On the sidelines of a retail summit on Thursday, CP Toshniwal, chief financial officer, Future Retail, said that the company was altering the product mix of HomeTown stores to focus on furnishings, bath and linen and kitchenware. It reduced exposure to big-ticket, heavy items such as furniture that require considerable backend, logistical and supply chain support.
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The home furnishing business has been severely affected by slowing customer appetite.
Toshniwal added that HomeTown will expand only through its small format stores, sized 25,000 square feet and under, called Hometown Express. While he did not disclose how many Express stores are scheduled to open this year, expansion would be judicious and only in select metros, he elaborated.
The company has already rationalized space in its large-format stores. In the quarter ended in June, 0.13 million square feet of space was rationalized in existing Home Town stores to drive higher productivity. Two HomeExpress stores were also shut.
While the HomeTown business is likely to become EBIDTA positive on a store-level this quarter, on a company-level, it will take at least three quarters, says Toshniwal.
But the underperformance of the home furnishing business has been offset by the stellar turnaround in the consumer durable business, eZone in the March-ended quarter. eZone has 39 stores. The eZone business turned EBDITA positive in the March-ended quarter, according to the company's investor presentation.
Future Retail also opted for a change in the merchandise mix. The focus was shifted from white goods such as refrigerators, washing machines and air conditioners, which require advanced warehousing and supply chain and yield only moderate returns, to small-sized, high-margin products such as mobiles, tablets and I-pods, says Toshniwal.
The concentrated efforts helped Future Retail achieve a positive same store sales growth (SSSG) of 3.7 percent in the standalone business in the quarter ended in June.
The company achieved a positive SSSG after seven consecutive quarters of negative growth. SSSG is an indicator of the performance of stores that have been in operation for a year or more.
The business earned an EBIDTA of Rs 32 crore.
On a consolidated basis, Future Retail continues to have a debt of Rs 4,800 crore. Its interest cost continued to be high at 1.1 times the EBIDTA.
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