A huge inventory pile-up in the December quarter has led to the rush of ‘discount sales’
One has to usually wait for at least a month into the New Year for the off-season sales to start. But not in 2012. Most retailers, including Pantaloons, Shoppers Stop, etc, are offering discounts on their products at the beginning of the year, when usually, there are no discounts. Shoppers Stop, Big Bazaar, Ezone, etc, have started with their discounts from the beginning of January. Westside, too, has started advertising for its big sale with the ‘come prepared’ commercial.
The rush is prompted by an inventory pile-up, on the back of diminished sales in the last quarter. “We are offering more discounts—even on products like iPad and new tablets and phones,” said a Reliance Retail salesman in Navi Mumbai. “We have seen little offtake; and the stock should be cleared up.”
While brokerage reports have placed FMCG (fast moving consumer goods) as a bankable sector, retail is now viewed as a prospective weak performer in the third quarter of FY2011-12 (Q3F12). A report by IDFC Securities says that big retailers like Shoppers Stop and Pantaloon Retail are looking disappointed. “Same-store sales growth across formats is expected to be in low single digits. Pantaloon Retail’s revenue growth is expected to be at 10% with same-store sales growth at 4%-5%. Shoppers Stop, is expected to report low single digit same store sales growth and HyperCity losses are expected to be at Rs160 million”, it says.
Apparel seems to be one segment which has seen a diminished consumer interest in the past six months. The IDFC Securities brokerage report also says that Pantaloon Retail will see an expected 20.6% decrease on a year-on-year basis for the December quarter in profit after tax while Shoppers Stop will see a paltry 5.4% expected increase for the same period.
Westside is now offering up to 60% off on its products; Shoppers Stop is offering discounts on various products like kids’ apparel, jewellery, footwear, kitchenware and home décor. Ezone belonging to the Future Group started with the discounts with New Year’s weekend. The already struggling premium brand, Espirit is going for a flat 40% off, while Mango, Raymond, etc, are also trying to clear the stocks while there is demand.
“The thing is, many retailers have seen mostly same-store growth in sales,” said an analyst, “but if they can’t clear their stocks, even these ‘pet’ stores will see fewer footfalls.”