“Shopper’s Stop Conference Call” - aceanalyser.com Call/132638_20080429.pdf · Shopper’s Stop Limited April 29, 2008 Page 2 of 26 Moderator: Ladies and Gentleman, good evening

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“Shopper’s Stop Conference Call”

MODERATORS: MR. B. S. NAGESH - MANAGING DIRECTOR,

SHOPPER’S STOP LIMITED.

MR. GOVIND SHRIKHANDE – CEO, SHOPPER’S STOP

LIMITED.

MR. NAVALKAR – GROUP CFO, SHOPPER’S STOP

LIMITED.

Shopper’s Stop Limited April 29, 2008

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Moderator: Ladies and Gentleman, good evening. I am Rochelle, the moderator, for this conference

call. Welcome to the conference call of Shopper’s Stop Limited, Mr. B S Nagesh is our call

leader for today. For the duration of this presentation all participants’ lines will be in the

listen-only mode. After the presentation, the question and answer session will be conducted

for the participants on this conference call. I would now like to hand the conference over to

Mr. B S Nagesh, thank you and over to you Mr. Nagesh.

B S Nagesh: Thank you Rochelle, good evening everybody. Welcome to our first call of the new

financial year, new financial year, April has begun; I am sitting with new visiting cards, a

new logo, and a new identity. But, I am still sitting with myself; Govind Shrikhande, our

CEO; and Navalkar, our group CFO. So, we are with new excitement and new identity

We are very happy with the way the last quarter has gone on the revenue side. We have

seen the last financial year having performed well on the like-to-like although somewhere

around the 3rd quarter it looked like that like-to-like was slipping, but the business has

really caught on very well, including the new initiatives revenue on our like-to-like basis.

So I think that is a very-very good situation that we are in as of today. We have had very-

very good launch of new identity, new logo, and a lot of changes had been done. We have

posted a slightly edited version of a presentation which I would request my colleagues

Govind Shrikhande to take you through.

We have also had a turnaround in terms of our new initiative Crossword has made profits

at EBITDA level, cash profits, Mother Care has net profits, Mac & Clinique has net profit.

And the three verticals which are still to turnaround are Home Stop, Arcelia, and F&B.

And I think there we are still facing different challenges although Arcelia is looking very

positive, HomeStop is looking positive, F&B there are still challenges, so will share those

challenges as we go forward.

I would also like to inform you that as on 26th of March we have submitted a document for

our rights issue. And therefore, now we are in a period where we are being governed by

the SEBI laws. And therefore in this conference call, till the time our issues closes we will

be constrained by not being able to talk to all our investors, anything more than that what

we have already put in into the document. And therefore please pardon us if we have to say

no to some of your questions or maybe you do not ask us those questions.

I will now hand it over to Mr. Govind Shrikhande to take you through the whole branding,

the significance of it, and how it is going to make a difference to us. Then I also request

him to make the presentation and discuss things with you, Navalkar will join in between to

talk about Crossword’s turnaround as the CEO of Crossword apart from being the group

CFO of the business. And I am here to take up answers to your question, post Govind


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finishing his presentation. I will hand it over now to Govind. And I will again come back

when the Q&A starts, over to you Govind.

Govind Shrikhande: Good evening friends. I am going to take you through the brand changes that we have done

and the brand philosophy change that we have done. If you can open the first slide on this

logo that we changed, I would start from there. I hope all of you have opened the 1st slide,

it is the new logo, Shopper’s Stop, Start Something New, that is the new thought process

that we have taken. Start Something New is not a line for us, it is a new philosophy. We

believe that we need to change a lot of things within the company as consumers outside

have been changing. So we have embarked on the whole program of touching all the

customer through our new 360 degree experience, cutting across various facets within the

store and outside the store.On the next slide, you can see the consumer in the center and

various touch points that we have tried to reconfigure for our, Start Something New

experience and we will take you through one by one each one of them.

The first one is on the brand positioning, if you look at Shopper’s Stop as a company and

as a department store, when we started off in 1991, we were a contemporary department

store, maintained that position over the years by launching various categories, brands as

well. And over the last two years we had tried to move upward towards bridge to luxury

position in a numbers of stores and you can see that in Juhu, Rajouri, and Malad where we

have launched a number of bridge to luxury brands from Lancome or a MAC or CK Jeans

or French Connection or Tom Hilfiger, all this brands are adding to that, customer’s

experience and aspirations of bridge to luxury. So we are moving up the ladder as for of

customer aspiration is concern. Therefore, we are on top in the positioning of the

department store.

Moving on to the next touch point which is talking about the brand logo and the brand

symbol, brand logo as you know the current, the earlier brand logos that we had which are

the oval shape, talked about our core value such as trust, comfort, and warmth. We needed

something which is much more dynamic we needed something which is progressive and

really portrayed as a thought leader in the department store industry. And that way we

adopted this new logo, and you must have seen various ads on TV, where the oval evolves

into a rectangle through a very good mechanism. And that is what you see the new logo

right now. Along with the new logo we also adopted a new symbol. If you see various

brands have various symbols like a Nike has a swoosh, and the swoosh really means

something to every customer. For our SS as a Shopper’s Stop it also stands as a think

beyond philosophy. So as if you look at this SS logo now, symbol now it tells you about

infinity and it also portrays our positioning which is bridge to luxury. And you will also

find within the store over the next few months lot of products carrying this symbol. You

can now see the applications of the new logo and symbol on our letterhead, envelopes on

our visiting cards then store facades for example, what you are going to see right now is


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our Bannerghatta Road at Bangalore and you will see the new logo and the facades on all

the stores across India right now.

Moving on the next touch point is about service in the store, last few months we had spent

a lot of time training and upgrading the service standards of all our associates. We also

covered the security and housekeeping in all the stores. And we do believe that customers

will see the difference in the kind of service standards. Next point is uniform. When the

customers enter the store, they interact with associates more and more and the kind of

uniform that we have catered is this moving towards the bridge to luxury positioning,

black and white stripe shirt for both men and women and black and white polka doted saris

for women as well, with the black trouser in a formal area and black jeans in the semi-

formal area which is easily a very-very sophisticated statement for the customer and very

fashionable.

Moving on to the touch point merchandise, as I mention earlier you have already launched

a number of brands across various categories in apparels as well as non-apparels right from

a CK to BOSS in watches to CK, Armani, Gucci in sunglasses. And other brands are

already mentioned in the apparel and cosmetics side too, apart from that we are also

upgrading our exclusive brands like In-Sense which is becoming more glamorous, Push

and Shove which is becoming more cutting edge fashion and Haute Curry which is fusion

brand for us is becoming more tikha and chatpata as well, with these we are dealing about

fashion quotient of the department store will only keep on increasing in future.

In ambience, we have launched for the first time in India a concept called Shopper’s Stop

Radio, similar to FM Radio where you hear radio jockeys, you will now hear radio jockeys

talking in the store, giving you tips on various things right from dressing sense to picking

up the right merchandise for your folk, buying up the right furniture, picking up the right

cuisine along with different kinds of music and the music keeps on changing throughout

the day where in morning you have a soulful music while in the evening the tempo keeps

on increasing and it will also be interspersed with regional topics.

