Madura Fashion & Lifestyle outperforms market in growth

Aiming high from Van Heusen

Madura Fashion & Lifestyle is eyeing on a turnover of Rs.1100 crore from its premium apparel brand Van Heusen alone by the year 2012-13. The company is counting on retail expansion across the length and breadth of India for its optimism. Retail boom has touched even small cities and towns in the interior parts of India. The company has 135 exclusive retail outlets to sell Van Heusen brand apparel. It plans to add 60 more outlets every year. The company had a turnover of Rs.650 crore for the year ended 31.03.11 and is aiming at a turnover of Rs.850 crore for the year ending 31.03.12. For the year ended 31.03.13, the company has stepped up its turnover target to Rs.1100 crore.

Espirit in trouble

Madura Fashion & Lifestyle belongs to Aditya Birla group. The company is now closing down the global fashion brand Espirit due to loss. Madura Fashion & Lifestyle is India’s largest fashion apparel firm. The company has the license to distribute the Espirit brand. The agreement is seven years old. The agreement comes to an end in less than a year’s time. The company is in the process of converting Espirit stores in Delhi, Mumbai and Bangalore into stores for the company’s other brands like Van Heusen, Louis Philippe, Peter England and Allen Solly. The company’s decision is not only because of losses, but because of the trouble experienced by Espirit worldwide, the change in management in Espirit and other reasons. At present a German management is in charge of Espirit and there may be some long term agreement in the offing.

Kumar Birla unwilling to sell the company

Private Equity firms have valued Madura Fashion & Lifestyle at $800 million, but the company management values the firm at $1 billion. Kumar Birla is reported to be planning for selling a portion of his stake in the company. At present Madura Fashion & Lifestyle is a privately held group company. Formerly, it was called Madura Garments and was listed in the stock exchanges. Now Madura Fashion & Lifestyle is functioning as a division of Aditya Birla Nuvo Ltd, which is a listed company. Some private equity firms are negotiating with Kumar Birla to offload his stake in the company or to spin off Madura Fashion & Lifestyle as a separate company. Apax Partners, managing $26 billion assets worldwide, is reportedly pressing Kumar Birla for the same. But Kumar Birla is reported to have told that any divestment from the company will be less than 26%.

Aditya Birla Nuvo

$1 billion turnover target

Till two years back, Madura Fashion & Lifestyle was a loss making company. But now it has turned black. The company has undergone some drastic restructuring with strict cost control measures. Instead of focusing on fashion retail business, the company now focuses on fashion brand business. Madura Fashion & Lifestyle reported a turnover of Rs.1600 crore for the financial year 2010-11 as against Rs.1103 crore in the previous year. Aditya Birla group is a well diversified $30 billion conglomerate doing business from metals to minerals. In 1999, the Birla group acquired Madura Fashion & Lifestyle from Coats Plc for what appears by today’s standards a throw away price of Rs.236 crore. One of the cherished ambitions of Kumar Birla was to make Madura Fashion & Lifestyle a $1 billion company in terms of revenue. But that ambition has never been fulfilled. Birla hopes to fulfil his ambition in another five years time. Kumar Birla never takes decisions in a hurry. He is prepared to wait and bid his time, but takes strategic decisions intelligently.

Branded apparel market worth Rs.14000 crore

The market for branded apparel in the organised sector in India is worth around Rs.14000 crore. Louise Phillippe and Van Heusen have around 8% market share. Van Heusen is now set to compete with global brands like Benetton, Levi’s, Zaras and Massimo Duttis. In 2010-11, apparel market witnessed a growth of 28% in India, but Van Heusen outperformed the market with a growth rate of 70%. This was because of the strategic planning of the company. When recessionary trend set in around 2008, many brands downsized their budgets and closed down shops. But Madura Fashion & Lifestyle increased its advertising and spent on expansion. The move paid dividends when better times arrived in last April.

Sourcing from Bangladesh is much cheaper

The company expanded its suit line with ceremonial and leisure suits. It launched V for youth and women’s wear. The suit business has grown by 60%-70%, women’s wear has doubled in growth, and V has grown by 80%. A new brand named Van Heusen Sport has been launched and it is already contributing 5% of the company’s revenues. The imposition of 10% excise duty on branded apparel by the Finance Minister in his last Budget has affected the branded apparel industry. But Madura Fashion & Lifestyle is gamely pulling on. Now players in branded apparel industry in India may source their requirements from Bangladesh or Sri Lanka to avoid this tax. As India has free trade agreements with Bangladesh and Sri Lanka, the merchandise will not attract any import duty. Before the imposition of the excise duty, 90% of the manufacturing of Madura Fashion & Lifestyle was done in India. The company was sourcing only winter jackets and knits from China.

Future plans

Van Heusen is targeting non-apparel space for its future growth. Plans are under way. It is evaluating manufacturing options. Plans to enter into women’s shoes and bags segment are being considered. Currently, premium non-apparel space is being dominated by multinationals. The plans of the company also include entering into men’s ties and belts, men’s footwear, eyewear (sun glasses), watches, luggage and travel kits. Madura Fashion & Lifestyle has totally 1000 retail outlets in India. About 650 outlets are multi-brand outlets, 120 are exclusive outlets, 100 are departmental stores, 80 are Planet Fashion stores and 50 value stores. In future, 60% of the upcoming stores will be exclusive stores. The company invested Rs.30 crore in its stores and all of them are doing well. Shirts, trousers and suits form 90% of the product mix. 75% of these items are manufactured by the company’s Bangalore unit. Balance is sourced from the company’s vendors in Bangalore and Mumbai. Knits, sweaters and jackets are made by units in Tirupur, Ludhiana and China.

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