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What’s making news?
FDI buzz continues
The DIPP proposal has continued to garner attention. However, the proposal comes with strong riders,
particularly on limiting cities that FDI backed retailers can operate in, requiring approvals from each state and
conditions around sourcing from and selling to small businesses
Recent press commentary points to the policy being approved as early as August
The Inter Ministerial Group (IMG) on inflation, which includes representatives of a number of ministries but no
actual ministers, has suggested that FDI in retail be allowed
If implemented, the riders would complicate potential FDI investments into existing players
News reports of some states opposing FDI in retail have already started emerging
There are also reports of small traders planning a stir to protest against the proposal
Pizza Hut plans larger stores (BL)
Pizza Hut has positioned itself as a casual dining resteraunt against its earlier QSR image
Recent store openings have been 50% larger at 3000 sq ft – something the company plans to continue
It plans 300 Pizza Hut Delivery outlets and 150 Pizza Hut Restaurants by 2015 (170 currently)
Watch retailer Ethos looking to youth segment for growth (FC)
Ethos, which retails ~35 watch brands, is looking at 40% growth this year on a base of Rs1bn in FY11
The fashion & youth segment, with price points of Rs5,000-50,000, will be the fastest growing segment, with
growth being led by new stores as Ethos’s existing portfolio is geared to higher price points
The company’s plans to add 14 stores in FY12 to take the total footprint to 40 stores
What’s making news?
Next retail targeting aggressive growth (FC)
Next Retail, the electronics retailing division of Videocon, is targeting 65% growth in sales to Rs25bn
The chain plans to scale up its store footprint to over 1000 by end FY12 against 609 currently
The company operates small as well as large stores and invests Rs10-50m per store
Retailers start charging for plastic bags (IBN)
In line with a recent government notifications, retailers have been asked to charge Rs1-7 for plastic bags
The initiative is being piloted in Mumbai and will eventually be rolled out nationally. RAI is also backing it
Stock pileup driving an earlier sale season in garments (BL)
The end-of-season sale in apparel has begun 3 weeks earlier this year
This is reportedly being driven by an inventory pileup following price hikes earlier in the season
A range of brands have started their sale periods early, as have some multi-brand retailers
Online retail set to grow: Assocham (TOI)
An Assocham survey saw 40% of respondents across 10 cities saying that they prefer to shop online
Convenience, information availablity, price comparison and product availability are cited as main drivers
Assocham expects the online retail market in India to become Rs70bn by 2015
1QFY12 preview: demand the thing to watch
Sector
Growth to moderate somewhat given tougher comparables and
volume drops in the face of price inflation (particularly in garments)
Things to watch out for will be the impact of inflation on growth and
margins, tax change impact, profitability trends, store growth
progress and performance divergence between formats
Titan
We expect revenue growth to continue to be led by the jewellery
business with sales being boosted by a strong Akshaya Tiritya festive
season.
Whilst we expect a margin improvement on a YoY basis in jewellery
given the weak base from 1QFY11 but expect a slight drop in watches
Things to watch: segment margins, impact of gold and diamond price
volatility, progress in eyewear, impact of excise duty change
Shoppers Stop
We expect growth to moderate to 19% against 22% in 4Q as same
store sales growth see some pressure
Margins should drop sequentially but still be strong YoY
Things to watch: product price inflation and excise impact, same
store growth, progress in Hypercity and store expansion
Jubilant Foods
We expect same store growth to moderate somewhat but still remain
high while space growth will add to the topline
Margins should be up sequentially but still down YoY
Things to watch: food inflation and price hikes, store growth
guidance, IPL/world cup impact
Pantaloon
Pantaloon will see the inclusion of HSRIL annualise causing the margin
