PRIL’s private label is important because of two key factors. 1) It is more profitable than branded products and at an attractive price for consumers. 2) It fills the gap in product categories where there is lack of product differentiation; that is, weaker brands. PRIL has private labels in food, electronics and apparel. We believe a successful private label franchise not only improves the revenue mix, but also increases the number of footfalls because of their appeal. The success of any new private brands will be critical to overall sales and will also act as a share price catalyst, in our view.
Inventory management is key to a successful retailer and we believe this will be PRIL’s key differentiator from incumbent competitors. PRIL has invested in Future Logistics for back-end operations and in SAP for each store. We think PRIL would need to constantly improve inventory turns while insuring zero-stock outs to improve markdown management. A continuous reduction in inventory or stable levels (announced in quarterly results) would be a positive and also reflect an improvement in the business and could act as a share price catalyst.
Pantaloon / Future Group's Private Label Business
Apparels contribute 80% to the Category Sales while Food and home Care contribute just 5% of the category sales. Surprisingly Electronics contributes 20% of category sales and on overall basis Pantaloon / Future Group is getting 20% business from its own Private Label Brands. Way to go Mr. Kishore Biyani, the Father of Indian Retail.
