Company Update : Shoppers Stop Ltd By Motilal Oswal Financial Services Ltd
Muted growth; store additions ramp up
* Shoppers Stop’s (SHOP) standalone revenue inched up 2% YoY to INR10.2b (in line, 8% YoY in 3Q), driven by 3% LFL growth and 15 net store additions.
* Private Brands revenue was flat at INR1.5b, while Beauty segment revenue stood at INR2.1b (down 6% YoY excl. distribution, but up 3% YoY incl. distribution).
* In-tune revenue stood at INR540m (vs. INR630m QoQ, INR160m YoY), with presence expanding to 71 stores (vs. 59 QoQ) in 30 cities. The company plans to open 12 stores in 1QFY26.
* SHOP added five departmental stores (closed two), one Beauty store (closed one) and 15 In-tune stores (closed three). Respective store count stood at 112, 85 and 71 stores, taking the total to 299 (net addition of 15 stores QoQ).
* Gross profit was up 12% YoY at INR4.5b (6% beat) as gross margins expanded sharply by ~380bp YoY to 44.3% (350bp ahead), likely due to higher intake margins in private brands, lower write-offs and optimized markdowns.
* Employee cost increased 12% QoQ/21% YoY, while other expenses jumped ~21% YoY (18% higher).
* As a result, EBITDA inched up 3% YoY to INR1.7b (in line) as margins expanded ~15bp YoY to 16.6%. GM expansion was largely offset by higher costs and operating deleverage.
* Pre-Ind-AS EBITDA for the quarter was flat YoY at INR380m, with pre-Ind-AS margin at 3.3%.
* Depreciation and interest costs were up 11% QoQ/22% YoY.
* Reported PAT came in at INR25m (vs. estimated loss of INR86m), driven primarily by higher other income (29% ahead of est.).
* CFO (interest + leases) declined to INR247m (vs. INR1.1b in FY24), impacted by higher WC requirements and increase in lease payments. FY25 capex stood at INR1.7b, resulting in FCF outflow of INR1.4b (vs. INR0.6b outflow YoY).
Management commentary:
* Despite continued softness in demand and challenging macros, SHOP achieved 4% revenue growth with 3% LFL growth, marking the second consecutive quarter of LFL growth.
* The strategy of premiumization continues to yield strong results, with premium brands contributing 65% of total sales, growing 7% YoY.
* Despite a gradual demand recovery, management remains optimistic due to structural changes like premiumization, customer engagement campaigns, and India's rising affluence and evolving consumer aspirations.
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