Saturday, 22 June 2013

Rs fall has made our Puma business 30% more expensive

Puma, the sports lifestyle brand from the stables of the 9.7-billion-euro ($13 billion) French luxury fashion house Kering, has grown at a CAGR of 42% in India since it started operations in 2005. But matching similar growth may be a difficult task this year. Puma India managing director Rajiv Mehta tells FE's Debojyoti Ghosh that the depreciating rupee and low consumer spend have made the firm revise its growth target for 2013.

How has the dollar movement impacted your business?

We buy from factories in China, Vietnam and Indonesia and we pay them in dollars, not in local currencies. When we did our budgeting in August 2012, rupee stood at about R46 to a dollar. But by December, it fell to R53 and by February 2013, it was at R 52-53.

This was about 20% more expensive than what we had budgeted for. So when we had budgeted at a dollar exchange rate of R45, we had a certain margin left to ourselves, but now we are paying almost 30% more to the factories. We cannot hedge that much in advance as the Indian government does not allow you to hedge unless you have the bill or invoice from the factories. We could not hedge one year in advance. Hence, the business has become 30% more expensive for us, but I couldn't have increased my pricing that much.

So, by how much have you increased the prices to offset the forex fluctuations?

We could increase our price only to a certain extent considering inflation. We have gone for some changes in pricing. For new products that involve latest technology, we have increased price by 30-40%, while if it is a basic shoe, we have kept it the same. On an average, there is a 12-15% increase in pricing across categories and not just shoes.

So have you revised the growth target for this year?

There were couple of things that made us roll back our forecast. Forex concerns on the dollar was the primary reason that we kept our growth figures conservative. Now we may end up growing by 26-28% instead of over 40% as projected earlier. For us the fiscal is January-December, the calendar year. Importing stuff has become more expensive with the rupee having fallen to 60 to a dollar now. And we cannot completely pass on everything to the consumer. There is an uncertainty and the macro-economic factors are not that favourable. People are sort of tightening their wallet and given the fact that we are a lifestyle brand, it becomes slightly more difficult to sell to consumers because it is not a necessity but a choice.

Will it impact your expansion plans?

Currently, we have 270 stores across the country. This calendar year we are adding about 15-20 stores. If you look at the competition, the number of their stores are higher compared to ours. But our sales per square foot is higher than the competition. We are very conscious about where we open a store. In the last eight years, we have closed only two stores. Large part of our stores are franchised. Of the total, 50 are owned and operated and the remaining 220 stores are franchised.

What is the current focus for Puma in India?

When we entered the India market, our focus was mainly at the lifestyle segment since we always had a strong foothold in that space. But in the last one and a half years, globally, we made a lot of progress in the performance shoes that we have launched. Even in India, we thought that now is the time to capture the performance shoe market. So our thrust now is on that segment.
http://www.financialexpress.com/news/rs-fall-has-made-our-business-30-more-expensive/1132162/3

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