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Shopper’s Stop says it’ll sustain growth in Q4

Shopper’s Stop hopes to touch double-digit like-to-like sales growth by Q4FY10 and is positive that it will maintain this momentum. A majority of retailers are witnessing improved footfalls

Shopper’s Stop Ltd has said that it is confident on sustaining its growth achieved during the third quarter of FY10 over the next quarter. It also hopes that its like-for-like sales will grow into double digits in Q4FY10.

“We are confident that we can sustain the same numbers in the next quarter also. In Q4FY10, we hope to see an increase in like-to-like sales growth which has almost touched double digits in Q3FY10. We will definitely be able to maintain earnings before interest, taxes, depreciation, and amortisation (EBITDA) between 7%-8.5%,” said Govind Shrikhande, president and chief executive officer of Shopper’s Stop.

During the third quarter to end-December, the retailer reported a net profit of Rs13.60 crore compared to a net loss of Rs3.10 crore in the same period a year ago. Its total revenues during the third quarter also rose to Rs421.10 crore on increase in average selling price and space additions.

During Q3FY10, the company registered EBITDA of Rs30.20 crore, a growth of 210% on a year- on-year basis, due to the combination of lowered operating costs, steady profit margins and increase in sales. 

For the past four years, the company claims that the third quarter has always reported good sales numbers due to the marriage and festival season. “This time also, our sales are up by 15% on a quarter-on-quarter basis,” said Mr Shrikhande.

Shopper’s Stop also reduced its electricity consumption by 14%. The company shifted to Tata Power from Reliance Infrastructure, which helped it to reduce electricity costs. It has also cut down on advertising. Last year, it had to spend around Rs14 crore on a logo change. The company has also cut down usage of office space by 15%.

A majority of retailers are witnessing improved footfalls and better conversion on the back of improved consumer sentiment. Like-to-like sales have seen strong growth for some large retailers. However, Shopper’s Stop’s like-to-like sales have been under pressure for the past two quarters.

“We expect the company’s top-line to grow by 19% in FY10 and operating margin to be at about 6.5%-6.8% in FY11. Shopper’s Stop has been able to turn around its operations over the past two quarters and is expected to deliver steady performance going forward,” said KR Choksey Shares and Securities Pvt Ltd, in a report.

Profitability of many retailers is likely to sustain due to the revival in fashion retailing and rebound in home retailing sales, which are poised to improve on account of revival in the real-estate sector. Expansion plans are back on track, at a slower pace and at strategic locations.

Shopper’s Stop has been able to hold the top-line steady, despite decline in conversion ratio and muted customer entry. However, the key concern still is de-growth in like-to-like sales for stores, indicating low brand loyalty, KR Choksey added.
 

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