ICICI Securitie's research report on Shoppers Stop
Revenue grew 5.3% YoY driven by a 3% YoY increase in the average selling price (ASP), implying a slip in volume growth and flat SSSG. Demand for the quarter was soft, impacted by fewer wedding days (14 days) and extended general election season. Average transaction value (ATV) grew 5% (to INR 4,890) with premium brands ontribution rising to 57% vs. 54% (YoY) and item per ticket (IPT) increasing 2%. Revenue from private label (12% contribution) stood flat while from beauty segment (17% contribution) grew 5% YoY. In the beauty segment, fragrance outperformed with 19% YoY sales growth (17% revenue share). In private label, overall contribution is at 12% with apparels 18% (1.1% lower on account of brands discontinuation and space rationalisation) driven by improved full price sell through for SS24. Revenue contribution from the loyalty program (First Citizen) stands at 80% of sales (67% repeat/13% new members). Added 2 department and 9 INTUNE stores.
Outlook
Shoppers Stop’s (SHOP) result was unimpressive. We understand that there is a general slowdown in the sector; however, SHOP’s accelerated underperformance in private labels (a key strategic pillar – over the last six quarters); - 12% YoY in revenue, is concerning. Key positives in the result include: (1) Relative outperformance in beauty (which continues to grow ahead of overall revenue). (2) On track scaling up of the value-retail franchise, Intune (at Zudio / Max equivalent price points). We believe, while incremental success for SHOP hinges on its fast-growth franchises – INTUNE / SSBeauty, it would be imperative for the company to revisit its departmental store business model, especially its private label strategy to solve for growth amidst rising competition in the industry. Downgrade to HOLD.
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