Shwapno achieves record operating performance amid high interest challenges

Bangladesh's largest and fastest-growing retail chain Shwapno achieved record operating performance in FY24, including the highest ever sales, store-level profitability, and operating profits. 

This success is attributed to its consumer-centric approach and innovative expansion model, which has helped Shwapno establish over 500 stores across Bangladesh. However, a higher interest burden added to its cumulative losses.

According to its audited financial statements, Shwapno surpassed its ten-year trend of a 21% compound annual growth rate, with revenue surging to Tk2,285 crore in FY24, one-fourth higher than the previous year.  

"Consumer centricity and continuous innovation helped us achieve 65% sales growth in the past two years, despite the inflationary pressures on our customers," said Sabbir Hasan Nasir, managing director of Shwapno. 

He attributed the success to year-round campaigns for steady footfall growth and an increasing number of stores.  

Nearly 500 Shwapno stores in 62 districts ensured the highest ever gross profit margin of 19.3% on average, compared to 17.6% during the pandemic. Additionally, by diluting costs over more sales, the company reduced operating expenses to a record low of 17.8% of revenue, down from 21% six years ago.  

"In continuous improvement, we achieved the highest ever operational performance in FY24," said Sabbir Hasan Nasir.  

These achievements translated into a 145% growth in operating profit, reaching a new high of Tk32.14 crore.  

However, Shwapno has yet to celebrate its operating success as its debt-driven retail empire now faces a high toll due to the sharp rise in borrowing rates. 

In FY24, its finance cost surged more than 39% to Tk214 crore, consuming all the operating profits and resulting in a Tk196 crore net loss for the year.  

From the start, Shwapno has relied on borrowed capital for its retail expansion, and the interest expense has become a significant challenge. 

Sabbir Hasan Nasir, anticipating the tightening of the money market in FY18, introduced the idea of allowing small and medium-scale businessmen to invest in Shwapno franchises. Over the years, this became a tremendous success story in retail. 

Approximately 408 franchise stores contributed to 42.4% of Shwapno's sales in FY24, without adding to the interest burden, while Shwapno itself owns 86 outlets, he added.  

From its humble beginnings in 2008 to becoming a trailblazer in Bangladesh's retail landscape, Shwapno exemplifies resilience, innovation, and a consumer-centric ethos.  

Sabbir Hasan Nasir believes the company has just entered "a new wave of growth to prove the power of innovative retailing in a market of 17 crore people." He is counting on equity injection, rather than debt, to fuel future growth.  

Most of its over Tk1,850 debt is from its parent company ACI Limited, a leading conglomerate in the country, and the debt can be converted into equity at any time if the parent decides.  

"With plans for financial restructuring and attracting foreign direct investment, Shwapno's aspirations extend well beyond achieving a surge in operational profitability," said Sabbir Hasan Nasir.  

According to a global potential investor estimate, Shwapno is worth $350 million, highlighting significant investor interest, he said.  

With impressive sales figures, sustained growth, and meticulous planning, Shwapno is steadily progressing toward achieving its Break-Even Point (BEP) within the next two to three years.

"Shwapno will have 2,000 stores across the country by 2030," he told TBS.