Apart from that we are also changing for example offering taste within every store,

offering a small café or a proper restaurant within it. And you will also find lighting levels

going up and even merchandize being presented in superior fixture and better kind of

wrapping paper as well or gift paper. We will just show you in the next slide and a gift

paper, a new gift paper which is in black and white as well as white and black and for

special occasions you also have it silver on white. We believe this goes very well, very

contemporary and very classy.

And in store design basically we have been increasing the size of a store from 45,000 to

65,000 now moving towards 85,000. And a special feature that we are now offering to our

women customer is day and night lighting in women’s trial room. We believe women are


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always very careful about the choice of merchandize that they make. And they always

want to check it out, how does a dress look like during day, how does the dress look like in

the night. And we are making it easier for them to make their choice in our trial room. This

is a first time happening in India.

Next to shopping bags - Shopper’s Stop shopping bags are extremely popular world over.

And for the first time we are not only carrying a new logo and symbol on a shopping bag.

We are also offering a limited edition of fashion shopping bags that for this time they are

depicting fashions through the last 30 years and you will be definitely very happy to carry

the shopping bags anywhere around the world.

Moving on to loyalty, we are expanding our loyalty program. These are the redesigned

cards further with the co-branded logo as well and the loyalty program has already crossed

a million and contributing more than 65% of the sales. \

For the associate behavior in order to get a similarity of spirit a similarity of service

standards serving the customer beyond their own deliverables, we have created an anthem

and the anthem is called “Hadh Se Aage”. We have also created a think beyond book

which tells them stories, real stories within Shopper’s Shop where some of our associates

have gone beyond their capabilities and delivered excellent service to our customers. We

believe that weekly initiative will bring together all our associates in order to deliver

exemplary services to customers as well as making them happy everyday, every minute

that they are in the store, making their every visit special.

The next touch point is owning a cause, we believe that environment and environment

awareness is extremely important for a retailer like us. And like our shopping bags are

recyclable we also thought about Life which is our exclusive brand owning up a cause like

Think Green. So the Life merchandise for the summer season with every Life product you

will get a merchandise which is free, which is Neem Seed Pack along with the Life

merchandise and we are targeting to distribute 1.5 Lakh seeds throughout India in the next

90 days time. We kicked off this whole initiative by planting 150 trees at Inorbit Mall and

some of our associates are now going ahead and mending and tending to trees themselves

at their homes as well as the office and we will go on a bigger drive to plant more trees in

future.

Advertising, you will see advertising happening in three stages, the launch of the logo in

the media has already happened, you must have seen the Times of India as well as

Hindustan Times carrying the cover page with the change of logo. As well as lot of TV

advertising which has already broken, as well as logo advertising happening through IPL

matches as well as hoardings. The next level of campaign is going to happen at a brand

campaign and I will show you some of the brand campaign visuals which are going to start

in the print media right now in the next few days’ time. This is the first part of the


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campaign and as usual the whole campaign is centered around two factors tongue in cheek,

it has lot of fashionable models in it at the same time it is showing a concern about the

whole environment. So, for example this particular ad when you see a great model but the

great model is giving distraction to the poacher and that way we are trying to say “Preserve

Wild Life”, Shopper’s Stop, Start Something New. The next slide for example talks about

giving a toy to a kid to buy a toy, keep him engrossed, and that way “Reduce Noise

Pollution”, Shopper’s Stop, Start Something New. So for us Start Something New is a

philosophy of not only changing logo or symbol, or the shopping bag, or the behavior we

also want all our customers to look at various ways of trying to look at the same thing

differently and start something new. So for example in this particular ad we are saying

“Save Paper” and so on and so forth in this particular saying “Save Water, Conserve

Water” and this ad for example which is one of our favorites “Wear Diamonds, Attract Ex-

Boyfriend, Recycle” Shopper’s Stop, Start Something New. So the whole message in the

print ad campaign is Tongue in Cheek, Start Something New and asking our customer to

really look at things anew, afresh, and really enjoy themselves while shopping.

We have also taken the communication at the store level and we are starting a significant

campaign within the store, where customers can come in and sign in a flash book to Start

Something New. For example giving up smoking could be Start Something New.

We are also putting in communication in other areas like parking, elevators and select

merchandise areas asking the customer to Start Something New. So for example, this is

what you will find in formal footwear area a pair of Nike or Adidas will be kept with the

sign ad saying Run and Start Something New, that is the whole message in this whole

philosophy. So the whole philosophy that I talked about of Start Something New we have

tried to take to all the touch points and you will see the same thing as well in our two film

campaign which will also start getting released in the next few hours and days across

various channels. And they again communicate a similar message of Start Something New.

So that is what I wanted to talk to you on the whole philosophy change.

Now let us run through the whole business overview I will first open the Page #1 of the

Business Overview. At Page 3 Shopper’s Stop opened its 24th store at Kolkata at South

City. We have also opened the second store for Airport Retail in Hyderabad. Crossword

opened its 48th store in Kanhaiya Mall at Bandra and the First Citizen number base crossed

a million and increase of 30% over last year and their contribution to sales for the year was

more then 65%. As Mr. Nagesh mentioned earlier draft letter of offer for right issue has

been file with SEBI on 26th March and our new brand Logo and Emblem was launched on

23rd April by Mr. Shahrukh Khan. Mr. Salil Nair was promoted to the position of COO of

Shopper’s Stop. His brief profile has been giving in the last slide of presentation. Rather

than waiting for the last slide to appear let me talk about Salil, Salil has been working with

us for more then 15 years and he has looked at various positions from the time he has


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joined. He was a Retail Operation Manager at Bangalore then he move to the Hyderabad

Store and then he became head of operations located at Mumbai. From there on he moved

to the B&M by handling the non-apparel portfolio then the men’s portfolio and then the

whole of buying and merchandizing. After that he also took over the portfolio of store

planning and now as a COO he will handle both buying and merchandizing and operations.

And we believe he will able to give the right impetus to the discipline in operation and

improving the efficiency and productivity along with great service standard for the

customers.

Coming back on awards, I feel extremely proud to tell you about both the awards that we

have won. Both the awards that we have won have come from the World Retail Congress,

the first has been Mr. Nagesh was inducted into the World Retail Hall of Fame. And it s a

very proud moment for us because he is the first Asian as well to be inducted into this Hall

of Fame and it had such celebrities like Sam Walton of Wal-Mart, Charles Walgreen of

Walgreens, and Marvin Traub of Bloomingdales, and Jeff Bezos of Amazon. So, he has

now joined all these big guns in the Hall of Fame, Shopper’s Stop also won the Emerging

Market Retail of the Year in World Retail Congress in the same function. And the other

awards were won by Tesco, H&M and Woolworths at the same time. We also won the

award for the Most Admired Fashion Retail Destination for The Year at IFA.

