Shoppers stop

1. SHOPPERS STOP: SEE-SAW DEMAND
Overall, even though stand-alone operating profit increased 6.5% year-on-year,
higher finance costs and tax outgo resulted in a 1% decline in net profit to Rs.10
crore
Shoppers Stop Ltd’s March quarter
financial results, announced on Tuesday after market hours, failed to impress. The
stock shed about 3% on Wednesday, a day when the benchmark Sensex index
declined 0.5%.
During the March quarter, the bricks-and-mortar retailer clocked 5.9%
like-to-like sales growth in its department stores. But expectations were higher after
like-to-like sales growth was as much as 17.4% for the December quarter, led by the
festival season. For instance, Motilal Oswal Securities Ltd had estimated the measure
at 9% for the last quarter. Like-to-like sales growth is the comparable sales growth of
stores that have been operational for over a year.
Demand is like a see-saw, says Govind Shrikhande, managing director of
Shoppers Stop, adding that demand for winter wear was low this time around. The
company had brought forward its discount sale season to the end of December this
time instead of in January. The sale season during the March quarter helped register
like-to-like volume growth of 5.4%. That’s on a base of a 1.7% decline in the March
2015 quarter.

2. Overall, even though stand-alone operating profit increased 6.5%
year-on-year, higher finance costs and tax outgo resulted in a 1% decline in net profit
to Rs.10 crore.
On a consolidated basis, subsidiary HyperCITY’s performance continues to be
lacklustre. The unit’s Ebitda loss at the company level for the March quarter and the
year as a whole stood at Rs.12.91 crore and Rs.19.58 crore, respectively. Ebitda is
earnings before interest, taxes, depreciation and amortization. In the near future,
store rightsizing, better assortment in food segments and a higher share of the
fashion mix are expected to help improve HyperCITY’s financial health.
After registering 8.5% like-to-like sales growth for fiscal year 2016, Shoppers
Stop is looking to clock 8% like-to-like growth this year. Implementation of the
Seventh Pay Commission is expected to increase disposable income, which could
boost demand for companies like Shoppers Stop. Moreover, if the monsoon rainfall is
better it will keep inflation under check, says Shrikhande.
The stock, which has outperformed the benchmark Sensex in the past year,
will take cues from a turnaround in HyperCITY’s performance and a better demand
environment resulting in stronger like-to-like sales growth