Gifts and greetings card company Archies Ltd is charting out a three-year re-building plan. The plan entails setting up of a company-owned retail chain of 100 outlets (40 in last three years), securing gifts- and paper products-driven topline growth of 15 per cent year on year, and bringing operating margins to 20 per cent — closer to pre-2001 level.
Speaking to FE, Archies director Pramod Arora said that the company’s decision to extricate itself out of loss-making categories like music and perfume, and a renewed focus on developing the company-owned retailing network have bolstered its operating margins and laid down a roadmap for future profitable growth.
Said Mr Arora: “We’ve had lacklustre last 12-13 quarters but now the retailing scenario is changing so dramatically that we anticipate that our next 12 quarters would reflect positive results.” Archies opeating margins have been steadily deteriorating — from 23.55 per cent in 2000-01 to 17.48 per cent in 2001-02 to 9.4 per cent in 2002-03 — before staging a comeback with 15.38 per cent in last fiscal 2003-04.
“In next three years we intend to bring operating margins to 20-21 per cent,” said Mr Arora. He added: “By that time (2006-07) we would have also developed a chain of 100 company stores, which will contribute Rs 50-60 crore to overall turnover of Rs 100 crore. We expect the company-chain’s share to jump to Rs 18 crore in 2004-05 from Rs 14 crore in 2003-04 while the turnover to rise to Rs 75 crore from Rs 67 crore during the same period.”
Topline growth continues to be a challenge for Archies, whose margins-rich paper greetings volumes have been brutally hit by emerging consumer preferences like cellular SMSs and internet e-mails.
Archies is now betting on gift items — around 75 per cent of its out-sourcing is accounted for by imports from China and Far East — to bring top-line growth. Gifts volumes, in turn, will increase only if Archies retailing presence expands in places like malls and high street locations.
“We’ve booked a place in 55 malls which would come up in next 3-4 years. Many of these could be also handed over to franchisees (now over 400 franchised outlets) who are willing to invest as per our new guidelines of maintaining larger formats (1000 sqft to 4,000 sqft),” said Mr Arora.
“Currently, PBT in gifting is around seven per cent but we hope to increase it to 10 per cent in next couple of years with the doubling of volumes to Rs 43 crore,” he added.