Moving to the next slide on page#5, our presence is still expanding, Shopper’s Stop today

has 24 stores, Home Stop 3, Mother Care 18 including 9 Shop & Shops, Mac & Clinique

put together 5, 4 Macs and 1 Clinique, F&B has 25 with 13 Shop & Shops. We have two

airports stores. Crossword has the 26th including 10 Shop & Shops and we have 2 Arcelia

total coverage is 16,01,000 square feet. These are all photographs of the new store both for

Kanhaiya Shopping Center at Crossword at Kanhaiya Shopping at Bandra, Linking Road,

which is 3700 square feet. This is the store of MAC at Kemps Corner. Page 8 you can see

the South City Store of Kolkata. It is a beautiful store.

In terms of store area on Page 9 now, the total additions for the year you can see,

Shopper’s Stop 3,50,00 Home Stop 27,629, and Specialty of 53,000. So, total store area as

of 31st March was 1.6 million square feet.

I am now moving on to Page 10 with the key financial highlights of Q4. The sales growth

for Shopper’s Stop Department Stores was 34% all format grew by 38% the like-to-like

sales growth for Shopper’s Stop Department Store is 16% with store greater than 5 years

growth at 6% and the stores less than 5 years going very well at 28%. All formats grew

same store growth at 25%. Sales of square feet on chargeable area for Shopper’s Stop

Department Stores were at 2161 versus 2230 of last year and all formats were at 2080

versus 2120 of last year. Overall customer entry increased by more than 25%.


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Moving on to Page 11, key financial highlights for the whole of year, sales growth of

Shopper’s Stop Department Store was 28% and all formats was at 34%, like-to-like sales

for growth for Shopper’s Stop Department Store was at 14% with stores greater than 5

years at growth of 6% and store less than 5 years at a growth of 25%. All formats like-to-

like growth was at 20%. Shopper’s Stop Department Stores sales per square feet on

chargeable basis increased from 8810 to 8979 and all formats sales increased from 7973 to

8671. Overall customer entry increased by 28%. I can see the same data in a graphical

format like-to-like sales growth, all formats up by 25% sales per square feet flat in fact it

has degrown. For the whole year like-to-like has grown 20% all formats and all formats

sales per square feet grew by 9% from 7973 to 8671. Operational indicators for Q4

customer entry was up by 25% and conversion ratio is at 26% whereas like-to-like stores

conversion is up by 8%. Transaction size is up by 7% whereas like-to-like transaction size

is up by 9%. ASP is up by 5% like-to-like volume growth for Q4 was 11%.

In terms of the full financial year, customer entry was up by 28% and like-to-like stores

grown by 5% entry. Conversion ratio is down with like-to-like stores degrown by 1% as

the entry was up much higher than normal. We have seen a downward slide in conversion,

whereas the transaction side continued to grow well from 1562 to 1721 a jump of 10% and

like-to-like sales store transaction side grew at 11%. Average selling price grew by 7%

whereas like-to-like volume growth was also 7%.

Moving on to Page 16, the private labels sales mix came down slightly from about 20.6%

to 19.8% whereas the merchandise buying model bought out also came down from 60% to

57% whereas all others have remained almost more or less the same. In terms of

merchandise mix for the full financial year the private label mix was down by 0.5% from

20.6% to 20.1% and the merchandise model again bought out is down from 60% to 58%

others are more or less similar whereas private label sales overall increased by 28% for the

whole year which is inline business top-line growth in sales.

In terms of category wise sales, if you look at Quarter 4, non-apparel continues to be

growing and it has grown from 42.2% to 42.7% and same thing you will also see in the full

financial year from 41.1% to 41.4%. All other categories what you are seeing women share

for example is almost constant and children share has been growing now even for the

quarter as well as for the year. When we look at the revenue mix for the whole year

apparel is down from 58.9% to 58.6% and non-apparel was up from 41.1% to 41.4%

whereas division wise we are now seeing that non-apparels is the highest with 41.4%

followed by menswear at 31.7%, women share has been maintained, and kids share has

actually gone up from 8% to 9.5%. The key drivers in the non-apparel category having

home, leather, watches, jewellery, electronics and personal accessories like sunglasses.


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Moving on to Page 20, shrinkage in the last quarter was slightly higher than the whole of

the year it moved up from 0.47% to 0.70% but for the whole year we were still able to

maintain at the level of last year. So against the 0.46% of last year we are at 0.47% in this

year which continues to be one of the lowest benchmark.

Page#22 is now the format wise P&L. We have clubbed all the new initiatives like Home

Stop, Crossword, Mother Care, Mac & Clinique, Arcelia, Food & Beverage under the new

initiative. And Shopper’s Stop Departments Store has been shown separately. So when you

see there the revenues 2758 million of Shopper’s Stop and new initiatives is 436 total

contributing to 3195 and against the gross margin in Shopper’s Stop are 29.9, the new

initiatives are at a 32.4, overall at 30.2. But operating expenses in Shopper’s Stop are at

24.5% whereas on the new initiative the expenses are still higher at 44.8, giving overall at

27.2, it leaves the EBITDA of Shopper’s Stop Department Store at 7.4 whereas the new

initiatives are continued to be at a loss at -9.4% and overall Shopper’s Stop Limited

EBITDA at 5.1%. Our finance charges and depreciation have been higher, this year for

both Shopper’s Stop as well as our new initiative, leading to PBT of Shopper’s Stop at a 99

million for Q4, at a percentage 3.6 whereas the new initiative is a loss of 62 million at a -

14.2%, the net Shopper’s Stop Limited PBT is at 37.6 million leaving at 1.2%. This is the

financial summary for Q4 2007-2008 for Shopper’s Stop Limited. Retail turnover up by

38% from 2356 millions to 3261 millions, margin on sale is also up by 35% from 716

million to 965 millions and margin on sale is slightly lower from 30.9 to 30.2 whereas

operating expenses are up from 25.7 to 27.2. As operating profit is almost maintained at

163 millions against 161 million of last year, a 1% jump, so operating profit as a

percentages has drop to 5.1% against 7% of last year, PBT is up from 26 million of last

year to 37 million in this year and PBT is up this year by 186% from a (-22 to19.5 million)

this year.

We move to format wise P&L for the full financial year of 2007-2008, when we look at the

revenue of Shopper’s Stop Department Stores cross the 1000 Crore benchmark this year

which is a significant milestone as far as we are concerned and the new initiatives were at

142 Crores all put together we are at Rs.11,900 millions turnover. Gross margin in

Shopper’s Stop was at 31.8% whereas operating expenses are at 26.4%, leaving a EBITDA

of 6.9% which if you recollect that two years back we are at about 8% EBITDA we are

currently cruising at a 7% and with finance charges at 0.4% and depreciation at 3.2% the

PBT is at a 3.4% at 354 millions on a 10472 millions turnover. The new initiative against

the 1428 million turnover the gross margins is at 33% whereas the operating expenses

continue to be at a slightly higher level of 45.4% leaving a -139 million and the percentage

EBITDA is at -9.7%. Overall Shopper’s Stop Limited is at a turnover of 11900 million

with operating expenses of 28% and margin of 32%, EBITDA of 4.9% and a PBT of 1.2%,

post-depreciation and finance charges of 3.7%. So we notice that as Mr. Nagesh had


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commented earlier that Shopper’s Stop continues to grow from strength-to-strength and

some of the new initiatives are now turning cash positive.

