Retailers have posted a healthy increase in operating profit margins (OPM) this quarter ended September 2009. Sales of organised retail formats and brands have increased and hope to grow the next quarter.

The severe global economic decline late in 2008 continued its impact on consumers spending well into the first quarter of 2009. The apparel industry that was expected to be adversely impacted by this recession for most of 2008 and into early 2009 has now started improving with the overall impact of the retail sales growing.

Powered by aggressive cost cutting and favourable terms, retailers have posted a healthy increase in operating profit margins (OPM) this quarter ended September 2009. Sales of organised retail players have increased 10% on a year-on-year (Y-o-Y) basis, against the 7% Y-o-Y increase in June 2009. With conscious emphasis on profitability and sustaining the business, the sector saw better results. Quarter-on-quarter (Q-o-Q) sales numbers are better at 17%, unlike the previous quarter. The growing margins suggest that the belt tightening is paying off.

Recently announced figures indicate that the Indian textile industry has made a triumphal upswing and the textile and apparel industry netted profits ended this quarter 2009 are projected as under as analytical perspective to the readers. For example, the margins of Pantaloon Retail, the country's largest listed retailer, have gone up from June to September 2009. Others such as the Raheja-owned Shoppers Stop and Tata Group's Trent, Reliance Retail and Spencer's Retail, Arvind Limited, Provogue, S Kumars, Koutons are not far behind.

Having moved from a growth orientation to profitability, the sector seems to be in a consolidation phase with lower rentals, tight check on employee costs and better inventory management. Employee costs as a proportion of sales for the industry have come down to 4% in September 2009 from 6% in the corresponding quarter a year ago. All retailers saw a 50-200 basis points (100 basis points make a percentage point) improvement in their operation profit margins (OPM) over the September 2009 quarter. New launches and brands, in particular, have made changes and advancements in technology, adjusting their product structure and enhancing market awareness.

Recently announced figures indicate that the Indian retail sector - formats and brands has made a triumphal upswing and the textile industry netted profits ended this quarter 2009. Few excerpts projected as under as analytical perspective to the reader.

Shoppers Stop's OPM went up to 5 per cent in the first quarter (April-June) of this financial year from 0.2 per cent in the year-ago period. The company's OPM now hovers around 7.5 per cent. In fact, Shoppers turned around handsomely in the first quarter after losses in the preceding quarters.

Says "Govind Shrikande, President & CEO, Shoppers Stop "The total retail segment went through a downturn primarily from Q3-Q4 in 2008 till Q1 in 2009 due to the economic downfall. We saw the sales graph going up from Q2 of 2009."

Shoppers Stop, President & CEO, Govind Shrikhande says "Costs are down from last year's levels and the extra sales due to improving consumer sentiment are translating into better margins. Shoppers Stop recorded a net profit of Rs.12.06 crore in the September quarter, ended 30, 2009 as against a loss of Rs.11.02 crore in the year-ago, due to a change in its depreciation policy that came into effect at the beginning of the financial year. The company gained 600 basis points from various cost reductions, including pay cuts and did in neither vacancies nor retrench people. Its gross retail turnover rose 11 % to Rs.413.3 crore in the September quarter compared with Rs.372.5 crore in the year-ago period.

Shoppers Stop took drastic steps to cut employee and administrative costs. Its top management took a 15 per cent salary cut, while 300 floor-level staff was not replaced. The company shrank its office space 20 per cent, power bill 12 per cent and corporate office expenses 40 per cent to cut losses. The company has also changed its depreciation strategy. It will write off its assets in seven to 10 years, depending on the products, instead of three to five years until now, which has contributed to improving profits in the June quarter. "Sales growth and margin growth are the top-up for our cost-cutting measures".

Pantaloon Retail (India) Ltd., numbers were in line with street expectations. India's largest retailer's 'standalone' sales grew 26% as net profit increase by 12%; Revenues increased 17.5%, driven by higher contribution from the higher-margin lifestyle stores. Same-store sales for value retailing increased by around 7% and for lifestyle retailing by about 11%. Operating profit margins increased 45 basis points to 10.7%. Operating performance improved on account of staff-cost control and marginally higher gross margins. Net profit increased 21 % to Rs.43.82 crore, helped by other income.