Spencer’s Retail Ltd has decided to exit Delhi-NCR, Andhra Pradesh and Telangana by closing down 49 stores to cut losses.

The board of the RPSG Group company has approved the plan to ramp down operations in these markets and focus on the high-growth and comparatively profitable east and Uttar Pradesh regions where future expansions will take place.

On a consolidated basis, these 49 stores spread across 18 cities accounted for 19.5 per cent of consolidated revenue of Spencer’s Retail in FY24. However, they accounted for a much larger share of losses for the company, which prompted Spencer’s to hatch an exit plan.

In a conference call with the investors after the first quarter results, Anuj Singh, managing director and CEO of the company, said the decision of the board was well thought through and considered. While the move will shrink the topline of the company, it will allow Spencer’s to consolidate and focus on the key markets, he explained.

Lower growth, higher competitive intensity and fragmented presence was cited as some of the key reasons for non-performance.

Spencer’s now aims to become EBIDTA positive by the fourth quarter of FY25. “Exit from these does impact the topline but it also significantly reduces store level EBIDTA losses,” Singh told investors.

The grocery retailer, along with subsidiary Nature’s Basket, had 167 stores, including 106 in the east and UP. The company has about 1.3 million square feet of trading area which will shrink to about 0.8 million square feet post store closures. However, it hopes to add at least 0.1 million square feet annually and reach the 1 million square feet mark in a couple of years.

In the quarter ended June 30, Spencer’s narrowed loss to ₹43 crore compared with ₹64 crore in the same period of last year, while revenue from operations slid 3.8 per cent to ₹548 crore. In FY24, it earned ₹2,345 crore in revenue from operations and ₹266 crore in losses.

The process to streamline the business along the lines ratified by the board last week was on display in the last fiscal too. Addressing shareholders in the latest annual report, chairman Shashwat Goenka said, “During 2023-24, Spencer’s has been laser focused on the efficient allocation of resources, a strategy that has been pivotal in optimising our operations.”

He informed that Spencer’s closed 19 non-performing stores across the southern region, including key locations in Chennai, Kerala and Hyderabad.