Coming back to the financial summary of 2007-2008 for the full financial year from an

8995 million we are up by 34% at 12069 million. Margin on sales is up by 37% so from

31.4% to 32%. Operating expenses are also up from 25.6% to 28.7% as well as the

operating profits is now at 586 million against 696 million of last year. Post finance

income, finance expense and depreciation PBT is at 145 million against 487 of last year so

PBT is at 1.2% versus 5.5% of last year and PAT is now at 69 million versus 261 million

of last year.

Page 26, you can see the same representation graphically with turnover, gross cash margin,

EBITDA, and PAT for Q4. On Page 27 you will find that a similar graphical

representation for the full financial year for again sales, cash margins, EBITDA, and PAT.

On Page 28, you will find the operation efficiency indicator as GMROF is up from 677 to

724 for Shopper’s Stop like-to-like department stores, GMROI is down by 10% from

1.01% to 0.91% whereas GMROL is up by 10%.

On Slide #29 you are seeing GMROF down at 9% for Quarter 4 and GMROI is down by

6% and GMROL is up by 11%. Page 30 is for the full financial year. The operational

efficiency GMROF wise we are up by 14%, GMROI we are 3% up, and GMROL we are

6% up and this is for like-to-like department store. And operational efficiency for the full

all stores GMROF is up by 4%, GMROI is up 3%, and GMROL is almost flat. I will now

handover to CB Navalkar: to comment on the Crosswords numbers. Thank you.

CB Navalkar: Thank you Govind. Good afternoon to all of you. Taking you to Slide #33 the Crosswords

financials for the Q4. I must say it has been a good year for Crosswords, with 48 stores and

healthy 17% like-to-like growth we have been able to show a profit after tax for Q4 in the

Crossword Book Stores Limited.

I will run you through the financials. Strictly the financials are not comparable with last

year’s quarter, because we changed the system of royalty with our franchises where earlier

we used to supply merchandised books and music through the franchises, this year it is a

pure royalty arrangement which we have with the franchises so the retail turnover which

shows a drop from 53 million to 22 million is not comparable so I will straight take you

through the profit before tax with all the effects it reached at 5 million for the current

quarter for the Q4 2008 again 4.3 million and after tax which is the MAT which we had to

take for full year. The profit after tax is 4.1 million down from 4.4 million. This in

Crossword Book Stores Limited, let me remind you that Crosswords is franchised all its

own stores operations to Shopper’s Stop Limited .Combined with CBL and Shopper’s


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Stop, Crossword operations in Shopper’s Stop there is a cash profit which has been

recorded in Q4 and also for the full year.

For the full year financials I will take you to Slide #34. In the full year again the turnover

is down from 403 to 99 million because of the change of the royalty term, but profit before

tax I will take you straight to that, the profit before tax is up from -1.4 million loss last year

to 18.3 million profit and after the MAT tax the profit after tax is 15.9 million against 1.6

million loss for the last year full year.

I will take you through the consolidate financials also taking over Slide #36 consolidate

turnover was at Rs.3.2 billion against last year’s Rs.2.4 billion. Let me remind you the

consolidation includes not only Shopper’s Stop Ltd. but also Crosswords Book Stores Ltd

which is a 100% subsidiary, Hypercity Retail India Ltd. to the extent we have shareholding

at 19%, Gateway Multi Channel Ltd shareholding is 51%, Time Zone Entertainment we

have 45% and Nuance Group is 50% shareholding incidentally Nuance Group, the airport

operations commenced in March for Hyderabad Airport and is scheduled to commence in

May for the Bangalore Airport that is when it will become fully functional for the contract

we have signed in India. The margin on sales this is consolidated with all the formats reads

at 993 million for the quarter against 812, an increase of 22%. The EBITDA is 142 million

against 162 million in last year, the growth of 12%, and it is a 4.4% of the revenue. After

finance charges which have moved from an income which was a 3.9 million of income last

year to 31.6 million of financial charges, and depreciation which after we changed the

method of actually the useful life last year has reduced in Q4 from 151 to 117, the profit

before tax is negative of 6 million against 15.6 million last year. After-tax and minority

interest, the profit after tax is 3.9 million negative against 33.9 million negative last year.

Taking you to Slide #37, the consolidated financial for the full year 2007-2008, the retail

turnover is at 12.2 million a major weightage of Shopper’s Stop Limited, against last year

at 9.2 billion, 31% growth. Margin on sales at 3.9 billion against 2.9 billion last year and

operating profit of 581 million against 717 million, and again financial charges which have

changed from a finance income to finance expense and depreciation which has grown by

146 million after the change of useful life the profit before tax is 72 million, at 0.6% of the

turnover and after-tax and minority interest, the profit after tax is 26.5 million, against last

year’s 41 million. That is 0.2% of the revenue.

That is all. I hand it over back to Govind for this time.

Govind Shrikhande: Thanks friends, so now the whole session is open for any questions.

Moderator: Thank you, sir. Ladies and gentlemen we will now begin the question and answer

interactive session for the conference participants. At this time if you have a question you

may please press “*” and then “1” on your touchtone-enabled telephone keypad. On


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pressing * and 1 participants will get a chance to present their question on a first in line

basis. To ask a question, please press * and then 1 now. First question is from the line of

Mr. Prakhar Sharma: from CLSA India. Please go ahead.

Prakhar Sharma: Hello sir! Congratulations on the result and the award. I have a couple of questions. I will

just come to them one by one. One, why were other operating incomes in this quarter

particularly high at about 6.6 Crores?

B S Nagesh: This is Nagesh here. Thank you for the compliments. We have a co-branded card which is

a Citibank and in the last year the numbers of co-branded cards that we have got are

substantial, and therefore, we have generated an income from Citibank. Last year it was in

Q3, and this year the income was accrued in Q4.

Prakhar Sharma: Fair enough. And comparing it to last quarter, two costs heads were significantly lower

besides the write-back of power cost. Could you just explain why was this so?

B S Nagesh: Which are the two costs that you are referring to?

Prakhar Sharma: Okay. I just give you. If you see your personnel cost, that was about 17.3 Crores against 21

Crores in 2Q and 21 Crores in 3Q. And this quarter it was a 17.

B S Nagesh: See, one part of the personnel cost will come down to the extent of the provision made for

our performance-linked reward system, so for twelve months we continue to apportion the

performance-linked reward system and the last quarter, we will look at the actual

performance-linked reward disbursement. And to that extent, we adjust in the last quarter. I

mean, that is the only change that has happened, otherwise, in terms of the cost structure,

there is no need of change.

Prakhar Sharma: Does that mean that employee performance was lower than that was budgeted earlier?

Govind Shrikhande: No, the employee performance, see, you budget the employee performance at the total

level, however, the disbursement happens at different, different level.

Prakhar Sharma: Okay. Fair enough, I will take that. So, basically that kind of fluctuation will occur at the

year-end, right, in a sense you know, it comes down steeply from between the two

quarters, but this will be apportioned to the what’s actual at the end of the year?

Govind Shrikhande: Correct.

Prakhar Sharma: Fair enough. And even the selling and distribution which last quarter included that three or

four distribution centers that you had increased capacity, why has the cost come down on a

Q-on-Q basis? Were there one of items last quarter?


