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Pantaloon: Research meet extracts - Views on News from Equitymaster
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Pantaloon: Research meet extracts
Mar 6, 2006

We recently met up with the management of the company. The management spoke at length about the journey till now and what lies ahead for the sector in general and the company in particular. Key takeaways…

  • Square feet expansions: Pantaloon Retail has ambitious plans for the next three years. Currently, the company’s floor space is around 3.5 m square feet. The company has already rolled out its plans for FY07 and FY08. It would be doubling its floor capacity in FY07 to 7m sq. ft. and is likely to add a further 3 m sq. ft. by FY08 (all these properties would be leased). As far as the expansion is concerned, the company mentioned that the identification of properties is carried out through a reality fund.

  • New Stores initiatives: For its ‘Pantaloon’ stores (flagship brand), the company would be adding 4 stores in FY07 and 9 stores in FY08, thus taking the tally to around 33 stores. The average size of the Pantaloon store is around 20,000 sq. ft. thus taking the total square feet tally from 0.4 m in FY05 to 0.7 m in FY08.

  • ‘Big Bazaar’ is expected to be the key beneficiary in terms of sq ft expansion. The company would be adding 30 new stores, which would have an average sq ft of 50,000 during the next 3 financial years (including FY06). In terms of sq ft expansion, it would be doubling the present floor capacity i.e. from 1.5 m to around 3 m.

  • ‘Central Mall’ is its vertical large store model. At the end of FY05, the company had 3 such stores having an average sq ft size of 200,000. Future plans include12 stores between FY06-FY08, having an average area of 250,000 sq ft.

  • ‘Fashion Station’ (the branded apparel initiative), which will have 3 stores in FY06 would have 75 stores by the end of FY08. The average floor area would be in the tune of 15,000 to 20,000 sq ft.

  • New retailing formats: The company was operating in 3 major segments i.e. fashion, food and general merchandise till FY05. Going forward, the management has indicated that it would be increasing its service offerings, which would enable it to de-risk its dependence on apparels. In FY05, around 50% of its revenues were from apparels while the rest came from the other two. In 1HFY06, apparels’ contribution to sales was even lower at 30%. The new service offerings include home (kitchenware, furniture), leisure & entertainment (through its 16% stake in Galaxy Entertainment), communications, wellness and financial products. While we believe that there are opportunities in these segments, in our view, some of the global majors like ‘Sears’ that aimed that selling from ‘socks to stocks’ have had failures. To that extent, investors have to be cautious.

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