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Last Updated : May 03, 2013 10:12 AM IST | Source: Moneycontrol.com

Consumers in no mood to splurge, says Shoppers Stop MD

Retailer Shoppers Stop will reduce the store size of its Crossword bookstore chain and now focus more on stationery and toys as sale of books and music and movie cds and dvds slows. It will also review its non-profitable stores.

 
 
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Nachiket Kelkar
moneycontrol.com


Department store operator Shoppers Stop plans to "tighten" its Crossword store format, by reducing store size and focusing more on toys and stationery products, rather than books and music and movies cds and dvds, categories where sales have fallen.


It is also conducting a review of its non-profitable stores to decide if they can be turned around or shut, Govind Shrikhande, MD, told moneycontrol.com on Thursday.


Physical book sales have declined in recent years as people shift reading habits to e-books, tablets and computers, although new launches, especially best sellers, still find takers, he said. But here too the company is facing stiff competition from online retailers, who are quick to offer discounts, even on new book launches, to boost volumes.


Sales of movies and music cds and dvds, meanwhile, are in a continuous decline as customers shift to other media forms like online downloads, and movies on demand on platforms like Direct-to-Home satellite television. This has hurt sales of retailers like Crossword and some of its rivals, who sell cds and dvds.


"We have strengthened our toys and stationery offering. Toys, stationery are growing at almost 20-25 percent like-to-like. That helps volumes, margins and the overall profitability of the format. So going ahead in Crossword, we are working on three plans. One is strengthening the offering in toys and stationery, number two, tightening the store size and number three overall look at profitable stores. I have undertaken a complete review of non-profitable stores so that it remains a profitable chain," he said.


Toys and stationery now account for more than 20 percent of Crossword's total sales. There are currently 45 company managed Crossword outlets and 40 franchisees. Out of the total 85 stores across India, around 7-8 stores could be non-performing, according to Shrikhande.


The store size is being reduced to 2,000-2,500 square feet from 3,000-3,500 square feet earlier. 


CAPEX PLAN


Shoppers Stop operates department stores, cosmetic stores like Clinique and Estee Lauder, Home Stop (furniture and accessories) and also owns the HyperCity food and grocery chain. It plans to spend Rs 130-150 crore rupees in FY2014 to expand its retail footprint.


The company has already opened 3 Shoppers Stop and 1 Home Stop outlet last month. The plan for the rest of the year is to open 5 more Shoppers Stops, 2 HyperCity stores, 1 Home Stop and 10 Specialty outlets.


Shoppers Stop already has generated Rs 110 crore of cash internally, so funding the expansion would not be an issue much, Shrikhande said.


Shoppers Stop currently has a total debt of Rs 480 crore (Rs 330 crore standalone and Rs 150 crore on HyperCity's books). Its consolidated debt-equity ratio stands at 1:1 and standalone debt-equity is 0.6:1, he said.


Q4 RESULTS & OUTLOOK


Shoppers Stop expects sales across formats to rise 7-8 percent on a like-to-like basis in the current financial year, driven by strong growth in apparel business. Like-to-like or same-store sales measure sales at stores that have been open for at least one year.


There is also double-digit growth in beauty and cosmetics, Shrikhande said.


The company's fourth quarter standalone net profit rose 10 percent year-on-year to Rs 15.2 crore, while retail turnover last quarter was up 15 percent to near Rs 715 crore. Consolidated net profit (includes HyperCity and other formats) rose to Rs 1.22 crore from Rs 96 lakh and consolidated retail turnover gained 13 percent to Rs 944 crore.


Like-to-like sales at its Shoppers Stop department stores were up 10 percent in Jan-March.


Shrikhande says, sales have been generally good across categories and there are no signs of a huge sales slowdown. However, he admits the mood among shoppers is unlikely to be buoyant and consumers are not in a "splurge" mood given the overall economic slowdown and negative news flow in recent months.


"Economic growth has slowed...There is lot of negative news all around. So in such a situation you don't expect a customer to go all out and splurge. Marriage season does help, and it did help in Q3, Q4 to some extent and marriage season is starting in May, so should help in some increase in spending. So I would say spend was better-off in the second half and should remain so at that cautious level this year," he said.


He also said that issues like high power charges and frequent power cuts in many places (which in turn increases expenses on diesel generators) is a big challenge and has increased the company's expenses. And that leads to slower ramp up of new stores, he added.


This year, expect more promotional activities being rolled out in stores, especially Shoppers Stop, to drive sales. For instance, it has kickstarted a new ad campaign with a new brand ambassador for one of its exclusive brands Kashish. It also recently had a bags and sunglasses fest. There will also be new product launches.


Despite the increased promotions, Shrikhande hopes to maintain total advertising spends at around 3.5 percent of total sales.


The excise duty cut announced in the Union Budget will also help in reducing apparel prices, he says. Shoppers Stop has already cut prices to some extent in its exclusive brands and also expects there will be price cuts in national brands around May-end to June.


Shoppers Stop shares closed up 1.3 percent at Rs 377.60 on NSE.


nachiket.kelkar@network18online.com



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First Published on May 2, 2013 05:43 pm
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