Page 13 of 26

Govind Shrikhande: I will ask our CFO to answer the question.

Prakhar Sharma: Sure, sure.

CB Navalkar: Yeah, Prakhar, you are talking about last quarter to this quarter?

Prakhar Sharma: Yeah.

CB Navalkar: Because last quarter, you see, we ran a corporate campaign in Q3, but in this quarter, that

is Q4, all we ran was our sale ad, so effectively, our corporate campaign involves a much

larger ad expenditure than our sale campaign does.

Prakhar Sharma: Fair enough. So, should this run rate continue at around 10 Crores, is that a fair

assumption?

CB Navalkar: Once again, as BSN said right at the beginning, this will be futuristic statement, so we

won’t really be able to comment on that.

Prakhar Sharma: Fair enough.

CB Navalkar: Strictly in the retail business we do not compare quarter-to-quarter, I mean last year

because it is quite seasonal. In the Q3 you will have all the festivals, we will have

promotions of a different kind whereas Q4 it will be sale, Q2 it will be a sale so, you know

strictly we compare against last year’s quarter that would break much more better

comparison than Q3.

Prakhar Sharma: Fair enough. And how much of the power cost was written back, the provision that was

made?

CB Navalkar: 2.8 Crores.

Prakhar Sharma: 2.8 Crores. Secondly, the consolidated statement has about 2.2 Crores of the loss before

minority interest, is that because you are doing 51% of Hypercity?

CB Navalkar: Well, it is Gateway.

Prakhar Sharma: That is Gateway loss?

B S Nagesh: Yeah. Primarily that.

Prakhar Sharma: Primarily that. And can I have a brief sense of how the balance sheet as of now looks like?

In the sense how much is debt and fixed assets, and how much interest has been capitalized

during the year?


Page 14 of 26

B S Nagesh: Interest capitalized, offline I do not have the figure of interest capitalized.

Prakhar Sharma: Can I have the debt figure as of now? In the standalone entity?

B S Nagesh: About 170 Crores of debt of the 31st March.

Prakhar Sharma: 170 Crores. Fair enough. So, your interest cost will be around 7%-8%, is that the correct

estimate?

B S Nagesh: Yeah, between 9 to 10.5.

Prakhar Sharma: 9 to 10.5.

B S Nagesh: 9.5.

Prakhar Sharma: Fair enough. And secondly, also just on the Slide #28 where you talked about operational

efficiency on a like-to-like basis, why was GMROI down by 10%, sir?

B S Nagesh: The GMROI actually that happened as we have opened stores.

Prakhar Sharma: That is like-to-like number, sir?

B S Nagesh: Actually, the stock for the like-to-like is gone up higher than as compared to the margins,

and that is the reason for the GMROI because again the numerator’s inventory with the as

compared to the margin, and that is the reason.

Govind Shrikhande: The inventory have gone up, Prakhar.

Prakhar Sharma: In the same-stores also?

Govind Shrikhande: Yeah. Actually what has happened is in the last quarter, January went off very well,

February we started seeing the dip in the market, and that was the time when we were

running our sale. And generally as a tradition we run the sale only for a period of two

weeks. We were running up to 17 days, which includes two week-end. This year, the

management took a call to increase the sale period by another one week. So it has two

impacts. One impact is that your inventory that you carried which otherwise you would

send back in the year-end. So, you had a slightly higher inventory at the year-end. And the

second, in that quarter, there would be a slight depression in margin because you would

continue to sell lower cost or more discounted merchandize for a week more than what you

had planned. It has an impact although in a quarter it looks seven days in a quarter it

should not make an impact, it does not make any impact. So we had excess inventory as of


Page 15 of 26

the closing for the March year-end which again during the first quarter would get

normalized by either selling or returning stocks wherever you had an option to return.

Prakhar Sharma: Fair enough. Sir, I just thought if I could get two comments from you. One I had visited

the Rajouri Garden Store on a weekend, maybe on a Saturday or Friday, but the number of

customers I could see was slightly lower than I thought of, could you give us a sense of

how the Rajouri which is I think the most expensive retail space as of now, how is that

progresses?

B S Nagesh: See, Rajouri in terms of the revenue is progressing extremely well. Rajouri is bang on

target in terms of the revenue. Rajouri is on target in terms of the way we expect this to

end up during this financial year. You know generally when we keep saying that stores

product breakeven between 4 to 6 quarters, and we would expect Rajouri is to be on the

same line.

Prakhar Sharma: Fair enough. And any thoughts on, is this a kind of slowdown are you seeing at your store

level or among your own consumers, any sign of inflation and other stuff that everyone

else is talking about, are you seeing those kind of sign?

B S. Nagesh: See, in Shopper’s Stop since the whole attempt is to move from premium to bridge to

luxury therefore, our actual average selling prices have been increasing and we have not

seen resistance till the March 31st figure. In Hypercity we notice something which is very

strange for us, although it is positive. The merchandize inflation is at 6.2% which means

basket-to-basket comparison inflation is 6.2, but the customer is buying at a 7.4% inflated

price, which means that the Hypercity customer is buying more inflated products than the

basket inflation. It does not give a sense that you will see a drop in the revenue. But

honestly, the actual talk around the sentimental effect of the inflation has actually caught

up in the media in the last three, four weeks. By the end of probably the month of May also

we will start sensing if there is any slowdown we expect in the quarter, but we are not

seeing slowdown as of now.

Prakhar Sharma: Fair enough. And any idea on the Hypercity, is there anything new besides what we talked

about, you know, or the same summer for the full year, anything that we can share as of

now?

B S. Nagesh: Hypercity, I cannot share about anything which is tomorrow, but as a store, Hypercity has

clocked 147 Crores.

Prakhar Sharma: Fair Enough. And sir, my last question is on, how do you see rentals and real estate

scenarios, lot of deals coming, newspapers have been carrying a lot of articles that real

estate guys are facing some crunch and good inventory could come to you, are you seeing

some kind of signs where…?


Page 16 of 26

Govind Shrikhande: We definitely see nervousness in the real estate. From one factor that the real estate

developers who are making us come to their office have started coming to our office. I

think that is the first sign. The second is that I mean, you can sense that the retailers

especially the smaller retailers were paying a rent of 250-300 and looking at a percentage

cost of 26%-27%, not signing property in the same gung ho fashion that they were signing

probably a six-month or a year back. So, we are sensing that the real estate prices will

definitely not go up. In many of the places there could be a 10% to 15% correction, okay,

but it has not become very visible because lot many properties are still not on the finishing

stages. And earlier negotiated prices continue to hold for most of us. And as anchors we

had substantially discounted prices.

Prakhar Sharma: Fair enough. Thank you very much.

Govind Shrikhande: Thank you

Moderator: Thank you, Mr. Sharma. The next question is from the line of Mr. Huzefa Topiwalla from

Morgan Stanley. Please go ahead.

Ms. Divya: Hi, this is Divya from Morgan Stanley. Sir, just a couple of questions. The first one being

I just need to understand how did you actually go about the thought of repositioning the

stores? I mean was there any particular reason for the store positioning at this particular

point of time?

