Retail major Dabur, which recently opened seven ‘new-u’ health and beauty retail stores has pressed the pause button on its expansion spree.
The imminent slump in the real estate sector has made Dabur take a wait and watch approach so that it can acquire property at low costs in the near future.
“As the realty landscape has completely changed, we need to reorient our retail strategy. Going forward, the idea is to get into much lower cost real estate and visibility of that is already appearing,” said Dabur India CEO Sunil Duggal.
The company will open about 10 more stores in the next four to five months, each ranging in the area of 10-15,000 sq feet. Earlier, Dabur had planned to open 50 ‘new-u’ stores in 2008-09, but since the real estate rates were too high, it brought down the target to about 13 stores.
“Dabur has been going slow on this venture. It hardly contributes anything to the top line right now. I think they will wait till 2010 to sufficiently evaluate the business model before gearing up,” said Anand Shah, FMCG analyst at Angel Broking. He added that although negotiations between retailers and real estate players are on, many real estate players are holding their ground and the rates may not come down significantly before three to six months.
“Looking at the current situation, we have pre-booked properties for future at low costs,” A source close to Dabur said. The company has plans to pump in an initial investment of Rs 140 crore, to be spread over five years for this venture.
Duggal further indicated that the company would expect faster recovery of investments. “At the supply end, we have more or less perfected the business model which we believe will work, so the new stores which we will be opening should reach store breakeven almost immediately,” he said.