Some bricks-and-mortar retailers, it appears, are delivering the goods quite well. This has set the cash box ringing for companies such as Aditya Birla Fashion and Retail Ltd. The stock has scaled a 52-week high, gaining 47% this past year.

Efforts on costs rationalization and business expansion have been paying off for the company. New brands introduction and store expansions are resulting in better same-store sales growth. This has led to a better revenue growth of 23% year-on-year to 2,281.5 crore in the quarter ended 31 December (Q3).

Same-store sales growth is the comparable sales growth of stores that have been operational for over a year.

Some of its businesses such as the "fast fashion" segment, though, have been reeling under competitive pressure. This segment continues to suffer, although operating losses have narrowed to 12 crore in the December quarter from 24 crore in the year earlier. Analysts at JM Financial Institutional Equities say losses at "fast fashion" are an area of concern.

Costs remain elevated on promotion and brand expenses. For instance, Aditya Birla Fashion has been making higher promotion spends in categories like innerwear. While its inner wear segment reported 89% growth in the December quarter, losses more than doubled to 19 crore. But higher promotion spends has been a big reason why the firm managed to ramp up the innerwear segment to a 100-crore business over a two-year period.

The other business arm, Pantaloons, has revamped its pricing strategy to adapt to a wider set of customers. The brand has also been adding stores, and some are breaking-even faster. Pantaloons operates 302 stores, while the other business—Madura Fashion and Lifestyle—runs 1,959 stores.

Still, analysts report that the apparel industry is intensely competitive. Store operations can get unwieldy if real estate and rental costs rise. Further, online and e-commerce platforms can pile pressure on margins.

For all its revenue growth, therefore, the margin growth in the business has not been much, dragged down by impairments and marketing costs. In Q3, Ebitda (Earnings before interest, taxes, depreciation and amortization) margin expanded a mere 20 basis points to 7.6%. The quarter also witnessed an extended festive season.

One basis point is one-hundredth of a percentage point.

The good news is that the business is not anywhere exhibiting the high cashburn rates of online operators. Bricks-and-mortar retailers are seeing greater growth traction, and analysts see a steady sales and revenue growth yet. Same-store sales growth has been on the rise, too, in all the divisions. Analysts say Aditya Birla Fashion will have to rein in costs. Nevertheless, as the stock has had a good run last year, investors in this counter may have to go slow on their shopping.

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