Aditya Birla Fashion and Retail Ltd: Post-GST good news Aditya Birla Fashion cuts clothes prices 8 pct in Pantaloons
Aditya Birla Fashion and
Retail (ABFRL) has trimmed prices of its apparel range at Pantaloons Retail by
7-8% as the company passed on the benefits of the goods and services tax (GST)
to customers and sharpened its focus on value fashion. The company has
consciously been focusing on value fashion and bringing down product prices in
the Pantaloons stores for the last one year. With taxes lowering post roll-out
of the GST from July 1, the company passed on the lower tax of 5% from the
earlier 7% on products costing below Rs 1,000 to customers to boost
demand.
Supply chain efficiencies following GST implementation have provided more
opportunities to companies to reduce prices. “As we continue to focus on value
fashion, we have brought down our prices by 7-8% in the July-September quarter
post implementation of the GST,” said Ashish Dikshit, business head, Aditya
Birla Fashion and Retail, at a post earnings conference call.
As on September 30, 2017, Aditya Birla Fashion and Retail has 1,893 exclusive
brand outlets and 210 Pantaloons value stores operational in the country. The
company operates a total 6.7 million sqft of retail space across formats.
Experts said the price cut is higher than the direct tax benefit ABFRL got post
the roll-out of the GST as companies also passed on lower costs of supply
chain, warehousing, among others, to customers. Rajat Wahi, partner,
Deloitte India, said:
“Apart from getting a direct
tax benefit of around 2%, retail companies focusing on value fashion must be
passing the supply chain benefits such as abolition of tolls in many locations
and reduction in number of warehouses, among others. While there may be
short-term impact on margins of companies due to the price cuts, the main focus
of companies is to boost sales. However, in the long-term, cost benefits got
through supply chain will mitigate the impact.”
Anurag Mathur, partner, PWC,
said: “Transportation and logistic costs have rationalised, which has helped
the companies to lower prices.” Aditya Birla Fashion and Retail had cut
prices of its apparel range by around 4-5% last year as well and had indicated
that the company would take further price cuts as it would sharpen its focus on
value fashion. Value fashion, or fashion at affordable rates, ranges between Rs
400 and Rs 1,500, and had emerged as one of the fastest growing segments
with all large players rapidly expanding their footprints. Vasanth Kumar,
executive director at Max Fashion, told FE that the company has reduced product
prices by 2-5% in its stores following the GST roll-out.
The price cut has been a
little higher than the direct GST benefit as the company passed on the benefits
of supply chain to customers. Sales of Aditya Birla Fashion and Retail were
impacted in July soon after the roll-out of the GST, but there was a swift
recovery in August. September recorded a strong like-to-like sales growth of
23% on the back of the festive season. The company added 30 Pantaloons stores
in Q2FY18 and 72 stores were added between Q2FY17 and Q2FY18.
Hit by the GST, ABFRL reported
a net loss of Rs 10 crore in Q2FY18, against a net profit of Rs 65 crore
reported in the year-ago period. The profit after tax before the GST impact in
Q2FY18 stood at Rs 16 crore. The company reported a 4.3% decline in net revenue
to Rs 1,804 crore, mainly due to the impact in sales following the GST.Moreover, due to early season
sales announced in June to clear stocks ahead of the GST implementation,
customers made their purchases a month earlier. The company reported earnings
before interest, taxes, depreciation and amortisation (EBITDA) of Rs 100 crore
in Q2FY18, compared with Rs 172 crore in Q2FY17. ABFRL’s EBITDA
margin for the second quarter stood at 5.5%, against 9.1% in the same period a
year ago. At the end of the September quarter, the company had net debt of Rs
1,946 crore.
Source:Financial Express,India
Tuesday, 14 November 2017