Faced with declining revenue growth and slow sales, Govind Shrikhande, MD, Shoppers Stop Ltd, is giving six more months for things to turnaround at the chain of department stores he runs.
“We’re working on increasing the number of stores, changing the positioning of our private brands and focussing on Web sales. We’ll see the benefits start to pay off in the September quarter next fiscal.”
For the December 2017 quarter, Shoppers Stop reported net profit of ₹16.34 crore, down from the ₹19-crore the chain had reported in the year-ago period.
Through that 12-month period, the company jettisoned the loss-making and debt-heavy premium grocery retail chain Hypercity, selling it to Kishore Biyani’s Future Retail for ₹655 crore. It exited its airport retail joint venture in Nuance and ended the Timezone JV, writing down lost values in these investments.
Tough year for apparels
In its primary apparels business as well, Shoppers Stop has had a tough year. Sales of its private labels – including brands like Kashish, Haute Curry, Vettorio Fratini – have fallen 22 per cent year-on-year for the quarter.
Fewer customers have been walking into Shoppers Stop department stores, with footfalls decreasing nearly 5 per cent in the October-December period mostly due to mall closures or store renovations.
On the bright side, Shrikhande points to the growing contribution of non-apparel categories – such as watches, cosmetics, personal accessories – to the topline. “In November, the government lowered the GST on non-apparel categories from 28 to 18 per cent. We’re seeing faster growth here since then.” Over the three month period, the company opened four new MAC stores, four more Clinique stores, two Bobbi Brown stands and two Smashbox (part of Estee Lauder) stands.
The specialty beauty segment will continue to open stores at the same clip; 12 more in the next fiscal, Shrikhande said. Crossword, the national bookstore chain that Shoppers Stop operates, is struggling with the online onslaught.
“We’ve turned EBITDA-positive on Crossword and expect to be profitable in 15 months.”
The sale of its non-core businesses through last year has lessened the debt on the balance sheet. In Q3, debt came down by ₹299 crore, more than halving over the quarter to ₹237 crore.
In the next three months, Shrikhande expects this to fall further to ₹40 crore, with cash of ₹179 crore being injected by Amazon’s investment arm. Next fiscal we will be debt-free, he added.
Shrikhande says Shoppers Stop is ready to put a tough year behind it.
“We’re focusing on Web sales. This used to be 0.8 per cent of revenue for us, this year, we will meet our 2 per cent target. We now have the facility to deliver to our online shoppers from our nearest stores.
“In two weeks, we will be debuting the click-and-collect facility in Mumbai stores, where customers can buy online and pick up an item at the store. And then next fiscal, we’re launching five more department stores, three of which will be in new cities such as Kozhikode, Guwhati and Bhubaneswar. This will take the total to 87.”