For almost a year, I have been confused about how Future retail stores are getting funding to operate given –
- the poor financial health of the group; and
- 2020 deal with Reliance retail not getting concluded due to the legal dispute with Amazon.
Operating the stores meant expenses in the form of lease payments, employee salaries, inventory and other operating expenses.
I was regularly visiting few Future retail stores to check for myself. In between for few months, the stores I was visiting had negligible inventory and very less employees. Then suddenly everything came back to normal with stores filled with good inventory levels and much higher numbers of employees.
I did check with few employees and some of them unofficially informed about Reliance providing the support. It did seem logical and I became confident that if the dispute with Amazon keeps on stretching, at some point Reliance will start taking over the stores that it finds making commercial sense.
And that’s what is happening now. As per the newspaper reports –
- To support the operations of Future Retail, Reliance
- had taken over the lease of certain Future stores and then sub-leased those to Future Retail.
- was also providing inventory to Future stores
- However, now due to the continued deterioration of Future’s financial situation and uncertainty about the legal dispute with Amazon, Reliance has decided
- to take over about 200 Big Bazaar stores and rebrand them to Reliance Retail. Future in total operates more than 1,700 stores.
- Has offered Future group employees to shift to Reliance Retail.
There is not much disclosed officially about the exact details. Future Retail has only informed that it’s scaling down the operations.
Personally I believe that this approach works much better financially for Reliance Retail as against the original scheme of arrangement agreed to with the Future Retail and it’s creditors. Reason – it’s ability to pick and choose and hence also the involved funding.
Though Reliance has maintained that it stands by the original takeover arrangement and will abide by it once legal dispute with Amazon is concluded.