, Turtle, among others that add a further annual top line of over Rs 800-850 crore.

As part of Future Group's Vision 2021, it is looking to more than treble its revenues to Rs 750-1000 billion, from Rs 220 billion last year. Unlike food and grocery retailing that operates on wafer-thin margins, apparel retailing is a lucrative business with 30% margins and Biyani hopes to cross Rs 12,000 crore sales for FLF and double its retail coverage to 10 million sq ft by then. According to Euromonitor, competition within the apparel industry may intensify further as more global brands enter the Indian market along with existing players such as Zara, H&M and Gap that have aggressive expansion plans to tap into the opportunities offered by India's non-metro cities. "Apparel retailing is highly competitive too although online companies have mostly impacted us in electronics and footwear," said Biyani who also owns Big Bazaar, country's largest supermarket chain.