Effct of Inflatn on Ss

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1/6

Shoppers Stop's expansion plans for the next financial year (2014/15) are very much on

track. The lifestyle retailer is planning eight new stores in the forthcoming fiscal (2014/15),

but in the following fiscal (2015/16), the plan is to open only around three-to-four stores.

The company, however, will tighten its belt with regard to its focus on several of its not so

well-performing categories. Managing Director Govind Shrikhande says there are plans to

seriously relook at some of Shoppers Stop's businesses, such as fine jewellery and

electronics.

The jewellery business' lacklustre sales due to restrictions on gold import and the increases

in gold import duty has, in fact, had an adverse impact on the third quarter (October to

December 2013) results of Shoppers Stop.

It reported a net profit of Rs 17.34 crore, slightly higher than Rs 17.10 crore in the year ago

(October to December 2012) period. Gross revenue rose 16 per cent to Rs 787.5 crore for

the quarter ended December 31, 2013. The company, however, expects the current quarter

to fare better than the third quarter.

"We have already curtailed the size (of the jewellery business) because we are seeing veryclearly that this category may not come back very strongly for at least another year or two,"

said Shrikhande, adding: "We will, instead (of jewellery), focus on the beauty and personal

accessories divisions."

He also said that HyperCITY, Shoppers Stop's hypermarket format, is likely to turn

profitable over the next 24 to 27 months. HyperCITY, which currently has 15 stores, will

benefit from an increase in Shoppers Stop's focus on the fashion division and store

consolidations, along with its move away from "non productive or non profitable categories"

such as electronic goods.

The company has taken the share of its fashion business to 13 per cent, and plans to take it

to 15 per cent in the coming year, as that would directly impact the profitability of thebusiness.

With this move, Shrikhande expects a 50 basis point margin improvement in the HyperCITY

business. "For two quarters, you will still see losses continuing in a similar vein, but the

second half of next year onwards will see us moving towards profitability," said Shrikhande,

adding: "We have started getting out of electronics and by the end of the fourth quarter, we

should be out of electronics completely."

There will also be a move towards smaller format stores, along with rightsizing some of the

larger format HyperCITY stores. "We're clearly seeing that small format stores can turn

around or start making money within 12 to 18 months versus 36 to 48 months required for a

big format store," said Shrikhande.

The company, which has already reduced its store sizes in cities such as Amritsar and

Ahmedabad, will now resize its store in Hyderabad and the ones at Vashi and Malad in

Mumbai.


2/6

The retail sector has been buzzing on the news of Foreign Direct Investment in multi-brand retail being

seriously considered by the government. On the other hand, it has not been a great festive season for

many players in the retail industry which witnessed a slowdown. In an interview with CNBC-TV18, BS

Nagesh the Vice Chairman of Shoppers Stop said,I wouldnt say there is a very big slowdown butthere is a very relative slowdown compared to what was happening earlier.The industry has

witnessed many companiesmargins taking a dent due to high inflation and discount sales during the

festive season. Below is an edited transcript of his interview. for more. Q: There is a lot of growth

slowdown that is being talked about. How are you sensing things in the retail space? A: In the last three-

four weeks, one has seen a down trading by the consumers. We have seen that the consumers have

probably bought the volumes that they wanted, however, they have down traded on the price and this

is more so in the lifestyle products rather than in food because in food we are still seeing trading going

on fairly strong. During the festival season, electronics, consumer durables, that part of the business did

well because there is a lot of consumer shift happening. Q: With the slowdown in the lifestyle segment

of Indian retail, do you suppose that also holds true for the luxury segment? A: I will not be able to

comment on the luxury segment because its still a very small segment. As far as the lifestyle segment

is concerned, there are two-three areas for example; in the home segment, in hard furniture you will see

a slowdown because home buying has slowed down due to the interest regime. We have also seen that

people have down traded on lifestyle apparels although we have not seen down trading as of now in the

food segment because people have continued to shop. Especially during the festival season, people

dont down trade on food because they look at it as an essential. I wouldnt say there is a very big

slowdown but there is a very relative slowdown compared to what was happening earlier. Q: What are

your thoughts on FDI in multi-brand retail? Is that a likelihood? How significant will it be to change the

landscape of Indian retail? A: As far as the likelihood is concerned you would have a better idea because

we have been hearing it out of the media only. I hope that the policies which are not initiated make

things worse. I have always been a proponent of FDI in retail and I still support it. As far as the impact is

concernedEverybody is looking at the impact only with few retailers coming in but the impact will

also be in the ecosystem and the parallel should be drawn with the auto industry. When you look at the