B S Nagesh: See, we do three studies on a regular basis. One is that we do the Mystery Shopper on a

monthly basis every year, we do the customer satisfaction studies, and every year we do a

study called Brand Track. About 2.5 years back doing the Brand Track what we realized

was that as much as customers are trusting us in terms of confidence, trust, dynamism, and

fashionability but what we found was a 18 to 25 age group fashionability quotient was

increasing at a very fast rate. And you would appreciate that our department stores we do

not vertically split a target audience, we have to split it horizontally, so we if we are

positioned at a level, we have to cater to 18 to 45. And we realize that the 18 to 25

although they were shopping with us, but on the fashionability part of this, they were not

associating with us. So, they shopped at Shopper’s Stop, but probably did not carry the

Shopper’s Stop carry bag or did not say hey I shop at Shopper’s Stop although, their

mothers and fathers and parents and brothers and sisters of the higher age would shop with

us. For us, the important thing was in the next 10 years, 15 years, would we remain as a

source catering to the medium age of 29 and 30 all we will be grown by 10 years. And that

was a challenge that we faced two and half years back. So when we went back, we said if

you reposition the store, we will be able to attract 18 to 45 as usual, but we also will be

able to associate with them. So 10 years down the line when these 18 to 25 or 25 to 35 they

will like to shop with us and continue to get associated. Now this is how the whole process

was identified. And then anybody who is a brand for 17 years has an emotional challenge


Page 17 of 26

to say how can I change it? And it took us almost about 18 months to research, workout

have Ray & Keshavan as a agency to design and have the total 360 degrees planned,

because it was not just changing the brand or the logo or just let me tell you that what

surprised us was that the association that customer had with our company was with

Shopper’s Stop the brand name and black and white the color and the output in terms of

trust, in terms of dynamism, in terms of customer service was directly related to that name.

That gave us the comfort that even if you change the logo we should still see a positive

movement. Now we are about 6 days down since the time we have changed the logo with a

very-very high impact campaign. And as of now the response is fairly positive.

Ms. Divya: Okay, okay fair enough sir.

B S Nagesh: And of course this takes us up in terms of our positioning from premium to bridge to

luxury and almost every international brand on the cosmetics front in luxury that has got

launched in the country is launched through our doors. So that further substantiates that

even our brand partners are seeing our positioning right in terms of brand as well as the

way we are going forward.

Ms. Divya: Right, just one more questions, regarding our like-to-like sales you have exhibited 16% in

Q4. I just need to know if you could give me a sense of how much of it would be volume

driven and have you taken any substantially price hikes?

B S Nagesh: If you look at the same slide you will actually see that there is a volume growth

percentage. 11% is the like-to-like volume growth and selling price has grown by 5%.

Ms. Divya: Okay, okay fine, fine, fair enough sir. That is perfect, and that is all from me sir.

B S Nagesh: Thank you very much.

Moderator: Thank you. The next question is from the line of Suneeta Sachdev from UBS, please go

ahead.

Suneeta Sachdev: Hi, Nagesh, hi team congratulations.

B S Nagesh: Hi Suneeta.

Suneeta Sachdev: Just one question on Page 15, the conversions ratio for the full year on your like-to-like

stores is down by 1%. What could be the reason for this?

B S Nagesh: Of the conversion going down.

Suneeta Sachdev: Yeah.


Page 18 of 26

B S Nagesh: Yeah I think the reasons could be that in the like-to-like stores if you look at the average

transaction size, it has gone up substantially. It is at a 10%. And if you look at our more

than 5 years store they are running at a like-to-like of growth of 5%. So what has happened

is that the older stores which are more than 5 years have actually had customers getting

upgraded. So the transaction size has actually moved up, are you getting me Suneeta? 5%

like-to-like stores sales growth, okay but like-to-like stores transactions size has grown by

11% of Slide#15. So less number of customers have bought much higher baskets. And

anyhow the customer entry for like-to-like stores has come down by 1%, go to slide#14

you will see that the like-to-like stores the customer entry is degrown. So in a situation

where the customer entry de-growth, the business has been able to manage to upgrade the

customer and make them buy more. So operationally the business has become more

efficient in both cases.

Suneeta Sachdev: You know with 65% of your sales coming from your loyalty card holders which is more

than a million. And new stores, you know just been a relatively smaller proportion of your

total stores, this like-to-like sales growth of (-1%) is slightly unnerving.

B S Nagesh: Not sales growth the customer entry is growth…

Suneeta Sachdev: The conversion ratio.

B S Nagesh: You know so conversion is on the number of cash memo which is not in the value. So you

should have to tell that if I get 10 customers who are buying worth Rs.1000 but I have an

option to get 9 customers who buy worth Rs.2000, I will prefer the 9 customer buying

Rs.2000 although I would love to get the last customer….

Suneeta Sachdev: Yeah, Nagesh the only reason I was saying this is basically wanted more bills and wanted

a higher bills side, that is what, that was the only…

B S Nagesh: No we are not getting more bills Suneeta basically, one more things that is happening, in

places which are old, they have had two impacts one is our own cannibalization impact

okay and the second is there is the competition impact.

Suneeta Sachdev: That exactly what I wanted to hear from you.

B S Nagesh: Absolutely.

Suneeta Sachdev: So what is that competition impact and how would you either quantify or qualify it.

B S Nagesh: No, I will quantify and qualify both because I have, I mean in this con-call, I cannot do

future, let me take the past, the last biggest competition in fact we have had it in Bangalore

when we had all our competitors opening, okay and in Pune. And like I had mentioned


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earlier whenever this competition comes in, in that particular year we lose between minus,

we will go down by -10% to -20% and it takes almost 12 months for the percentages to

come back, because even if they love us if a competition comes up, that quarter 50% go

across to the new store. And we do have to make efforts to get it back and that as far as

competition is concerned, but if you look at our oldest store, wherein all the old stores we

have had our own stores get cannibalizing the store, so that is the one but to that extent 1%

is not real earning but I would not want to lose at 1% also. And I would go by what you are

saying.

Suneeta Sachdev: In terms of new competition coming, this going forward I do not see any competition

increasing in all, I mean your all the more now in 24 locations and all the majors retail

cities you are present in. So I mean is it a little bit unnerving that you know with brand

heritage like yours with you know being a departmental store known as India’s best

departmental store, why should this happen?

B S Nagesh: What has happened?

Puneeta Sachdev: The point I am trying to say is competition should not affect us to this extent.

B S Nagesh: Oh no, not at all, I think it is absolutely unfair if the world’s best retailer tells you that

competition does not impact, I mean in retail competition impacts during the first quarter

and first half and first one year. So we would be fooling ourselves I would not want to say

that, let me tell you wherever competition comes in the same catchments in that quarter or

the next two quarters we will have an impact. Now it is the ability of our organization to be

able to come back in the 3rd Quarter and reach back from the original level, but if it drops

then it means we are not doing well, but be rest assured that here when we say a 1% drop

in customer entry but we see a 11% growth in like-to-like transaction size, it a huge

operation efficiency which means your existing customers are loving you. So I am not too

concerned.

