SHOPPERS STOP: Headed in the right direction
- Contrary to the challenging market outlook and its historical performance, SHOP posted a healthy 13% growth over pre-COVID levels (1QFY20) on higher store additions and marginally positive SSSG. EBITDA grew 18%, with 60bp improvement in EBITDA margin.
- 1) Healthy annual store additions of 12/15 for SHOP/Beauty, 2) improving share of private labels and Beauty stores, and 3) the newly initiated smaller store size of 25-30k sq. ft. which is driving store economics are expected to drive growth. We expect a revenue/EBITDA CAGR of 30%/67% over FY22-24. A higher SSSG, which is a key missing piece in the jigsaw, is key to profitability and valuation. We maintain our Neutral rating with a TP of INR610 per share.
Delivers healthy earnings growth
- Standalone revenue grew 13% above pre-COVID levels (1QFY20), despite a delay of 10 day in its end of season sale. On a LTL basis, revenue rose marginally. Revenue from Private Brands/Beauty segment grew 29%/28% v/s pre-COVID levels. Sales from the omnichannel rose 3.7x over 1QFY20 levels.
- Gross margin improved by 350bp YoY to 42.2% in 1QFY23 (est. 41.5%), due to improved share of private labels. However, the same is 60bp below pre-COVID levels.
- The company reported an EBITDA of INR1.6b, 18% above pre-COVID levels (6% miss). EBITDA margin improved by 60bp to 17.2% v/s 16.6% in 1QFY20, due to employee cost rationalization. Pre Ind AS EBITDA stood ~INR654m, with a margin of 6.9% (v/s 5.9% in 1QFY20).
- Reported PAT stood at INR228m (42% miss) v/s INR24m in 1QFY20.
- The company opened six new stores, which includes two Departmental stores, three Beauty stores, and one at the international airport.
Shoppers Stop Limited is a holding company. The Company is engaged in the business of retailing a range of household and consumer products through departmental stores. It operates through approximately 80 such departmental stores located in approximately 40 cities. Its products include apparels and non-apparels. Its non-apparel category includes cosmetics, personal accessories and leather goods, home wares, electronics, books and music. The Company, through its Website, Shoppersstop.com, offers international and national brands in men's, women's and kids apparel; gifts and fashion accessories, such as ladies watches, men's watches, artificial jewelry, fine jewelry, handbags, fragrances, men's and women's footwear, home furnishing and decor products. It has over six private brands namely STOP, Kashish, Life, Haute Curry, Velorio Fratini and Elliza Donatein. It offers First Citizen Loyalty Program for customers. Its application is available on Google Play Store and Apple App Store.
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