Star Bazaar slashes jobs by a third in FY16

By Raghavendra Kamath , Business Standard, Mumbai | In Others | October 12, 2016
Move aimed at faster profitability and cost reduction.

Star Bazaar, the hypermarket chain operated by the Tata-Tesco joint venture, shrank its staff size by a third in the financial year ended March 2016, signalling the biggest redundancy in Indian retail in recent times.

The employee strength at Star Bazaar decreased by 675 in FY16 compared to the previous year, according to data in parent company Trent's annual report.

The number of employees at Star Bazaar was 1,568 in FY16, down from 2,243 a year ago, the latest annual report of Trent shows.

"We closed down hypermarkets in Mumbai and Bengaluru. Each hypermarket employed more than 200 employees," said a Trent executive.

The executive, who refused to be named, said the chain was focusing more on small and medium stores and was taking a closer look at hypermarkets which are not making money.

"We transfer them to other stores wherever we can. But, they also leave for other opportunities," he said.

The move was aimed at cutting costs and faster profitability of the company, which set up its first store in 2004, it is learnt.

Trent Hypermarket, which runs stores under formats such as Star Hyper, Star Daily, Star Market and others, reduced its loss before tax in FY16 to Rs 44.77 crore from Rs 65.37 crore in the year-ago period.

When contacted, a Trent Hypermarket spokesperson did not comment on redundancy but said: "As on March 31, 2016, we have an employee count of 1,566. We will grow our staff as we expand further. We aim to close this financial year with 50 stores and plan to have 200 stores in the next three years."

Currently, Star has 35 stores.

In 2014, UK-based Tesco signed a joint venture with Trent, becoming the first chain to apply under multi-brand retail foreign direct investment (FDI) norms. This followed United Progressive Alliance government's decision in 2012 to allow 51 per cent FDI in multi-brand retail.

Head count reduction in the Star format indicates cost rationalisation, which is critical in the low-margin grocery retailing business, says Abhishek Ranganathan of Ambit Capital in a recent report.

"In line with management guidance, we expect the JV to break even in FY19 on the back of higher store throughput (smaller stores) and better absorption of central costs due to higher scale," he said.

Although Trent Hypermarket did not open many stores between FY12 and FY15, it is now rapidly expanding to take advantage of its supply chain and logistics set up.

The chain is looking to buy land in Bengaluru, Mumbai and other cities to build distribution centres for its stores.

Buying land will help the company meet this country's norm of multi-brand foreign direct investment in the segment, with $50 million (Rs 330 crore) investment in new back-end infrastructure.