Retail 24-01-29 الزيارات: 1293

Shoppers Stop revenue rises in Q3, buoyed by expansion and beauty focus

Retail 24-01-29 الزيارات: 1293

Shoppers Stop, the iconic Indian department store chain, recently released its Q3 results for the fiscal year 2023-24, painting a mixed picture. While the headline numbers showed a decline in net profit, there were also bright spots that suggest the company is on the right track with its strategic initiatives.It demonstrated resilience amidst a slowdown in discretionary spending, posting a 7 per cent YoY growth in quarterly sales for Q3FY24. This performance, along with strategic investments in expansion and a focus on the booming beauty segment, paints a cautiously optimistic picture for the company's future.

Revenue on the rise, profits drop

On the positive side, Shoppers Stop's revenue from operations for Q3 was Rs 1,240.88 crore, a 8.83 per cent year-over-year (YoY) growth. This uptick was primarily driven by a 6.63 per cent increase in standalone revenue and a 15.55 per cent jump in revenue from its subsidiary, Crossword Bookstores. Growth was particularly impressive considering the ongoing macroeconomic headwinds and inflationary pressures. It suggests that Shoppers Stop's strategic focus on smaller towns and cities, coupled with its renewed emphasis on the beauty segment, is paying dividends. Growth was driven primarily by the department stores segment, which saw a 6.63 per cent increase in sales. However, the Hypercity segment continued to struggle, with a 13.37 per cent decline in revenue. This highlights the need for Shoppers Stop to focus on revitalizing its Hypercity stores to unlock their full potential.

However, the positive revenue story was overshadowed by a sharp decline in profitability. Shoppers Stop's net profit for Q3 fell 41.27 per cent YoY to Rs 36.85 crore. This was significantly lower than analysts' expectations and raised concerns about the company's cost management and operating efficiency.

Financial performance (last 3 years)

Metric	FY22	FY23	FY24 (Q3)	YoY Change (Q3)
Sales	Rs 2,713 Cr	Rs 3,498 Cr	Rs 1,207 Cr	+7per cent
EBITDA	Rs 464 Cr	Rs 355 Cr	Rs 219 Cr	-8per cent
Net Profit	Rs 112 Cr	Rs 111 Cr	Rs -177 Cr	N/A
ROE	39.23per cent	-53.64per cent	N/A	N/A

Analysing its performance in the last three years indicates though revenue remained positive YoY it has fluctuated within a narrow range over the past three years. Profits has struggled, even showing a net loss in Q3FY24. This raises concerns about their cost structure and efficiency. The negative ROE further highlights the challenge in generating returns for shareholders.

Strategic growth pillars

So what has been the main catalyst for growth in Shoppers Stop’s business.

Beauty: This segment emerged as a clear winner, contributing 18 per cent to overall sales. Shopper Stop's focus on customer engagement and in-store experiences, including makeovers and masterclasses, has paid off. The opening of a state-of-the-art Beauty Store at Bengaluru Airport further strengthens the company's commitment to this segment.

Intune: This ‘Fashion for All’ format is proving successful, with four new store openings in Q3 and a planned expansion to 24 stores by FY24 end. The high full-price sell-thru (65 per cent) and strong acceptance for family shopping with a 27 per cent kidswear mix bode well for Intune's future.

Beauty Distribution: This business clocked Rs 39 crore in sales with an expanded network of over 334 doors. The addition of new brands like Armaf and Soda Makeup demonstrates Shopper Stop's commitment to diversifying its distribution portfolio.

Store Expansion: The company remains on track to meet its guided store expansion target for FY24, adding 13 stores in Q3 and 33 YTD. This includes department stores, beauty stores, Intune stores, and an airport store.

Challenges and outlook

Despite the positive performance, Shopper Stop faces challenges like intense competition from online retailers and changing consumer preferences. Shopper Stop faces intense competition from online retailers like Amazon and Myntra, offering wider selection and convenience. The company needs to continue innovating, focusing on personalized experiences, and strengthening its omnichannel presence to stay ahead of the curve.

Categorywise growth

Metric	Q3FY24	FY23	YoY Change
Sales	Rs 1,207 Cr	Rs 1,122 Cr	+7%
EBITDA	Rs 219 Cr	Rs 240 Cr	-8%
Beauty Segment	+10%	+8%	+2%
Private Brands Mix	13%	12%	+1%
Apparels Mix	19%	20%	-1%

The company's focus on strategic initiatives like beauty, Intune, and store expansion, along with its commitment to providing personalized experiences, can help it navigate the changing retail landscape and secure a brighter future. However, continued innovation and adaptation will be crucial for Shopper Stop to maintain its position as a leading retailer in the Indian market. Strengthening omnichannel presence by integrating online and offline experiences, leveraging loyalty programs, and providing personalized recommendations is one way ahead.

Meanwhile Shoppers Stop is actively pursuing a strategic expansion plan, targeting smaller towns with less competition. This strategy aims to tap into the growing demand for premium shopping experiences in these regions and broaden the company's customer base. Recognizing the booming beauty market, Shoppers Stop is significantly enhancing its offerings in this segment. The company is introducing a wider range of international and niche brands, creating dedicated beauty sections within stores, and offering personalised consultations. This focus on a high-growth segment is a positive move that could drive future revenue and profitability.

Changing consumer preferences is another challenge it faces today with consumers increasingly shifting towards value-driven purchases and experiential shopping. To combat it Shoppers Stop needs to expand private label offerings, introducing curated collections, and invest in interactive in-store experiences like workshops and events. Then there is the issue of high operational costs with high rentals and reliance on traditional brick-and-mortar stores that squeeze margins. Shoppers Stop can deal with it by optimizing store network, exploring smaller format stores, and diversifying into adjacent businesses. Shopper Stop is often associated with high-end products, potentially alienating cost-conscious shoppers. It needs to broaden product offerings to cater to diverse price points, promoting value deals and discounts, and emphasizing on affordability alongside quality.

Moreover their online presence lags behind competitors, hindering reach and engagement. It needs to invest in website and app revamp, enhancing mobile shopping experience, and leveraging social media platforms effectively.

While Shopper Stop faces significant challenges, it’s actively implementing strategies to address them. By focusing on omnichannel integration, value-driven offerings, operational efficiency, and a reimagined brand perception, the company can regain its footing and compete effectively in the evolving retail landscape.

Financial Highlights