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Apparel retailer Arvind Lifestyle Brands Limited (ALBL), on Thursday announced that it has signed a definitive agreement to sell its value-fashion retail chain Unlimited to retailer V-Mart Retail Ltd., for an estimated Rs150 crore in an all-cash transaction.

The move comes as Arvind Fashions Limited (AFL) continues to lower debt and focus on six key lifestyle and beauty brands. ALBL is a wholly owned subsidiary of AFL. It will also utilize funds from the sale towards working capital purposes.

Unlimited operates 74 value fashion retail stores across South and West India and retails fashion apparel and accessories for men, women and children.

“As part of the transaction, ALBL will sell assets of the 74 retail stores, warehouses, inventory and the ‘Unlimited’ brand to V-Mart at its book value. ALBL would receive cash consideration estimated at about Rs150 crores upon the closure of transaction and thus, will fully recover the capital employed in the business. In addition, there are contingent payments to be received, based on certain milestones achieved by V-Mart over next few years for these stores, post the acquisition," Arvind Fashions said in a statement.

Arvind Fashion has been in consolidation mode, offloading and exiting brands and shuttering unviable stores and focusing on power brands. In its latest investor presentation, the company said it completed the exit of brands that it plans to discontinue selling including The Children’s Place, Hanes, Newport and Ruf & Tuf; it already exited Gant, Izod and Nautica in FY20.

Its exit from the GAP franchise has been delayed to the ongoing fiscal.

In FY21—the company drove cost reduction by 40% or an estimated 540 crore across rentals, warehouse, manpower optimization, it said in its Q4 and FY21 investor presentation.

The last fiscal has been particularly challenging for apparel retailers as demand for formal and occasion wear took a beating. In July 2020, Flipkart Group bought a minority stake in Arvind Fashions Ltd’s subsidiary Arvind Youth Brands for Rs260 crore. The company, which owns denim brand Flying Machine, plans to build the brand online and in India's smaller markets.

AFL plans to focus on six brands—US Polo Assn., Tommy Hilfiger, Arrow, Flying Machine, Calvin Klein and Sephora.

The sale will help the company put capital behind growing these six focus brands, said Shailesh Chaturvedi, Chief Executive Officer, Arvind Fashions.

“We had created a scalable format with significant product capabilities in value retail, which has a large potential. However, in line with our strategy of focusing on our 6 high conviction brands, we decided to exit the business," he said.

For V-Mart—that sells value clothing, accessories and footwear and other products through large format stores and focusses on smaller cities—the acquisition will help it expand footprint in South India. To be sure, V-Mart has a large presence in northern and eastern.

“The business fits well the retailer’s strategy of expanding its regional presence as well as adding capabilities in select categories," said Lalit Agarwal, managing director, V-Mart Retail Limited.

“V-Mart’s expertise in creating a scalable and profitable value fashion retailing business model, and Unlimited’s large presence in South India with strong fashion mindset and delivering a differentiated store experience to customers, provides a long runway for sustained stakeholder value creation," said Agarwal.

For the FY 2020-21,Unlimited reported a turnover of 289 crore. This accounted for 25% of ALBL’s revenue, it said in a filing to the exchanges. Unlimited, earlier Megamart, was set up in the 1990s.

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