Prominent retail groups, like Reliance Retail, Shoppers Stop, and Spencer’s Retail, are being forced to reduce expenses, raise debt, and leave unprofitable locations due to a protracted decline in consumer spending.
The more than 18-month-long slump was made worse last quarter by a lengthy election season and heatwaves in various regions of the nation. According to executives, companies that quickly opened stores in order to capitalise on post-pandemic revenge shopping are now streamlining their networks in order to maintain operations.
In the three months that concluded in June, Reliance Retail, the biggest retailer in India, closed 249 locations. In terms of growth, the corporation is likewise moving slowly; in FY ’22, FY ’23, and FY ’24, 470–800 new stores were launched each quarter; in the current quarter, 331 new stores were opened. Due to the closures, Reliance Industries’ retail division added 82 net new stores during the most recent quarter—the fewest in the previous fifteen.
Spencer’s Retail has made the decision to shut down all 49 of its locations in the National Capital Region (NCR), Andhra Pradesh, and Telangana in order to fully abandon the North and South Indian markets. Although the move will result in the loss of Rs. 490 crore in revenue annually, the corporation hopes that it will increase profitability.
Kavindra Mishra, the CEO of Shoppers Stop, warned investors last week that the company would have to postpone a few store openings for this fiscal year because of legal and other concerns. While the market is still slow, the company would also borrow Rs. 100 crore for expansion. According to V-Mart Retail’s most recent investment presentation, the company closed 22 outlets in the first half of 2024.
Earlier this month, Reliance Retail’s chief financial officer, Dinesh Taluja, informed analysts that the company is restructuring operations in order to increase profits. He claimed that the sector as a whole has seen a decline in discretionary spending in areas like fashion and lifestyle.
Anuj Singh, the CEO of Spencer’s Retail, informed analysts on Thursday that the 49 outlets the company is closing account for about 22 per cent of sales but also for Rs. 56 crore in losses at the regional Ebitda level in North and South India. According to Singh, the corporate offices’ approximately 35 per cent workforce reduction and the shop rationalisation process will lower overheads from 8 per cent of operating costs to 6.3 per cent of total sales.
Shoppers Stop’s Mishra stated that the prolonged election season, which included weekend polling dates, heat waves, and a high rate of cumulative inflation contributed to the low demand seen in the previous quarter. All of these variables—aside from value fashion and beauty—combined to produce hit growth and volume recovery.
