Economic Times – Major fashion brands like Mango, Aldo find it tough to keep pace with global rivals

In Elargir Press Coverage by Elargirindia0 Comments

MUMBAI: Major Brands, Indian franchisee for over a dozen marquee fashion brands including Mango, Aldo, Charles & Keith and Nine West, is struggling to keep pace with main rivals as its expansion has slowed amid speculations that its promoter is shifting focus to the more lucrative Middle East market.

Major Brands — owned by Dubai-based billionaire Nilesh Ved who heads one of Middle East’s most successful retail firms Apparel Group — posted 10% rise in sales at Rs 415 crore during the year ended March 2014, a sharp decline from 40% growth in the previous year. In comparison, other major global fashion brands Zara, Marks & Spencer, Vero Moda, Benetton, Levi’s and Tommy Hilfiger had all posted anywhere between 14% and 42% year-on-year jump in their revenues last fiscal.

When contacted Ved said he can’t comment on the Indian business. The company’s MD Kamal Kotak didn’t respond to an email query as of press time on Thursday. Some experts said the company may be losing interest in the market as it is forced to operate at much lower margins than in other international markets due to high rentals and rising competition that has forced them to keep merchandise prices in check.

Also, its biggest brand, Mango partnered with DLF two years ago for new store openings, which meant Major Brands could retain operations of existing outlets but couldn’t open new ones.

“Spanish brand Mango contributes nearly half its sales, but there isn’t any growth avenue for the company after DLF deal,” said a CEO of a rival fashion brand. “During the same time, competition intensified and most labels under Major Brands had to discount heavily to keep prices at par with rivals,” the person said.

The 15-year-old firm posted a marginal profit of Rs 4 crore, less than a percent of its sales, during 2014. Experts also said premium fashion labels in Major Brand’s portfolio needed pricey real estate and labour to maintain a store network, impacting the already squeezed margins further.

“The company has always been conservative in its expansion and shied away from areas outside affluent neighbourhoods,” said Ruchi Sally, director at retail consultancy Elargir Solutions. “While some of their brands such as Charles & Keith and Aldo are doing reasonably well in terms of sales, their number of stores are limited,” she said.

While most of the global fast fashion brands consider India as one of their last bastions for growth, profitability has become a huge challenge. Major Brands, however, may fight back. It has plans to double its store network in India to 200 doors by 2017.

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