Future Retail Expects 15-20% Annual Sales Growth In The Next 3-4 Years

Future Retail Ltd. expects sales to grow 15-20 percent annually for the next three to four years. The retail giant is banking on doubling its same-store sales to meet this target, said Axis Capital which recently arranged a roadshow for the company.

The retailer which currently has an operating margin of 3.5-4 percent sees it rising by 5-7 percent over the medium to long term.

Lowering of working capital cycle (from 78 to 60 days) will improve the company’s return on capital employed to 20 percent in the medium term from 15 percent currently, Future Retail said at the roadshow. The RoCE is a ratio that measures a company's profitability and the efficiency with which its capital is deployed.

Future Retail now has 749 stores and services over 300 million customers annually, the note said.

Expansion Plans

The retailer has a multi-pronged strategy to boost profitability by expanding its small store network, increasing margins in the food and fast-moving consumer goods portfolio, building an omni-channel network, increasing stock velocity and leveraging its customer data across group companies to increase sales per customer, the Axis Capital note added.

Omni-channel is a multi-channel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone or in a bricks and mortar store.

Future Retail converted its KB's Fair Price shops, which were run as neighbourhood general stores, into EasyDay small format supermarkets after buying the brand from Bharti Retail last year. The plan is to have to eventually have 3,000 EasyDay stores from 330 currently.

The re-branding exercise was carried out to strengthen Future Retail’s presence in the small format store segment, Axis Capital noted.

The retailer also plans to open 350 Big Bazaar stores by 2021 from 231 currently and almost triple its apparels and accessories store fbb (fashion at Big Bazaar) to 150-200 stores from 55 stores currently.