Maruti story, the whole ancillary that they have developed has helped the new players to come and

establish. Similarly when a large retail player from international shores comes in, he brings in the full

ecosystem whether it is training organisation, fit outs, you have the green movement and their way of

looking at suppliers and lot of suppliers are likely to set in factories. I would definitely urge policymakers

to look at what the ecosystem will do in terms of new players and new categories coming in and that the

impact will be much larger than the impact of the FDI only into retail. That is very positive. I am looking

forward to these changes happening. Q: What about the new clause thats been added to the FDI in

single-brand retail. Do you suppose that now with this additional clause, the owner of the brand will

push away some of the prospective buyers from this space? A: It will depend on case to case because

most of the players who are going to enter will be brand owners only because India is a long-term play.

Anywhere when you enter a country, you always look at a 10-15 year horizon. Here also whether you

are a single-brand or a multi-brand you would have to look at 10-15 years. So it has to be an investor

and a brand owner who will come together. I dont see a major issue and if it goes into 100% then the


3/6

true owners will come in and maybe they will have partnership with Indians who will help them

establish the market because of the complexities of the market. Q: We have seen the margins of many

of the retail players come down over the past few quarters. Given that inflation is very high, we have

seen an increase in raw material prices and competition is also heated up quite a bit. Are companies

likely to live with these lower margin scenarios? A: There are two kinds of margin impacts; one margin

impact is because of inflation, the second margin impact is also because of non-food price sale that has

taken place. The discount sales during the year have gone up and the last impact is also because of self

cannibalisation. So as much as all of us appreciate growth, we forget that players who are existing, get

growth on the basis of self cannibalisation because they want to capture market opportunities to gain

share. I dont expect margin growth from here until and unless somebody has overstocked himself for

the season and underperformed in which case they will have to again go into discounting. We do expect

many players in the industry in the apparel segment may have to go into discounting because of a little

slowdown relatively. Other than that I dont see the margins squeeze going forward for the industry.

Shoppers Stop stock price On February 11, 2014, at 11:17 hrs Shoppers Stop was quoting at Rs 370.00,

down Rs 1.45, or 0.39 percent. The 52-week high of the share was Rs 453.90 and the 52-week low was

Rs 317.70. The company's trailing 12-month (TTM) EPS was at Rs 5.30 per share as per the quarter

ended December 2013. The stock's price-to-earnings (P/E) ratio was 69.81. The latest book value of the

company is Rs 83.41 per share. At current value, the price-to-book value of the company is 4.44.

Read more at:http://www.moneycontrol.com/news/business/dont-see-big-margin-squeezeretail-

ahead-shoppers-stop_618759.html?utm_source=ref_article

Shoppers Stop, Trent fall short of analysts

expectations
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4/6

Standalone revenue for Shoppers Stop, which accounts for nearly three quarters of the consolidated revenue, grew

at 20% to Rs.537.07 crore in the June quarter from Rs.441.32 crore a year ago. Photo: Priyanka Parashar/Mint

Updated:Wed, Jul 31 2013. 12 34 AM IST

Mumbai: Shoppers Stop Ltd,Indias oldest department store chain, andTata GroupsTrent Ltd,which operatesWestsideand hyper market chainStar Bazaar,missed analysts earnings

expectations even as they improved their financial performance from a year earlier.

Shoppers Stop reported a consolidated loss of Rs.1.1 crore for the quarter ended 30 June, burdened

by its money-losing hyper market chainHyperCity.On a standalone basis, the retailer who runs the

eponymous department store chain, more than doubled its standalone net profit to Rs.1.6 crore.

Consolidated revenue for theK. Raheja Corp.group firm, which operates large-format department

stores and speciality stores such asCrosswordandMothercare,grew 13% to Rs.866 crore, helped

by the strong wedding season in May.

