Future Group is in an advanced stage of buying out the franchise rights of British retail chain WHSmith in India from Travel News Services India (TNSI), a New Delhi-based company that runs about 80 outlets in the country.
The financial contours will be finalised in a few days and Kishore Biyani-owned Future Retail will focus on opening more stores mainly in corporate offices to sell wares ranging from stationery and lifestyle products to imported food and gifts, according to two officials involved in the negotiations. “Both teams will meet in the next three days to discuss the financial details,” said one of the people.
Future Group and TNSI didn’t respond to email queries sent to them. “There is a lot of potential in travel retail, especially with the addition of new metro stations and airports, making the overall travel space lucrative,” said Harminder Sahni, founder of retail consultancy Wazir Advisors. “Since they have so many stores, it gives a head-start for anybody to move instead of starting from zero, which is difficult for locations which already have similar stores.”
WHSmith operates more than 1,400 outlets, mainly in the UK. It has 815 units at train stations, airports, hospitals and workplaces and 611 high street stores. The retailer generated £1.2 billion in revenue in the year ended August 2017. Established 225 years ago, the UK-based chain of convenience stores entered India in 2010 and has focused on locations such as airports and metro stations.
Experts said the Future Group could leverage the fact that stores at airports generate the highest sales per square foot for most retailers in the country. TNSI posted consolidated revenue of Rs 130 crore during 2015-16 with a net loss of Rs 8.5 crore.
The Future Group operates 13.8 million square feet of retail space in 221 cities, with annual sales of Rs 17,075 crore. Over the past few years, Biyani has expanded nationally. Within the grocery business, it acquired Bharti Retail, Big Apple, Nilgiris, Heritage and just last month, HyperCity. In the lifestyle segment, Future Group has exclusive licence rights for international brands, including Lee Cooper, Converse, Champion and Umbro, and has also joint venture operations for retailers such as Clarks and Celio.
As part of a strategy to more than treble revenue to between Rs 75,000 crore and Rs 1 lakh crore by 2021, the retailer has added stores, mainly in the smaller or convenience formats. Over the years, Biyani has sold his Pantaloons department store chain to the Aditya Birla Group and exited non-core businesses such as financial services and office product retailing.
A recent Morgan Stanley report said Future Retail had higher-than-expected operating margin expansion, driven by product mix improvement, focus on private label and scale benefits. “While strong revenue growth and attendant operating leverage can drive margin expansion, other drivers of improvement in operating margins include product mix improvement through a rising contribution from the high-margin fashion segment and increased contribution from higher-margin categories,” added the report.
Source: Economic Times