Hit hard by second wave, Shoppers Stop expects a recovery in Q2FY22

Shoppers Stop posted its best quarterly result in a year in the March quarter as COVID cases subsided and footfalls improved in its stores.

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Though department store chain Shoppers Stop reported sales recovery in the fourth quarter (Q4) of financial year 2021, the second wave of COVID-19 has again derailed its progress. The company declared its result on May 24.

The company’s footfalls had dropped below 5 percent, compared to the pre-

COVID levels in Q1FY21 due to the nationwide lockdown, but recovered to 83 percent in the fourth quarter. As the second wave of the pandemic rages, the company again witnessed a drop in footfalls as well as sales.

“We imagined that we are done with the crisis but it is not done with us.......as I speak to you, a large part of India is still under lockdown,” said Venugopal Nair, CEO and MD, Shoppers Stop, addressing investors at a post-earnings call.

Nair added that the vaccination drive is a silver lining and the company expects recovery from the second quarter of the current fiscal onwards.

“We expect recovery to start from Q2 and progressively get better in Q3 and Q4. This year, Diwali and Dussehra are early, so this would also help in bringing back the business on track,” he said.

However, even as the company’s offline operations suffer, it is betting on e-commerce to tide over the difficult times.

The omnichannel focus

Backed by various initiatives taken by the company, Shoppers Stop has witnessed its sales from e-commerce grow by three times in the last year and the channel contributes over 6.2 percent (FY21) to its overall sales as compared to 1.5 percent in FY20.

“The last year has seen a paradigm shift in how we operate. The year before, many would not have anticipated the role of omnichannels in our business,” said Nair, talking about the growth in the channel.

Nair informed that the company’s e-commerce platforms witness 300,000 daily traffic, on an average, while the average order value on digital stands at Rs 2,588. The company has also made available over 100 exclusive brands, which are not available in its offline stores, on its e-commerce channels.

At present, about 80 percent of its offline catalogue is available on e-commerce, and, going ahead, the company plans to make available 90 percent of its range on the platform, Nair said.

Shoppers Stops’s tie-up with Amazon remains instrumental in its omnichannel play, Nair informed and the marketplace currently contributes about 20 percent to its online sales. Out of its 84 department stores, about 50 are tied up with Amazon.

Going ahead, Nair said the private brand will continue to play an important part in the company’s omnichannel strategy and it plans to launch more products under its own label. Last quarter, the company launched leisure and sleepwear brands Altlife and Insense, respectively.

The company also plans to launch about 20 small and large format stores.

Best quarterly result in FY21

Shoppers Stop posted its best quarterly result in the March quarter as COVID cases subsided and footfalls improved in stores. Its sales recovered to 90 percent of the Q4FY20 levels.

The company narrowed down its losses to Rs 24 crore in Q4 as compared to Rs 127 crore in Q4 FY20. Its net sales declined 6.1 percent in Q4 to Rs 680.46 crore from Rs 724.38 crore in Q4 of FY20.

The stock, however, was downgraded by ICICI Securities from ‘buy’ to ‘add’.

“Factoring in the impact of the recent lockdown owing to the COVID resurgence, we reduce our EBITDA estimate for FY22E, though we maintain it for FY23E. We downgrade the stock to ‘add’ from ‘buy’, with a DCF-based target price unchanged at Rs235 per share, given the likely gradual recovery in discretionary spending and reasonable valuation at 9.4xFY23E EV/E,” ICICI Securities said in its report.