Puneeta Sachdev: Last question on these new businesses where you have not given them separately in terms

of the numbers, any idea on when these really start showing up positively in terms of…

B S Nagesh: Like said the Crossword, Mother Care, Mac & Clinique have perhaps turned positive. I

think we have three businesses Home Stop, Arcelia and F&B our internal projections are

showing that Home Stop and Arcelia we should be able to see a breakeven or a positive.

However in F&B we are likely to struggle.

Puneeta Sachdev: And is there anything that you would like to tell me about the right issue that you all have?

B S Nagesh: We have filed the document and awaiting the procedure to take it’s time.


Page 20 of 26

Suneeta Sachdev: And this is entirely for the takeover like Hypercity?

B S Nagesh: Well as for the documentation is the 17 stores that we have shown in the document and

investments in Gateway.

Suneeta Sachdev: Okay sir thanks.

B S Nagesh: Thank you very much.

Moderator: Thank you Ms. Sachdev. The next questions is from the line of Mr. Percy Panthaki from

HSBC, please go ahead.

Percy Panthaki: Hi sir, thanks for teaching us through the brand presentation, I think that was just fantastic,

however, I have a question on the structure of department stores in India as compared to

rest of the world, when you say you are positioning yourself as a luxury department store.

B S Nagesh: No, bridge to luxury, not luxury.

Percy Panthaki: Okay, but department store which is towards the premium and elsewhere in the globe

would probably make a gross profit margin of nearly 40% whereas we are at about 30% to

32%, moreover, we are constrained here because the branded products that we store

basically I believe those brands would want you to sell at the same price as it would be

available in other outlets. So having classified yourself as a premium department store,

how do you see your margins going in the region of EBITDA margins of 12% to 15% as

the other department store players in Asia currently do, how do you see that evolving in

the next 5 to 7 years, does do you think it will happened at all?

B S Nagesh: Okay I am a little constrained to make a statement to say, how things will look in the

future but let me talk about the general question in terms of how department stores around

the world have looked at it. In terms of when you go bridge to luxury or grow from

premium to bridge to luxury, the first thing that it does is it increases the average

transaction size and average selling price. Now I think that is what is very clearly getting

displayed if you look at the last 6 to 7 quarters as to how things have moved on the average

selling price. And therefore although in the market you are seeing like-to-like peer growth

of either competition on many players at the region of 8% to 10% you are seeing us

displaying a 16% like-to-like growth. Although, we have the largest number of stores

which are more than 5 years old compare to competition. And if could take away the stores

which are more than 5 years are like-to-like is running at a high of 25%. So bridge to

luxury is going to definitely increase the average cash per customer and therefore, increase

the average GMROF or the gross margins return on the floor space that will definitely

happen. Now again without commenting on the future if you look at the departments store

business around the world whether you have a gross margin of 45% to 35% the EBITDA


Page 21 of 26

ranges in the region of 68% except for businesses of department stores which are older

stores where the property is in the assets and not in the P&L so if you go to many of the

European stores where you see a 12% to 15% of EBITDA that is coming and when you go

and look at their occupation cost you find the occupation cost will be at about 1% to 2%.

So that is the difference, you will see the balance sheet you will find the assets is sitting

and most of them of course have been sitting on very old assets .

Percy Panthaki: Okay but do you think sir that there could be a scenario where an Arrow shirts says that X

price in Shopper’s Stop and Y price in other outlets.

B S Nagesh: In India.

Percy Panthaki; Yes.

B S Nagesh: Under the current MRP rule we will not be able to do it. And we do not expect the MRP

rule to change at least in the 12 to 15 months definitely.

Percy Panthaki: Okay so apart from let us say in the next 2 to 3 years you reach 50 Shopper’s Stop outlets

maybe another 5 or 6 years or let us say on a 10 year view you have reached let us say a

100 outlets but then the growth from the new outlets will definitely slowdown. So what do

you think will support the current multiples of the stock going forward?

B S Nagesh: Okay again I have heard the projections that you have made, but I am not making a

comment, but if I would go by saying that your projections of 100 stores goes right in the

next 10 years’ time, if we just look at the way the pyramid in the middle is growing, and

even at let us say the country growing at 8% and not 9% you see that bulge is the biggest

bulge. So all of us in that department store space or catering to that top-end space will

continue to see the actual pie growing, or for example let me put it slightly in a different

way, when we look at our businesses we still see that 12% to 15% of the Indian customers

are still our target audience and not beyond that. And most of course wherever we are

talking of the top 15% and the top 10 to 12 cities, and there you see that the bulge is

continuing to increase. So even if one talks of a 80 to 100 stores as you were saying for

anybody that pie is not seen as reducing. And the evidence that we have of the last 4 to 5

years is that in the first citizen, which is constant customer, which means you have lot of

like-to-like first citizen customers the average transaction size is increasing, so you had the

same gentleman spending more amount and upgrading himself, so I think that is what is

the direction for the future.

Percy Panthaki: Okay, and in last conference also you said that on FY2010 you would be targeting

EBITDA margin of around 8% anything changed in that.

B S Nagesh: I had to remain silent to indicate to you that I would continue to be silent on this.


Page 22 of 26

Percy Panthaki: Okay, okay fine sir, thanks.

B S Nagesh: Thank you.

Moderator: Thank you Mr. Panthaki. Ladies and Gentleman before we take the next question I would

like to reminder you can press * and 1 to ask a questions. The next questions if from the

line of Mr. Ankur Perywal from Religare Securities, please go ahead.

Ankur Perywal: Hello.

B S Nagesh: Hi Ankur.

Ankur Perywal: Yeah, hi, good evening sir.

B S Nagesh: Good evening.

Ankur Perywal: Sir taking on the strategic Slide like you started doing that, you have been focus more on

the departmental stores for now. And we have been expanding in the specialty store as

well. So going ahead how do we plan do we plan to expand more in the apart from the

departmental store format do we plan to expand more in the specialty format or would we

go more in the Hypercity format side?

B S Nagesh: Again please respect my restrain due to the document that we have filed. So I can only tell

you that the current mix is still highly dominated by the department store business, even if

you look at our total business more than 80% to 85% of the business is coming from

Shopper’s Stop. And for references of how we are looking at department store and the

hypermarket and the specialty, I would request you to refer back to our last quarter con-

call and the last to last quarter I think where we will actually put it together for you.

Ankur Perywal: Thank you, thank you.

Moderator: Thank you Mr. Perywal. The next questions is from the line of Ms. Priya Iyer from

Edelweiss, please go ahead. Ms. Iyer your line has been unmuted you can go ahead with

your question.

Priya Iyer: Good evening everybody, I just have one question, in the previous quarter, you know we

had not considered the impact of Time Zone and Hypercity right.

B S Nagesh: Yeah we had considered both the impacts.

Priya Iyer: Both the impacts.


Page 23 of 26

B S Nagesh: Yes.

Priya Iyer: As in the consolidated numbers included both the numbers, is it?

B S Nagesh: Yeah very much.

Priya Iyer: Yeah, okay thank you.

Moderator: Thank you Ms. Iyer. The next question is from the line of Mr. Ronak Shachdeva from

Anand Rathi Securities, please go ahead.

