Shwapno, the country's largest supermarket chain, has begun enjoying operating profits for the first time in its decade-long journey and that inspires the company to aim bigger, according to its Executive Director Sabbir Hasan Nasir.
Operating profit is a company's profit before the payments of interests and corporate taxes.
ACI Logistics Ltd, the owning company of Shwapno, witnessed operating profits for the first time in the March-June period this year, and the same success repeated in the consecutive period of July to September.
Sabbir Hasan Nasir attributed the profitability improvement to the controlled costs and the improved gross profit margin, which is the difference between procurement cost and selling price.
In an interview with The Business Standard recently, he said the company's earnings before interest, taxes, depreciation, and amortisation, an indicator of how much profit the business itself can generate, have been positive for the last three years, as the big supermarket chain then began to enjoy its increasing bargaining power.
"At a certain stage of outlets, customers and turnover growth, in 2021, we focused on the next step – improving gross profit margin, checking the expenses and seeing operating profits."
"We right-sized some of our costs for more efficiency," he added while explaining the improved financial outcome.
In the July-September quarter, store sales continued their double-digit growth, but a drastic year-on-year drop in e-commerce sales, mainly due to the fall of some large platform companies such as Evaly this year, subdued the top-line growth.
Having sales of Tk302 crore in the July-September quarter, Shwapno improved its gross profit margin to 20.2% from 18.4% a year ago.
It achieved more than Tk37 lakh in quarterly operating profits in July-September, while in the same period of last year its operating loss was Tk3.42 crore.
But, interest expense still remains a curse on the supermarket chain as it had to pay over Tk30 crore in interest against its gigantic Tk1,734 crore in loans that gradually mounted in line with the company's leveraged expansion-first strategy.
However, in the end, the post-interest quarterly loss stood at Tk30.33 crore in July-September, down from that of Tk34.68 crore a year ago.
Shwapno, the latest entrant in the superstore market, began its journey in 2008 and aggressively expanded its network to lead the market.
Now it serves nearly half of the supershop market of Bangladesh, way ahead of its nearest competitors Agora or Meena Bazar.
Sabbir Hasan Nasir said the focus to grow efficiently will continue.
Shwapno will keep expanding across the country by increasing its own outlets alongside the franchisees, 80% of which are making money nowadays.
To get the best out of omnichannel retailing, it would revamp its online selling platform.
The plan together would improve Shwapno's gross profit margin to 23% by 2025 to push the annual gross profit to as high as Tk1,000 crore, he expects.
He aims at Tk320 crore in gross profits this fiscal year alone.
Responding to the question that would the target gross profit be enough to position Shwapno to a track of higher operating profits which would offset the interest expenses, he said, "Of course, we are working on it."
He is optimistic that the superstore chain would see net profits by 2025.
Increasing the company's equity in line with its ever-expanding operations would help, he added.
ACI Logistics is a subsidiary of publicly listed conglomerate ACI Ltd, and Shwapno's profit-making is most desired by ACI shareholders who are eager to see the retail chain subsidiary's cumulative losses of over a thousand crore taka begin to come down.
ACI shares closed at Tk304 each at the Dhaka Stock Exchange on Thursday.