Same-store sales hurt lifestyle retailers

Thursday, 31 May 2012

Poor demand has resulted in lifestyle retail chains witnessing weak same-store sales in the quarter ended March 2012. Moreover they foresee lower growth in the fiscal. Interestingly driven by new stores, most retailers saw 20-30 per cent sales growth in the quarter. But same-store sales saw single digit growth. Same-store sales are an important indicator of consumer demand and the health of the retail industry and retailers don't expect things to improve this fiscal as demand is subdued. Experts say the downturn began after Diwali, and the increase in prices of essential commodities, lower salary increments, adverse macro-economic conditions and government inaction dented consumer confidence.

Shoppers Stop's revenues increased by 27 per cent to Rs 621.35 crores in the January-March quarter, however, same-store sales grew only 10 per cent. Similarly Lifestyle, which operates stores under the Lifestyle and Max chains generated sales of over Rs 2,500 crores last year and targets revenues of Rs 4,500 crores by 2013-14.

Pantaloon Retail’s sales grew by 7.6 per cent in the quarter ended March 2012, but same-store sales rose just 3.6 per cent, the lowest in 13 quarters. Likewise, Arvind Lifestyle Brands and Retail which operates Megamart reported 11 per cent growth in same-store compared to 18 per cent a year ago. However, its lifestyle brands business, which includes Arrow, US Polo and Flying Machine grew by 27 per cent in the fourth quarter in terms of same-store sales.

As Devangshu Dutta, Chief Executive of retail consultancy Third Eyesight points out that significant work can be done to make the product on the shelf more compelling for the buyer, both in terms of merchandising and placement. Retailers can also differentiate by looking at their private labels not just as additional margins but as brands that fill a gap.

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