base to become easier; Ebitda margins flat QoQ, +30bps YoY
Our forecasts assume a recovery in same store sales growth;
uncertainty around this remains high but store growth should support
Things to watch: Ebitda margins, same store sales growth and
inflation, Ex-HSRIL performance, E-Zone hive off, progress on
restructuring, store openings, garment price hikes and demand
Titan Industries- TTAN IN (SELL)
Business description:
Titan is India's largest manufacturer /retailer of watches (19% FY11
sales) and jewellery (77% FY11 sales)
In the watches segment Titan sells high, mid as well as low end
watches
In jewellery, Tanishq is Titan’s luxury jewellery retail format and
GoldPlus is its new mass market offering
Goldplus (mass market jewellery) portfolio now stable at 29 stores
with no major store additions planned
Eye+ (prescriptive eye-wear) formats are being scaled-up and is now
present in over 45 cities
Precision engineering division is expected to break-even in FY12
Growth drivers
As of March 2011, Titan has 665 stores spread over 0.8m sf
‘World of Titan’ stores: 311
Fastrack stores: 45
Helios stores: 6
Tanishq stores: 120
Gold Plus stores: 29
Zoya stores: 2
Eye+ stores: 150+
Titan well above 5 year average PE now
News and updates
Titan has launched HTSE (High Tech Self Energized), a
collection of self energizing, light powered watches
Diamond prices for Titan increased 90% between
December 2010 and April 2011
GoldPlus is seeing competitive pressure from local
jewellers becoming more aggressive Akshay Tiritya sales
were reportedly strong this year despite high gold prices
The company plans to add 150-200 stores in FY12. Capex
is expected to be Rs1.5-2bn
Pantaloon Retail- PF IN (U-PF)
Business description:
Pantaloon is India’s largest retailer and a part of Future group.
Its retail business can be grouped into 3 categories:
Lifestyle retailing: Pantaloon and Central
Value retail: Big Bazaar, Food Bazaar and KB’s fair price
Home retail: Home Town and E-Zone
Non retail businesses of Future group
Post-restructuring, PRIL will be a pure play retail company
Asset management: Real estate and private equity funds
Consumer finance, hotels and logistics
General and life insurance
The restructuring of the financial holdings has run into
regulatory hurdles
PRIL has crossed 14m sf in retail space
PRIL trading well below its 5yr mean PE
News and updates
The group plans to add Rs3bn in opening 25-30 Big Bazar stores
in FY12
Future group will reduce the size of eZone stores and position it
as a convergence platform for physical and online shoppers
Future Group plans to invest Rs4bn/year for the next two years
to strengthen its supply chain
Future Group has reassigned roles of its top executives to push
new businesses such as high-end supermarket and catalogue
retailing, , as well as to fill the void created by the sudden
demise of Future Value Retail CEO Raghu Pillai.
Shopper’s Stop- SHOP IN (U-PF)
Business description:
Shopper’s Stop operates India’s largest chain of department
stores under the Shopper’s Stop brand
It also has 5 specialty retail formats
Crossword: Books, gifts and music
Mothercare: Mother and baby care
MAC: Cosmetics, Arcelia
Home Stop: Home furnishings
Hypercity: Food, grocery and general merchandize
It has increased its stake in Hypercity and now owns 51%
Current retail space: 2.37m sf across over 100 stores and
another 0.98m sf in Hypercity (9 stores)
News and updates
Valuation below long term average but still high
Price: Rs475
Mkt Cap: US$865m
Avg T/O: US$0.7m
Shoppers Stop has raised garment prices to pass on
the excise duty hike
Hypercity hopes to break even in FY13
Hypercity will be opening in the MARG Junction mall
in Chennai. The company will spend Rs0.4-0.5bn on
new store openings this year
Hypercity expects to reach a target of 35 stores by
FY15
Hypercity’s diverse product portfolio
Jubilant Foods – JUBI IN (O-PF)
Business description:
Master franchisee for Domino’s in India. Dunkin’ Donuts added
recently
End market for Domino’s growing at 20%+ with broad growth
and a penetration led shift towards takeaway and chain formats
Rising middle class income, evolving attitudes and a young
population drive this
Its strong brand and retail model generate healthy margins and
return ratios
Store portfolio over the 380 mark
News and updates
Financials
Price: Rs847
Mkt Cap: US$1,191m
