Companies

Shoppers Stop eyes turnaround after closure of unprofitable stores

Abhishek Law Kolkata | Updated on January 09, 2018

Govind Shrikhande, MD, Shoppers Stop

Posts ₹4-crore net loss in Q1 FY-18

Shoppers Stop is expecting a turnaround from the July-September period this fiscal as hiccups resulting out of “impairment losses” iron out and the effect of closure of unprofitable stores kick-in.

The company reported standalone losses for two straight quarters. In Q4 FY-17, it reported a loss of about ₹36 crore, while in Q1 FY-18 – for the April to May period of this fiscal – it reported a net loss of ₹4 crore. Cost-cutting measures are also expected to bear fruit.

According to Govind Shrikhande, Customer Care Associate and Managing Director, the shut down of unprofitable stores over the last 12 months will have a positive impact towards its bottom-line. The company also accounted for “impairment losses” arising out of a review/revaluation of a joint venture operation.

“Profitability should be back in Q2 (FY-18),” he told BusinessLine.

For the full fiscal, the company was expecting a 11-12 per cent revenue growth with a 20-25 per cent increase in profitability. Like-to-like store sales are expected to move up around 9 per cent. The company has also lined up an investment proposal of ₹100 crore for this fiscal that include setting up of five new Shoppers Stop stores and renovation of existing ones. Shoppers Stop’s omni-channel strategy is also expected to be rolled out soon.

Improving numbers

In fact, it is not just standalone numbers that the company is looking to work on.

Shoppers Stop is also working to bring its loss-making mixed retail format, ‘HyperCity’, back in black.

HyperCity – a 51 per cent subsidiary of Shoppers Stop – is yet to turn profitable in its over-a-decade-long journey with accumulated losses running to the tune of ₹400 crore.

The company has invested close to ₹800 crore in the format over these 11 years. It has 19 stores across 10 cities.

Shrikhande hopes that HyperCity will turn profitable (profit after tax) in FY-19, while he is hopeful that the format will be Ebitda (earnings before interest, tax, depreciation and amortisation) positive “in another four quarters” or by the end of this fiscal (FY-18).

“Initially, the large format store of HyperCity got a good response and we expected it to be a standard model. However, over the years we saw that people came to HyperCity primarily for monthly shopping needs. The day-to-day or emergency purchases were taken care of at the neighbourhood stores or kirana shops. So we decided to change the strategy, resize and reformat stores,” he explained.

Around 65 per cent of the business from HyperCity comes in from the food portfolio, with garments accounting for a 16-17 per cent. The rest comes in from other products.

While there are no immediate plans to add to HyperCity stores, the online roll-out of “hypercity.com” strategy is expected from the second-half of this fiscal.

Published on August 24, 2017

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