Apparel Retail Trent Ltd.

Amit Kumar Khetan Gauri Sankar Das Noufal M Basheer Sri Sudha Konatala Sudeep Mohapatra

INDIAN APPAREL INDUSTRY

Estimated Size: Rs 1872.2 billion Growth Rate of 12.4% between 2005-2010 Dominated by unbranded players 93.4% Market Share 100% FDI permitted in single brand retail. Multibrand retail still not open for foreign players.

Industry Definition for Analysis

Retail

industry is highly fragmented with unorganized retail taking a huge share The largest player (Aditya Birla Nuovo) in organized retail has a total market share of 0.8%. Largest Single Brand Retail (Reebok)-0.4% market share Focus of the analysis will be exclusively on organized apparel retail

INDUSTRY ANALYSIS
High economies of scale in distribution and advertising in organized apparel retail Low switching costs of changing suppliers-Textile industry is largely labor intensive and highly fragmented High Capital requirements due to increasing real estate prices and high marketing costs in metros Limited access to distribution channels Threat of new entrants

Low Bargaining power due to lack of economies of scale Backward integration of retailers into textile manufacturing introducing private label products. Shoppers Stop(18%) and Westside(30%) Forward integration of major brands(which constitute 9% of clothing industry) like Raymond into apparel retail

Supplier power

Porters framework

Interfirm Rivalry

Fast growing industry-CAGR of 12.4% during 20052010.Estimated CAGR of 30% during 2007-2015 and 1.6 million personnel by 2015 (Source : Mckinsey global report ) Organized retail contributes to only 22% of total apparel retail. Still a lot of scope to make inroads Currently few major players-Foreign players restricted to operate in multi-brand retail

Substitutes are usually cheaper but brand reliability and quality is questionable Low switching costs Two major substitutes-stores in unorganized sectors and customized stitching by tailors

Threat of substitut es

Buyer power

Increasing buyer base in organized apparel retail with growing middle and upper classes(38% of population) Loyalty being built through membership programs. Shoppers Stop(73% of sales in 2010-11 through this).However switching costs are still very low

Government FDI restrictions have reduced competition from foreign players 100% FDI is permitted in single brand retail subject to the condition that at least 30% of the merchandise is manufactured in India which has incentivized foreign players to enter the market

Complementary Services Online Retail-With India poised to have third largest net users by 2013, we certainly would have more online purchasers in India The online retail has seen a 30% increase year on year from the last few years

FIRM ANALYSIS
Trent Ltd. Westside
57 stores

Star India Bazaar

11 stores

Landmark
26 stores

Fashion Yatra
7 stores

LS
SS

Westside 30% in 2009 10 85% intent in 2011 - 2012 8000 34000 sq. ft (57 stores)

Shoppers Stop 18.8% in 2009 2010 60000 sq ft ( 49 stores)

696 crores sales

1912 crores

Variety

POSITIONING
Apparel Brand vs Retail Brand

High quality, latest in-style products, international shopping experience and value for money pricing is the experience at a Westside store.

DU PONT ANALYSIS
Gross Margins P: 35% S: 43% Net Profit Margin P: 1.6% S: 3.9% T: 5.4% Operating Expense Ratio P: 26% S: 35% ROE P: 2.7% S: 16.6% T: 5.0% Leverage Factor P: 2.0 S: 2.0 T: 1.6 Fixed Asset Turnover P: 3.8 Asset Turnover Ratio P: 0.8 S: 2.1 S: 6.7 T: 3.4 T: 43% Selling & Administration P: 16% S: 18% T:25% T: 54%

T: 0.6

P: Pantaloon Retail S: Shoppers Stop T: Trent

Working Capital Turnover P: 4.1 S: 16.6 T: 2.7

Thank You