Ronak Shachdeva: Yeah good evening everybody.

B S Nagesh: Hi, good evening, Anand.

Ronak Shachdeva: Sir this is Ronak here.

B S Nagesh: Sorry, sorry.

Ronak Shachdeva: Sir I would just like to get a sense of what kind of per square feet revenues are you

generating on the older stores that is, that the store that are more than 5 years old?

B S Nagesh: Okay, actually like this if you look at on the old stores which are more than 5 years they

are still continuing to grow at 5%, and the area has remained the same. I do not think I

have directly here in front of me the sales per square foot, but offhand I can tell you that

there will be larger than the new stores.

Ronak Shachdeva: Yeah I mean, I just try to get a sense is to what kind of you know sales per square feet

could be generated at majority by...

B S Nagesh: No, you know what we will do, is one of us we actually send this across you.

Ronak Shachdeva: That will be great sir.

B S Nagesh: Yeah they will send across you as a mail, okay because if you look at the Shopper’s Stop

department stores on slide#11, it shows about Rs.8900 as you know if you take the square

foot, okay and overall and this must be including the 34% growth that you have seen, but if

you look to like-to-like which is 5%, they would be on a higher side, but we will send you

the figure for that.

Ronak Shachdeva: Yeah sir, the follow-up question on last, I do not know if I am repeating this but the 5%

growth that you are talking about like-to-like in the older stores, is there a reason why it so

less?


Page 24 of 26

B S Nagesh: Yeah I mean, this includes Andheri which is 17 years, includes the Bangalore, which is old

and Delhi which is almost 10 years. And I had mention more as a general point that our

experience of the last 17 years shows that stores start showing a decline around the 7th

year.

Ronak Shachdeva: Around the 7th year.

B S Nagesh: From the 7th year, okay and some stores where we had for example, Hyderabad we did a

renovation in the 7th to 8th year and we saw a growth again coming back. Almost like a

rejuvenated curve okay which is done, anyway I got the figure now, let say per square foot

of stores more than 5 years is at about Rs.12,000 per square foot.

Ronak Shachdeva: Rs.12,000 per square foot.

B S Nagesh: They actually are almost 35% to 40% higher than the average.

Ronak Shachdeva: Yeah, alright sir just another question. Sir your private label sales as the percentage of a

total, it was actually come down in this quarter when compared to the Q4 last year. So is

there a reason for that, I mean is there a strategic motivation to go for more branded

product or something or what.

B S Nagesh: I will request Govind to answer this question, please.

Ronak Shachdeva: Yeah.

Govind Shrikhande: There is no strategic reason to downgrade the share of exclusive brands. In fact we would

love to increase the share of exclusive brands.

Ronak Shachdeva: Yeah because of the margin advantage over there.

Govind Shrikhande: But as a position, last two quarter what we have also done is we have increased the kind of

bridge to luxury brands share. We have launched brands like Lancome, we have launched

brands like Tommy Hilfiger in our most stores some earlier and that has caused some

decline in the share of exclusive brands.

Ronak Shachdeva: Right.

Govind Shrikhande: Our endeavors definitely will continue to increase the share of exclusive brands.

Ronak Shachdeva: Alright sir, sir I mean that explains probably a little dip in the gross margin as well.


Page 25 of 26

B S Nagesh: If you look at Slide #16 you will actually see that compare to last year Quarter 4, this year

the own what has come down on 50% to 57% however the consignment and the

concession has gone up by 11%, okay some of the bridge to luxury brands that Govind is

talking off, have actually gone into that area.

Ronak Shachdeva: It is the concession area.

B S Nagesh: Right to that concession area.

Ronak Shachdeva: Okay.

B S Nagesh: Okay and therefore you see that kind of a …

Ronak Shachdeva: Alright sir, sir that is it from my side at the moment if there is anything I will probably

comeback, thanks sir.

B S Nagesh: Thank you.

Moderator: Thank you Mr. Shachdeva. Ladies and Gentleman if anyone has a question at this time,

you may press * and then 1 on your touchtone telephone. We have a question from the line

of Ms. Priya Iyer from Edelweiss, please go ahead.

Priya Iyer: Hello Nagesh, I just had a quick question again about how the real estate part of your

business is panning up, as in the retail real estate, you filed the rights document you said to

whatever you can discuss within the per view of that, would be very helpful?

B S Nagesh: As far as the document is concerned, in the document we have sought from our

shareholder’s equity for adding up 17 stores.

Priya Iyer: Okay.

B S Nagesh: The actual number of stores that we had signed and had discussed are available in the Q3

and Q2 con-call discussions.

Priya Iyer: Correct.

B S Nagesh: As far as the real estate is concerned the scenario now I am talking outside of the

document we continue to fetch the rate of an anchor and I had in the last quarter con-call

mentioned saying that although in the last 2 years the average rentals for retail as a

business has gone up by 200% from 150%. Our average rental on signing has not gone up

by more than 10% to 15% I mean this was in the last quarter Q3 if you look at the con call

transcript you will find that there. Okay and some discussions we have put in there, and


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outside there I cannot comment. However, I feel to us another colleagues question earlier I

have mentioned that there is nervousness in the real estate especially to do with retail and

we believe that although the prices may not soften, but you will see different kinds of

models emerging a lot of real estate players may come at a lower minimum guaranteed

rentals with us or others and look at revenue share so that they can participate with the

growth of the retail business.

Priya Iyer: Okay.

B S Nagesh: And that we are sensing very clearly.

Priya Iyer: Thank you very much.

Moderator: Thank you Ms. Iyer. Ladies and gentlemen if anyone has a question at this time you may

press * and then 1. If anyone has a question you may press * and 1. At this moment there

are no further questions from the participants. I would now like to hand the floor over to

Mr. B S Nagesh for any final remarks.

B S Nagesh: Yeah thank you very much Rochelle, thanks to the ladies and gentlemen, thank you for

being on the con call. We appreciate the time that you take to be on the con call and

discuss as much as we are able to pass information which helps in the retail understanding.

We do learn as much from the kind of questions that you ask. I would also thank Govind

and Navalkar and the team who had been here with us in preparation of the con call and I

would also welcome Mr. Salil Nair who has now been promoted and upgraded as a chief

operating officer and I just want to say that we continue with our tradition of growing

people from within the organization. We would also request that if each of you can just

send a small mail to our Finance or any of us to say that you would like us to plant a tree in

your name, we would love to plant a tree in your name and god save all of us together we

will make the earth more green. Thank you very much and look forward to meeting you

again.

Moderator: Thank you very much Mr. Nagesh, thank you Mr. Shrikhande, and Mr. Navalkar. Ladies

and gentlemen, on behalf of Shopper’s Stop that concludes this conference call. You may

now disconnect your lines. Thank you for connecting to the audio conference service from

Chorus Call and have a pleasant evening.

B S Nagesh: Thank you Rochelle.

Documents

“Shopper’s Stop Conference Call” - aceanalyser.com Call/132638_20080429.pdf · Shopper’s Stop Limited April 29, 2008 Page 2 of 26 Moderator: Ladies and Gentleman, good evening