Fashion retailers tread the catwalk with care

Mumbai-based fashion retailers are bracing themselves for tough times ahead. Fashion retail brands belonging to companies such as Kewal Kiran, Globus and Provogue are not too enthused with their performance this quarter.

Kewal Kiran Clothing

Mr Kewal Jain, Chairman and Managing Director, Kewal Kiran Clothing, says “It has not been a feel good quarter for us. With 10 per cent increase in excise duty, we have had to take price increases by almost 25 per cent and this has affected our volumes. While there has been no de-growth in the company as yet, we have to maintain the growth momentum. Footfalls are already down at the retail level. In fashion, retailing companies have to be cash rich and being a debt-free company, we have managed to survive the ups and downs in the fashion business.”

The Rs 170-crore Kewal Kiran Clothing has almost 50 per cent of its turnover coming from its flagship brand — Killer. It has also ventured into retailing with its K–Lounge stores. Another Mumbai-based fashion retailer, Provogue India has also been facing difficult times and is looking to re-strategise its business in the new year.

Provogue India

According to Mr Salil Chaturvedi, Deputy Managing Director, Provogue India, “The real worry has been the shrinkage in spends. With higher interest rates consumers have been paying heavily on EMI (equated monthly instalments) and in this scenario luxury spending has taken a back seat. In the last three quarters, there has been de-growth in our bottom lines.”

The Rs 440-crore Provogue India also has its retail stores (Provogue Studio) and its retail arm has helped the company to tide over the difficult times.

As Mr Chaturvedi says, “Our stores have been a life saver for us and we have an advantage in that sense compared to the new people who are entering the textile business. Besides the slowdown in real estate development may also slow down mall development in the country leading to a spike in rental among the existing shop owners.” Provogue has also demerged its mall business — Prozone Shopping Centres, to attract more investors into the business and has roped in an MNC partner with a 30 per cent stake in the business.

Globus

Increase in raw material prices combined with high excise duties have made another Mumbai-based fashion retailer, Globus, go slow in its expansion plans.

With its 35 stores, Globus has now decided to scale down its new store opening with just four new stores till March next year and then trickle down to opening just about 1-2 stores next fiscal.

“There will not be much expansion as we will be not be able to clear our sales,” says Mr Vinay Nadkarni, Chief Executive Officer, Globus Stores, promoted by the Rajan Raheja Group.

In fact, 2011 has been a difficult year for the retailer and there are no great expectations for next year either. The retailer had taken up prices during the first half of last year due to escalation in raw material prices and also had to face another brunt of changes in excise duties due to which it could not bring down prices and, thereby, sales were affected.

“Last summer we had raised price points and were hoping to bring it down but the excise duties changed the picture. Customers were hoping prices to come down and have been seeking value in their purchases,” added Mr Nadkarni.

Besides, an extended summer is not helping Globus with its winter sales. “Our winter wear sales usually take off in November but it seems summer has already got extended by 2-3 months,” claims Mr Nadkarni.

Being positioned as an ‘affordably priced brand' did not go with its image. Globus did face slowdown in sales in 2011 and next year is not expected to change things for the Mumbai headquartered fashion retailer.

As Mr Nadkarni says, “2012 is not going to be that great considering the way the rupee is going, it will not work for retailers like us. There is no positive cheer in the year ahead. However next year's budget may give us some relief.”

Globus launched its first store in Bandra in 1999 and has been private-label driven brand, targeting the youth with its in-house brands. The Rs 250-crore retail chain has been recording operating profits on the back of higher margins from its private label strategy.

Globus has also discarded its brand ambassador, Kareena Kapoor, for the last two seasons and does not see itself hiring a new face for its retail brand.

Feeling blues

In fact, fashion retailers have been feeling the blues since Diwali this year.

While sales continue to be robust during the Diwali season, retailers have witnessed lower footfalls as consumer sentiments have been dampened by general inflation and scams.

“Personally I feel the sentiment of the consumer is not that great this Diwali. The mood of people is affected by several concerns such as the 2G scam, issues over governance and the Anna Hazare episode,” said Mr Govind Shrikhande, Managing Director, Shoppers Stop, during the analyst meet for the company's Q2 results.

In fact, more than Diwali, consumer sentiments are linked to India winning in cricket and the way Dhoni plays, than the festival season, felt Mr Shrikhande.

“The mood of the consumer is more likely to be impacted by how Dhoni plays and India winning, claims Mr Shrikhande.

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