Avg T/O: US$34.2m
Jubilant plans to increase its pace of store expansion
to 80 in FY12 against 70-72/year in FY10-11
The company is targeting same store sales growth of
20% in FY12
The rollout of the Dunkin’ Donuts will be gradual with
the first store opening in 4QFY12 and 80-100 stores
over five years
Trent- TRENT IN (NR)
Business description:
Trent is one of India’s leading retailers and is a part of
the Tata group
It operates over 100 stores
Westside (Department stores): 54
Star Bazaar (Hypermarket stores): 11
Landmark (Books and gifts stores): 31
Fashion Yatra
It has two JVs –one with Inditex, to open Zara stores,
and another with Tesco, to open cash and carry stores
and also to be the supply chain and logistics partner
to Star India Bazaar
Other highlights
As of FY11, Trent’s floor space was at c.2m sf
We expect it to cross 3m sf of floor space by FY13
The management intends to scale up to 50 Star
Bazaar (Hypermarket stores) over the next three
years
The company will focus on increasing the private label
mix within Star Bazaar
News and updates
Trent is reportedly in talks with Inditex to add another
brand besides Zara
The company has reportedly shelved plans of a tieup with
the Arcadia Group for the Top Shop format
Trent is experimenting with gourmet retailing in its
Westside format
Star Bazaar has announced ‘Quick Queue - The Green
Line Revolution’, an initiative of short billing queues
Reliance Retail- Unlisted
Business description:
Reliance Retail is 91.1% subsidiary of Reliance Industries
Ltd.
It operates over 1,000 stores across 86 cities across 14
states
Other formats: Mart, Super, Digital, Trendz, Footprint,
Wellness, iStore, Footprint, Jewellery, TimeOut,
bookstore, AutoZone
Currently there are c.5.5m ‘RelianceOne’ members under
its flagship loyalty programme
News and updates
Reliance Retail has named Rob Cissell, former COO of
Walmart China, as CEO. Shawn Gray, vice-president
in-charge of store operations of the same company,
will join as COO
Reliance Trends plans to double revenues in FY12 on a
base of Rs3.3bn in FY11. The format recently opened
its 50th store.
Reliance Digital has recently opened its 36th store and
plans to launch private label offerings shortly
Bharti Wal-Mart- Unlisted
Business description:
Wal-Mart and Bharti Enterprises formed a 50:50 JV to foray
into the wholesale cash and carry business under Bharti
Wal-Mart Private Limited
In addition, Bharti has also opened retail stores, the supply
chain for which is supported by Bharti Wal-Mart
Currently, Bharti has a total of 118 stores, including Easy
Day stores and Easy Day Market stores, in Punjab,
Haryana, UP, Rajasthan, among others.
Bharti plans to increase its store portfolio to about 140
stores by the year end; Bharti Wal-Mart has recently
opened its third cash and carry store
The company plans to open 15 wholesale cash and carry
stores by the end of CY 2011
Details of Bharti Enterprise’s retail venture
News and updates
Bharti Walmart plans to open eight more cash and carry stores
in 2011 (6 currently) with another 8 in 2012
The company is planning to extend its cash & carry offering to
the Western and Southern markets
The company hopes to have 12 cash & carry stores by the end
of 2011, employing nearly 15,000 people
Aditya Birla Retail- Unlisted
Business description:
In January 2007, Aditya Birla group announced plans
to enter the retail sector with the acquisition of south
India based Trinethra Super Retail
Trinethra group operated 170 stores across 0.5m sf
retailing food and grocery in Andhra Pradesh, Kerala,
Karnataka and Tamil Nadu
Retail franchise:
Currently: 560 More supermarket store and ten
hypermarket stores totalling over 1.7mn sq ft
Store size: Super markets average 2,500-3000 sf
and hypermarket stores 55,000 sf
ABRLs merchandise mix is 15% fresh food, fruits
& vegetables, 50% grocery food & staples, 25-
30% FMCG and 5-10% general merchandise
Its loyalty program ‘Clubmore’ has 2.6m
customers, of which 0.4m are currently active
News and updates
Aditya Birla Retail’s growth plans are focused on South
India for supermarkets but pan-India for the
hypermarkets format
The company plans to have 1600 supermarkets and
65 hypermarkets by 2016
The company expects to break even at the PAT level
by FY15 and Ebitda level by FY13
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