Monday, 21 May 2012

Planet Retail cuts investment, expansion plans

Planet Retail Pvt. Ltd, which sells a clutch of international clothing and accessory brands in India, has shrunk both its expansion and investment plans on the back of a weak global economy and slow sales.

The retailer of Guess, Body Shop, Accessorize, Next and Nautica brands in India may also miss its 2015 break-even target.Planet Retail, after a substantial restructuring and clean-up exercise in 2010, embarked on an expansion plan not just for a wider reach but also to bring in new brands and build existing ones. All that is on hold now.

“The plan now is to restructure and reduce the pace of expansion across our brands and recast investment plans to half,” said chairman Ramesh Tainwala, adding that it shouldn’t be surprising if Planet Retail is unable to break even as planned by 2015. He didn’t disclose revenue details.

Planet Retail also has a licence to run a chain of Debenhams lifestyle stores in the country.“Macro-environment issues such as rupee depreciation, weak retail sales in the last two quarters were not at par with expectations for most premium brands and the entry of FDI (foreign direct investment) in the retail sector not happening anytime soon, are some of the reasons that forced us to restructure business,” said Tainwala, who is also president, Asia-Pacific and West Asia, at Samsonite.

Many global brands in India have changed their pricing, positioning and sourcing strategies during the slowdown of 2008-09 to adapt to the local consumer palate, while some including Dockers and Springfield decided to exit the country. Global brands that have survived and done reasonably well in India, such as Marks and Spencer, have incorporated some flexibility to adapt to the local market, said Devangshu Dutta, chief executive of retail consultancy firm Third Eyesight.

The UK-based retailer restructured prices and sales strategy to suit the Indian market three years ago, and decided to source locally, making it possible for the company to price its products competitively.

Marks and Spencer recently said it will continue to open stores in India and source locally. Six new stores were opened in 2011-12 and Marks and Spencer Reliance India Pvt. Ltd will continue to expand in the country as a priority market, a company spokesman said by email. Besides local sourcing and pricing, even designs have been adapted to India, he said.

Planet Retail’s global brands, on the other hand, are entirely imported. The retailer has shrunk its investment plan of Rs.200 crore by half and is deciding on whether it should focus its capital on existing brands or on a few strong ones such as Debenhams and Accessorize.

Retail sector analysts said that brands that come into India through licensing agreements, such as the brands Planet Retail sells, face challenges in terms of both pricing as well as their product mix. Tainwala admitted that both pricing and positioning may have been an issue for some of Planet Retail’s brands in India, and these aspects are being reworked.

For instance, Next, which had 15 stores earlier, now has only two in Delhi. Its positioning is being widened from being a garments-only brand to include accessories. Planet Retail will open a full-format Next store in Pune that will have the look and feel of any of the brand’s UK stores.

“We will consolidate our brand portfolio and exit one-two brands if required. For both Next and Guess, we will do an honest evaluation of (the) brands’ potential over the coming months,” said Tainwala.

Another retail analyst, who didn’t want to be named, said premium brands such as Guess will need a substantial capital input to grow. “What largely went wrong with both Next and Guess is that both the brands were not positioned appropriately here and prices were way too high,” he said.

Planet Retail had intended to grow aggressively to 300 stores by 2014 from 80 now, but expansion will be scaled down now. While international premium brands may be dealing with their unique problems in India, domestic brands have not downsized their expansion momentum despite sales slowing.

Jacob John, brand head, Louis Philippe, a premium menswear brand under Madura Fashion and Lifestyle, said the brand opened 40 stores in 2011, including some large ones of 3,000-10,000 sq. ft, despite sales dropping due to an inevitable price rise.

“We increased prices by almost 30% last year and may raise them further by 10% and we will remain aggressive on expansion plans this year too,” said John. Relatively, most domestic premium brands such as Louis Philippe have an entry-level pricing of Rs.1,500 or below for a shirt and only compete with foreign brands for their high-end segments.
http://www.livemint.com/2012/03/11211651/Planet-Retail-cuts-investment.html?atype=tp

 
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