Aditya Birla downsizes Forever 21 India stores to cut costs

By

Isabelle Crossley

Published
Feb 6, 2018

Aditya Birla Fashion and Retail Ltd (ABFRL), which has the Indian licence for the American fast-fashion brand Forever 21, is rolling out a cost cutting initiative and downsizing their retail stores after the brand incurs large losses.

ABFRL have reported losses of 23 crore rupees (approximately 3.45 million US dollars) in the fast-fashion section of its business during the financial quarter, ended December 2017, and attributes much of that to Forever 21’s poor performance.

“The Rs23 crore loss in fast fashion is mostly because of Forever21, Rs15-16 crore is a one-time inventory markdown after rationalizing the business,” said Ashish Dikshit, the Managing Director of ABFRL’s Madura Lifestyle business, in an interview with Live Mint.

The business’ financial results have caused them to reassess their business model for Forever 21.

“Assumptions have changed for the Forever21 business,” said Dikshit. “We recognize that the current business needed significant restructuring—store resizing, a new store model, renegotiations.”

Dikshit also cited GST rates as a reason for the company’s losses.

The plan moving forward is to reduce store size and limit the number of store openings to between six and eight a year until growth picks up.

“Size, cost, and competition impacted legacy stores in Forever21, they were much bigger than the business model deserves,” Dikshit said.

The new business model for Forever 21 in India will be “driven by revenue share models and capital investment from builders.”

Despite the losses of last quarter, ABFRL remains positive about the brand’s potential in India and expects its overall fast fashion business to turn around by next quarter.