Shoppers Stop scrip falls as growth disappoints

Hypercity breaks even at operating level; growth and profitability may improve in coming quarters

Though Shoppers Stop beat the Street’s estimates on profit growth in the September quarter, its shares fell 5.5 per cent on Wednesday. Analysts believe the consolidated net profit growth has come below estimates and so has the same-store sales growth in the department store business. Like many other physical retailers, Shoppers Stop, too, appears to have faced the heat from e-commerce companies in the festive season. So, even as net profit of the standalone business grew 60 per cent year-on-year to Rs 16 crore, the same-store sales growth of 11 per cent disappointed the Street. Analysts were expecting the retailer to report a same-store sales growth of 16 per cent during the festive season. Shoppers Stop has 72 stores Shoppers Stop across 33 cities in India. During the quarter, the company added three new Shoppers Stop stores in Ahmedabad, Pune and Visakhapatnam, 10 Crossword stores and one HomeStop store in Pune.

The disappointment was not just on the same-store sales growth. The company also missed the Street’s estimates on sales growth. The retailer’s top line at Rs 842 crore came below the Street’s estimated Rs 850 crore. The retailer’s operating margins during the quarter came in at 4.3 per cent, which was marginally below the estimated 4.7 per cent. However, the concern stems from the same-store sales growth, which analysts claim could have been impacted by online retailers. Analysts claim the firm is concerned about this, too, as it is increasingly becoming difficult for physical retailers to match the discounts offered by the e-commerce companies.

On the upside, the Hypercity’s losses continue to come down and during the September quarter it is breaking even. Even though the improvement is not in line with the Street’s estimates, Hypercity is no longer a cause of concern. Hypercity has 15 stores across India and sales at these stores grew six per cent year-on-year. Same-store sales growth during the quarter was 13.7 per cent. The company has said the operating margins of Hypercity grew 140 basis points. Hypercity has managed to break even at company level Ebitda. Analysts believe the consolidated numbers of Shoppers Stop have disappointed the Street. Even though other formats might fare well in coming quarters, the current quarter’s consolidated net profit growth has been a disappointment.