Mumbai: Clothing retailer Fabindia’s sales growth fell to its lowest in more than a decade in 2017-18, hurt by sourcing issues during the government’s demonetisation drive as well as increased competition from large chains and private label brands.
The 58-year old firm, popular for selling ethnic products sourced mostly from rural areas, posted a 2% rise in sales from the previous year to Rs1,060 crore on a standalone basis. Net profit for the year declined by 42% to Rs 59.33 crore, the company said in the financials sourced from Tofler, a company research platform.
The lower profit was due to an impairment loss of Rs 57 crore, the company said, adding that excluding the one-off item, profit would have grown 13% to Rs 116.3 crore.
Business for the company that sources a bulk of its products from the rural market was hit after the government’s November 2016 demonetisation drive, as it saw restricted supplies from craftsmen for the next six-eight months.
“As a brand that does not discount and is closely associated with the craft and small-scale sectors, the effects of demonetisation and introduction of GST in 2017/18 were heightened and prolonged,” said Viney Singh – managing director of Fabindia.
Fabindia was founded in 1960 by John Bissell to market the craft traditions of India. It started out as an exporter of home furnishings and the first retail store came up in the Greater Kailash area of Delhi, 15 years later. In the mid-1990s, Bissell’s son, William, took over the company. In 2000, the company added the non-textile range, while organic foods and personal care products were launched nearly a decade ago. During the year, it opened 43 new stores, taking its overall door count to 275.
Leading department chains such as Shoppers Stop, Lifestyle and Westside have been increasing the width of their private label range and also offer contemporary styling in the ethnic space, fuelling growth. The ethnic wear segment is also seeing aggressive competition from online retailers such as Indiwear , Biba, Soch, and other regional and in-house brands, all riding on online marketplaces for their distribution, a move that also hurt Fabindia’s growth.
The company, in its filing, said EBIDTA for the year decreased by 1.57% on account of stagnant sales, expenses incurred for forming SBUs and migration to Indian Accounting Standards.