Reliance Retail to break even by Sept

NEW DELHI: Reliance Retail is expecting to break even at the store level in all cities except Mumbai by September following six months of stepped up efforts at reducing cost and increasing footfalls at the stores, a senior company executive, who did not wish to be named, said. ���We will be able to generate cash at our stores by September, except in Mumbai, where real estate cost for our stores is still high,��� the executive said.

The retailer, which runs over 900 stores, including 50 in Mumbai, has already broken even at the store level in around one-third of the 80 cities it operates in. The executive said stores in Chennai, Bangalore, Hyderabad, Orissa and half the number in Delhi have broken even. Stores in the other metro, Kolkata, however, may fail to break even.
A Reliance Retail spokesperson declined to give details on the company���s finances, saying, ���As a policy, we do not comment on our financials and do not make any forward looking statements.���

The company���s value formats, comprising convenience store Reliance Fresh, supermarket Reliance Super and hypermarket Reliance Mart, together have 750 stores. The speciality formats, including apparel, jewellery, wellness, footwear, consumer electronics and eyewear, account for the rest.

The downturn hit all modern trade players and their sales fell due to weak consumer sentiment and unavailability of funds precipitated by global credit crunch. Indian retailers, new to the game, were also saddled with high operational costs, mainly that of rental and manpower.

That is when Reliance Retail made a strategic shift: It renewed focus on presenting itself as a deep discounter, started a war on cost and moderated the pace of expansion.

As the cost cutting drive had started, another top company official, while speaking to ET early this year said, ���We are making double digit savings in both capital and operational expenditure, with our new way of doing things.���

The retailer is far more cautious now, choosing the right location at far lower rentals, compared to the overheated days of 2007. Similarly, the company shut several unviable stores, relocated many and shrunk the size of many others to suit business requirements. The exact number of stores shut couldn���t be ascertained, but people close to the development said over a hundred stores must have been impacted by the whole exercise.

On the same line, these people say at least 3,000 staff were retrenched at the retail chain, but company denied this, saying only an insignificant number of staff have lost jobs. The company currently employs around 23,000.

A significant move was also made to underline its position as a value retailer. The company went ahead to present itself as the right destination for bargain hunters through different communication strategies.

It has even piloted a ���Supervalue��� format in some smaller cities and towns, including Jaipur, Mysore and Dhanbad, where it has no-frills stores that offer products, up to 10% cheaper than other Reliance stores.