Top News
India ranks among most attractive destination for retail
According to US-based global management consulting firm, A.T. Keamey, vide its Report on 2012 Global Retail Development Index, India has been ranked the fifth most attractive destination for retail investment among 30 developing countries.
The Report further states that India remains a high-potential market with accelerated retail market growth of 15 to 20% expected over the next five years. It further mentions that the growth is supported by strong macro economic conditions including a 6 to 7 percent rise in GDP, higher disposable incomes and rapid urbanization.
This information was given by the Minister of State for Commerce and Industry, Shri Jyotiraditya M. Scindia in a written reply in the Rajya Sabha today.
India's Retail Sector outlook revised to negative for H212: Fitch
Fitch Ratings has revised the H212 outlook for the Indian retail sector to negative from stable in view of a sustained deterioration in the discretionary spending ability which is unlikely to improve over the short term.
Fitch has revised down its real GDP forecasts to 6.5% and 7.0% from the earlier 7.5% and 8.0% in FY13 and FY14, respectively. The agency believes that the worsening business conditions could negatively impact credit profiles, while the impact on individual retailers would depend on their ability to manage their capital structures. The Private Final Consumption Expenditure (PFCE) growth rate, which was weakest in the last seven years in H112, is unlikely to improve significantly unless consumer price inflation declines and consumers receive a significant raise in real wages.
The same-store sales growth of retailers has decelerated across lifestyle and value-based formats from Q312. Fitch expects retailers to combat slowing SSG across format (lifestyle and value) by offering discounts which in turn would help boost volumes and consequently overall revenue. However, this may lead to an erosion of gross margins, which retailers may counter by adopting cost-rationalisation measures as seen in the past. Nevertheless, pressures on operating margins are likely to remain, given that a large part of these costs are fixed in nature.
The likely margin contraction, expansion plans, along with increased need for inventory as retailers open up new stores, will increase working capital requirements which will be largely debt funded. However, companies have been implementing various strategies to contain the debt, including raising equity and selling certain non-related assets and business segments, which may help in maintaining credit profiles.
The inventory holding period increased by a marginal extent in H112, with a reduction in the credit period availed from creditors. The expected lower operating profitability as well as higher funding costs and working capital requirements should continue to exert pressure on operating cash flows.
A sustained reduction in consumer price inflation, coupled with a rise in real wages, is likely to restore the discretionary spending power of Indian consumers. This along with an increase in household savings and the associated benign impact of a positive wealth effect on consumer sentiment could change the outlook to stable.
A stable outlook may also result from liberalisation of the multi-brand segment which could provide easier access to foreign direct investment and would have a positive impact on the capital structure and liquidity profile of companies in this sector.
Some of the Fitch-rated Indian retailers are Pantaloon Retail India Limited ('Fitch A-(ind)'/Stable/'Fitch A1(ind)'), Shoppers Stop Limited ('Fitch A1+(ind)') and Tristar Retail Limited ('Fitch BB-(ind)'/Stable/'Fitch A4+(ind)').
Result
TBZ Q1 net profit at Rs162.69 mn
Tribhovandas Bhimji Zaveri (“TBZ”) Limited, a well known and trusted jewellery retailer in India, has posted Total Income (standalone) of Rs. 2,835 mn for the quarter ended June 30, 2012. TBZ’s Net Profit was Rs. 162.69 mn for Q1 FY 2013 despite a tough economic environment, higher gold prices, jewellers strike and fewer wedding-festive occasions.
The EBITDA for quarter stood at Rs. 295.64 mn and the EBITDA margin for Q1 FY 2013 was 10.4% as a percentage of total income even though the industry faced several challenges in the first quarter. TBZ maintained Net Profit margin at 5.74% for the quarter on account of a judicious sales mix of gold and diamond wherein diamond jewellery sales enhanced the margins.
Commenting on the financial performance of the Company, Shrikant Zaveri, Chairman and Managing Director, Tribhovandas Bhimji Zaveri, said, “In the first quarter following the successful completion of the IPO, our focus was on reinforcing the brand and its premier wedding jewellery positioning. We deployed an interesting sales mix of gold, diamond and fusion jewellery while unveiling exciting new collections such as Dohra collection to entice the customers and increase same store sales. For the first time ever, TBZ opted for a gold loan facility during this quarter as a best-of-breed business practice to help enhance business efficiencies and mitigate the risk of gold price volatility.”
TBZ, which is recognised as a jeweller of choice for wedding occasions, faced several challenges due to bleak industry scenario in Q1 FY 2013, such as lower gold volume due to fewer weddings and festivals during the first quarter. Gudi Padwa, an auspicious day for gold purchase across Maharashtra, was celebrated in the first quarter last year, but happened in Q4 FY 2012 this year. The jewellers’ strike from March 16 to April 6, 2012, during the quarter impacted sales. TBZ capitalised on the trend by focusing on increasing diamond jewellery sales across stores.
According to Zaveri, overall volumes are expected to recover during the 2nd half of FY13. “TBZ is maintaining the momentum of its retail expansion across key markets in sync with the IPO disclosures. TBZ opened a new showroom at Churchgate, south Mumbai, on 6th July 2012. With festivals around the corner, TBZ Ltd. is unveiling attractive new collections including the recently launched ‘Surprises – Gifting’ collection. And our innovative marketing and promotional initiatives will help us attract more footfalls at retail outlets,” added Mr. Zaveri.
For the year ended March 31, 2012, net profit of TBZ Ltd. was Rs. 571.93 million and total income from operations was Rs. 13,854.70 million.
Welspun Global Q1 revenue up 45%
Pantaloon Retail Q4 net profit at Rs227.10 mn
Domestic News
Delhi, Manipur back FDI in multi-brand retail
The Department of Industrial Policy & promotion, Government of India, wrote to all the State Governments on 19.6.2012. Till date, written communications, indicating support for FDI in multi-brand retail trade, have been received from the Governments of NCT of Delhi, Manipur, and from the Union Territory of Daman & Diu and Dadra and Nagar Haveli.
As per extant policy, FDI, up to 100%, is permitted, with prior Government approval, for single brand product retail trading. FDI is not permitted in Multi Brand Retail Data relating to single brand retain trade operations in the States is not centrally maintained.
This information was given by the Minister of State for Commerce and Industry, Shri Jyotiraditya M. Scindia in a written reply in the Rajya Sabha.
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International News
McDonald's July same-store sales flat
McDonald's Corp (MCD.N) reported flat sales in July its worst performance in more than nine years due to weakening of global economy.
According to reports, the results came in to less than expected by Wall Street's and marked the first time since April 2003 that sales at restaurants open at least 13 months did not rise.
Shares were down 1.6% at $87.56 in midday trading. The stock has fallen more than 14% from its peak of $102.22 in January.
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