Future Group founder Kishore Biyani on Wednesday said the homegrown retail major lost nearly Rs 7,000 crore revenue in first three-four months of the COVID-19 pandemic due to closing of stores, which led him to sell his business to Reliance Industries.
"We got into a trap to be very honest with COVID-19. In the first 3-4 months, we lost nearly Rs 7,000 crore of revenue,” Biyani said at the Phygital Retail Convention.
There was no way the company could have survived losing such an amount, he said, adding “the problem is rent doesn't stop, interest (on debt) doesn't stop”.
"We did too many acquisitions in the last six-seven years... I thought there was no other answer but to exit," he stated.
He said for retailers the worst is yet to come.
"We have designed business to be profitable at 90 percent of our targets. In any scenario... we will not be able to touch 70-80 per cent (of target) ... If you look at long-term planning – 5 to 10 years -- it will not be easy for physical stores," he said.
Biyani also said that consumer behaviour is changing, which could make it difficult for retail stores to bring shopper back. He added that most large format stores have been rendered useless because of restrictions on movement, as a result of which people now prefer to buy from shops closer to them.
In August this year, billionaire Mukesh Ambani's Reliance Industries announced acquisition of retail and wholesale business and the logistics and warehousing business from the Future Group as going concerns on a slump sale basis for lumpsum aggregate consideration of Rs 24,713 crore.
Through the deal made in August with Reliance Industries, the Ambani –led firm will acquire Future Retail that owns the BigBazaar that sells everything from groceries to cosmetics and apparel, and Future Lifestyle Fashions Ltd that operates fashion discount chain Brand Factory.
While Reliance will take over Future Consumer, which sells food, home and personal care products, Future Group's financial and insurance business is not part of the deal.
Future Retail operated 1,550 stores. Its flagship brands BigBazaar, FBB and Foodhall, Easyday, Heritage Fresh and WHSmith. Future Lifestyle Fashion operates 354 stores.
Investment from Reliance would help Future's founder Biyani pare debt. The deal is awaiting regulatory approvals.
Last week, US online retailer Amazon slapped a legal notice on Future Group, alleging that the retailer's Rs 24,713 crore asset sale to Reliance Industries violated an agreement with the e-commerce giant.
"We have initiated steps to enforce our contractual rights," a spokesperson for the Seattle-based e-commerce giant said. "As the matter is sub-judice, we can't provide details."
Amazon last year bought a 49 per cent stake in one of Future's unlisted firms, Future Coupons Ltd, with the right to buy into flagship Future Retail after a period between 3 and 10 years. Future Coupons owns a 7.3 per cent stake in Future Retail.