Future Avenue Trend

Spencer’s Reliance Hypercity

Name Enterprises Supermarts Hypermarket
(2015) Fresh Ltd. Retail Ltd.
Ltd. Ltd. Ltd.

EBITDA -807.31 140953.90 15996.50 62207.90 760.35 -577.90

(1.95) (4.46) (-7.53)
(margin) (-4.8) (6.18) (7.2)

Operating profit -1238.24 137922.90 4484.70 61401.90 518.98 -813.90

(0) (0) (-10.61)
(Margin) (-7.36) (12.13) (4.91)

Net Profit (Loss) -1735.52 2724.80 379.90 2113.90 134.77 -843.10

ROA -21.35 3.18 0.12 9 2.63 -7.53

*Exhibit 6

The competitors are able to generate positive EBITDA and Operating Profit signifying that
Spencer’s is having high Operating expenses and overheads with respect to revenue. The reason being
that they were in premium locations as per their image. They need to focus on decreasing the operating
costs. The table also shows that the ROA is negative, which depicts unutilized assets or improper assets
usage.

Also, we can see that the Operating profit of Spencer’s is -7.36% as compared to the Industry average of
Hyperstore as 7.2% (from exhibit 2B). This shows that they are spending a lot in Operations than
needed.

Recommendation:

Given the current scenario, it is recommended for Spencer’s to first increase the efficiency of the
existing stores. This will enable them to get a confidence boost in terms of profitability. They also need
to reduce the average store sizes, reducing the operations cost of the stores and helping them in
excelling in Operation costs.

Later, they should focus on the aggressively expanding to tier 2 & 3 cities, since the Retail segment
shows potential to grow at 17% annually. The rental costs in tier 1 cities is very high, this may not be
beneficial for growth, hence tier 1 cities can be avoided.