Reliance Retail says profit margins will improve from next year as its online business investments pay off

Kolkata: Reliance Retail expects its earnings before interest, taxes, depreciation and amortisation (Ebitda) margins to improve from next fiscal year as investments in scaling up ecommerce operations begin to pay off, chief executive officer Jeyandran Venugopal said.

The country's largest retailer is ramping up investments in dark stores in large cities to enable 15-20-minute deliveries, while remodelling existing stores and warehouses to serve online customers. The spending has weighed on profitability over the past three quarters, with net profit either declining or growing marginally.

Speaking to analysts on Friday after the company reported its September-quarter results, Venugopal said the targeted improvement in operating Ebitda was realistic once the current investment phase was completed.


"Even though it may look very, very aggressive, it is not starting from zero. It is not a bootstrapping story. It is about how do we leverage our existing large asset base that we already have by doing these incremental investments, which are significant, but we get the high leverage effect once we do the investments on the existing base," he said.

Reliance Retail reported a 24.5% year-on-year decline in net profit in the September quarter, following a 14.2% drop in the June quarter. Profit had grown just 0.5% in the March quarter.

The company is accelerating its push into ecommerce and quick commerce as online platforms account for a growing share of sales across grocery, electronics and fashion. Its digital commerce business grew 42% year-on-year in the latest quarter, driven by higher average order values and a 24% increase in units per order at JioMart, its ecommerce and quick-commerce platform.

Venugopal said online growth across the industry was being fuelled partly by heavy spending on customer acquisition, coupons and discounts. Reliance Retail intends to pursue growth without matching competitors' spending indiscriminately-will do it on a much more "measured and meaningful way".