Standalone revenue for Shoppers Stop, which accounts for nearly three quarters of the consolidated

revenue, grew at 20% to Rs.537.07 crore in the June quarter from Rs.441.32 crore a year ago.

However, the standalone numbers missed analysts estimates. ABloombergpoll of eight analysts

had estimated standalone net profit at Rs.5.98 crore and revenue at Rs.578.6 crore.
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5/6

Trent reported a net profit increase of 36% in the June quarter to Rs.17.34 crore from Rs.12.76 crore

a year ago. Total sales increased by 15.4% to Rs.252.40 crore from Rs.218.70 crore in the same

quarter a year ago, the company informed BSE.

A Bloombergpoll of three analysts had estimated net profit at Rs.18.33 crore on sales of Rs.253.1

crore for the June quarter for Trent.

On 4 March, Trent had agreed to a scheme of amalgamation and arrangement betweenLandmark

Ltd,Fiora Link Road Properties LtdandTrexa ADMC Pvt. Ltd.The appointed date of the merger will

be 1 April with retrospective effect, subject to approval.

Meanwhile, Shoppers Stop said it got shareholders approval for the transfer of business done

byElca Cosmetics Pvt. Ltdby way of a slump sale to its wholly-owned subsidiaryGateway

Multichannel Retail (India) Ltdfor Rs.63.46 crore. Elsa runs the cosmetics business ofEstee

Lauder,M.A.Cand other beauty retail chains.

Shoppers Stop also got shareholders approval to increase its borrowing limit to Rs.1,000 crore

from Rs.650 crore.

The company may need the additional funds to fund its expansion plans and invest in HyperCity.

This is just a provision, saidGovind Shrikhande,managing director of Shoppers Stop, adding that

the company may not necessarily increase its borrowings immediately.

Like-to-like same store growth, a measure of growth based on sales in stores that have been open

for at least a year, for Shoppers Stop stood at 12%, driven by a 9% price increase and 3% volume

growth. This is much higher than the 5-6% like-to-like growth that the company had reported in fiscal2013. It is also higher than the estimates the company has given for fiscal 2014 at 8%.

We maintain our outlook of like-to-like sales growth of 8% for the fiscal year, said Shrikhande.

It is good to see the like-to-like sales growth coming in double digits, said Abhishek Ranganathan,

vice president, retail, real estate, institutional equity research,PhillipCapital (India) Pvt. Ltd.

However he added, sustaining the momentum will be a challenge. Also, the new store openings

could impact profitability going forward.

During the quarter HyperCitys loss widened to Rs.24.72 crore from Rs.21.35 crore a year ago due to

a write-off of Rs.3.3 crore for the closure of a store in Ludhiana. Sales grew 12% to Rs.228.33 crore

from Rs.204.75 crore in the same quarter a year ago.

Over the past year, Shoppers Stop has been tweaking the business model of HyperCity as it looks at

making the chain profitable. During the June quarter, it closed one store and is also considering

exiting from the consumer durables and Information Technology (IT) products business division in

the next 12 months.
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6/6

During the quarter, the retailer has also launched a new compact HyperCity format of 30,000 square

feet in Bangalore. Further it is planning to resize three stores in Cyberabad, Vashi and Thane.

In the June quarter, Shoppers Stop opened five new Shoppers Stop stores, twoHomestopstores,

two M.A.C. stores, threeClinquestores, two Estee Lauder stores, oneBobbi Brownstore and two

HyperCity stores. Trent opened four new Westside stores, taking the total number of such stores to

74 and total number of stores under various formats to 78.

Indias largest publicly traded retailer,Future Retail Ltd(formerly Pantaloon Retail (India) Ltd), is still

to announce a date for its June quarter earnings.

On Tuesday, shares of Shoppers Stop fell 3.72% to Rs.353.35 on BSE, Trent shed 0.7% to Rs.998

while the exchanges benchmark Sensex declined 1.25% to 19,348.34 points.

Shoppers Stop reported its earnings before the close of market hours while Trent posted results

after the close.
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Effct of Inflatn on Ss