![Sanjiv Goenka](https://img.etimg.com/thumb/msid-67687020,width-210,height-158,imgsize-138356,resizemode-75/sanjiv-goenka.jpg)
Edited excerpts:
Demergers are a reality now. Let us talk about the value unlocking that you see specifically in the retail business. How differently are you going to grow these businesses now that they are all individual entities?
I am told that we are not able to say anything that is very forward looking. We have to be very careful of what we say but what I can tell is the retail journey over the last couple of years. As far as the first half of this year was concerned, for the first time in the history of Spencer’s, we clocked a PBT positive of Rs 5.2 crore. We added 19 stores this year, most of which are doing well.
Another nine stores were to be added in the remainder of this year and 28 stores over the next 18 months. We have moved a part of our portfolio to value-added, differentiated products. Private label now consists of about 13% of our portfolio. In apparels, our margins have gone up by 6% and our total apparel sales are going up. In general merchandise, our margins have gone up by 3% and the ratio of general merchandise sales to the total sales is also going up.
Our expansion will be concentrated in three clusters; east UP, West Bengal and Andhra Pradesh. This is where we have dominance. We are strong, our backend is very robust and our margins are the highest. Also, Spencer’s is completely debt free and going forward without saying anything that I should not be saying, I think we are on the right track.
Spencer’s is completely debt free. There is zero debt on the books and that is a good sign. Secondly, we are doing calibrated expansion. So, in the next or the current quarter of this financial year we are opening another nine stores and another 28 stores next year. Most of these will come in these three clusters I mentioned.
So, capex will be the lowest and except for store refurbishment costs. there will be virtually nothing. Bulk of the stores which we have started this year will start turning profitable. We have got two standalone apparel stores as we speak. There will be another 10 added in the next few months. All this will lead to the bottom line being better and better. Our online business has been revamped completely and that revamp saw about 60,000 orders coming through in December. We expect this to be a rising trend.
This is an added convenience that we are offering our customers. We expect this to create a greater stickiness with our customers. We want to reach out to customers who cannot come to or do not want to come to our stores because of distance. So overall, I feel very good about the business.
Since the end of FY18, the focus has been on large format stores. How much of an impetus does this strategy provide for future growth? Also, from a medium to a longer term perspective, what sort of same store sales growth do you hope to achieve?
A recent Morgan Stanley report highlighted that in India grocery is still more than 62% of retail revenue pool. Store-based retailers have captured less than 3% of that opportunity. Online penetration also is just a mere 0.3% and grocery is your mainstay. Do you believe it gives you an edge over your peers and how are you looking to essentially capitalise on this opportunity?
Even if you look at the US, online sales are just about 10% of total sales. You rightly said in India it is under 3%. Online will be an adjunct to physical sales, not the principle component of sales, that is the first point.
Second point is our private label programme is getting very robust and private labels typically contribute about 10% more margins than branded products.
Four, with a greater emphasis on apparel, general merchandise and private label, the share of grocery will be going down. It is not that grocery per se will reduce in sales, but the others will increase. We are also focussing on value-added grocery. Inside all the big Spencer stores, you will have a gourmet section. It is food but it is differentiated food. There will be exotic mushrooms, avocados, 40 varieties of cheese, cold cuts etc. All these have higher margins. It is about getting a higher percentage of your sales on higher margins thereby taking your overall margin percent up.
Currently your online presence is in just eight cities. Are you looking to scale that up? Also, what is your strategy for Omni channel expansion?
As far as online is concerned, you would not see any firsts from us but this will be an additional service that we will give our customers. I cannot forecast numbers. Today we really cannot be talking about forward looking numbers. But we are very conscious that we should not make losses in this and so that has been our strategy. So getting sales is one aspect but getting profitable sales is the more important aspect that we are focussing on.
The top 10 states contribute almost 64% to India’s retail and they are expected to grow in double digits CAGR. States where Spencer’s is present account for about 50%. Will these markets be your focus areas? What sort of growth are you expecting over next four to five years?
We are told we cannot speak about long term numbers and long term forecasts and projections, but if what you say is true, all I will say is aapke muh mein ghee shakkar.
Let us understand also the plans that you have for CESC ventures especially their relatively new FMCG arm?
The premise of our products is based on taste and which is healthy. It is baked, not fried. It has taken the customers by storm, we are adding new distribution outlets. We are already at 4,20,000 distribution outlets for our FMCG initiatives overall. It is the fastest growing FMCG company. We will be fastest company to cross Rs 1,000 crore. So, so far so good.
In the course of time, we will launch products beyond snacks. Those products are ready but it is a question of when we launch them. We are very conscious of bottom lines, we do recognise that any such venture consumes a lot of advertising money. We are conscious of our advertising spends and we have to balance between brand building and not expenditure for vanity. It is a cautious, calibrated approach that we are taking and it is paying off. The brand is visible, the product is moving off the shelves and it has only been 16 months since launch. It is still very young and if I may say so at the cost of sounding immodest, remarkably successful for a 16-month product.
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Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price