Aditya Birla Fashion and Retail
After making losses for four consecutive years, this Aditya Birla Group retailer finally reported a Rs.53.5 crore profit in FY17 after shuttering 189 marginally profitable or loss-making stores as well as its e-commerce fashion venture ABOF. The key revenue contributors are Pantaloons and Madura Fashion, which has brands like Louis Philippe, Allen Solly, etc. ABFR now also owns the retailing rights for Forever 21, having acquired it from Diana Retail, a subsidiary of DLF Brands, for $26 million.
It had earlier acquired Pantaloons from Future Group in FY13 but the synergy benefits took its own time accruing. Besides the benefits from GST implementation in terms of lower input rates (6% v/s 12.5%), the steady increase in the contribution of high margin private labels (60% of total Pantaloons revenue) has pulled in growth. The Ebitda margin has also improved for Pantaloons from 2.3% in FY14 to 4.9% in FY17.
Madura grew 3.4% in FY17 and its growth has significantly tapered in the past two years. Stiff online competition has affected revenue as Madura is unwilling to sacrifice its margins and give up its premium positioning. It has instead resorted to calibrated discounting by switching from a two-season cycle to a four-season cycle. This is expected to result in faster inventory turnover and also attract new customers. International fast fashion brands such as Zara and Forever 21 have a 45-day cycle.
The management aims to open 50 Pantaloons stores and 150 Madura stores ye