Odel turns to rationalisation measures to mitigate spending slump

Ashok Pathirage - Chairman

By Nishel Fernando 

With heavy taxes dampening consumer spending, loss-making Odel Plc has moved to location and brand rationalisation measures to mitigate further adverse impacts on its top and bottom lines in 2024/2025 FY.
“In response to these challenges, Odel implemented several strategic measures, including location rationalisation. We focused on optimising our store locations by closing down non-performing outlets. This move aimed to consolidate resources and concentrate efforts on key outlets showing better performance, thereby improving overall operational efficiency,” Odel Plc Chairman Ashok Pathirage told shareholders in its latest annual report.
This included the closure of underperforming stores in Nugegoda, Ja-Ela, and Wattala, in order to optimise Odel’s store operations.

Through brand rationalisation, Odel invested in key brands that contributed to 80 percent of its sales. 
“This strategy involved prioritising and supporting the most profitable and popular brands, ensuring that our marketing and inventory efforts were aligned with consumer demand and profitability,” the company said.
Although, sales promotions were implemented to stimulate demand, Odel noted that such promotions had to be carefully balanced to avoid excessive margin erosion.

Despite these efforts, Odel faced a decline in net revenue and gross profit, partially highlighting the impact of reduced consumer spending and increased operational costs on profitability.

The company recorded revenue of Rs. 7.3 billion in the fiscal year 2023/24, reflecting 12 percent decline compared to the previous year’s revenue of Rs. 8.25 billion

“This reduction was primarily attributed to higher income tax rates, VAT, duty charges, and rising electricity costs, which collectively dampened consumer demand,” the company reasoned.

Meanwhile,  Odel reported a loss after tax of Rs. 4.20 billion for the fiscal year, reflecting a steep 90 percent increase compared to the previous year’s loss of Rs. 2.21 billion. This increase was primarily driven by significant rise in administration costs, which included an impairment loss of Rs. 767 million on the investment in Odel Properties One (Pvt) Ltd, coupled with a 12 percent decline in revenue during the year.

Odel reported a total debt of Rs.22.64 billion at end of 2024/2025 FY, up from Rs.18.86 billion a year ago.