In a major restructuring effort to stem the sagging revenues, Medicine Shoppe India - the master franchisee of the US-based pharma retail major Medicine Shoppe in the country, has started trimming down the number of its retail outlets.
The company is reducing its number of standalone outlets close to 15 from the present 140 plus shops, based on the potential to make a turn around to operational profit in a fixed time frame. The outlets operating in super markets, however, may be excluded from the scrutiny, informed market sources close to the company.
When contacted, the top official working with Medicine Shoppe India confirmed that the company is currently going through a transition to reach operational profit in a fixed period of time. "We are in the process of reducing the number of outlets. But 15 would not be an accurate number and we can't say the numbers at present," said Raman Nanda, who is in the team of Medicine Shoppe India working for the restructuring.
The company is doing diligence on a few stores to see the potential. The idea is to see operating profit at the store level within next six months or so. It is expected to have a clear picture on the exact number of shops for operations in a few months' time, he added.
The company has more than 140 franchised outlets throughout the country, as per the reports in mid 2008. Among this, almost 50 shops in Mumbai are run directly by Anariksha Pharmaceutical Traders Pvt Ltd, the firm closely working with Melrose Trading Company. Melrose Trading Company is the master franchisee of Medicine Shoppe International in India. Medicine Shoppe India has its operation in Maharashtra, Gujarat, Goa, Delhi, Uttar Pradesh, West Bengal, Andhra Pradesh and Karnataka.
According to Nanda, the company is assessing each of its stores, the teams and their ability to manage the stocks to develop consumer portfolio of the market partner and to achieve an operating profit. The strategy is to focus on shops which have potential to generate profit in next three quarters of financial year, than maintaining a large number of shops which fails to perform well.
The company has been limping in performance in the recent past and the investors' board consisting of Acumen Funds and APIDC Venture Capital had remarked their disappointment in several meetings. The investment of both the companies in the retail firm sums to around Rs 20 crore, sources said.
Sources added that the chief executive officer, Viraj Gandhi has submitted his resignation of late, in the backdrop of financial and operational problems faced by the company in the past. Acumen Funds has increased its share hold in the company and has assigned Raman Nanda, chief financial officer, Acumen Funds, New York to support the management in transition. However, Nanda said that he is working with Viraj Gandhi in the turn around effort of Medicine Shoppe India and refused to reveal his designation.
Medicine Shoppe India, which started its operations in India in 1999, has been aiming to open 1000 stores by 2010, primarily growing through its sub franchisee network. The company is currently facing some issues on maintaining performance in all its shops, agreed Nanda. He added that the management is successfully overcoming the issues and is expecting growth towards profitability in a short period.