After a slow start, the country’s first departmental store, Shopper’s Stop, is slowly catching up. Though Pantaloon has left it far behind in terms of geographic reach, the Shopper’s Stop stock gave investors a return of 68% over the last 10 months, better than Pantaloon, which posted a return of 49% during the period.
With 1.8 million sq feet of space, Shoppers Stop is the country’s largest department store chain. This is small compared to Pantaloon’s 13 million sq feet space.
Unlike Pantaloons, Shopper’s Stop has concentrated on providing a high-end shopping experience, which has helped build a strong 1.3-million loyal customer base that contributes around 74% to its sales. That is why Shopper’s Stop commands a premium valuation at 4.2x its price to book value (P/BV) against Pantaloon’s 2.8x P/BV.
Though the company reported a loss in the previous quarters, the going may be better with a rebound in consumer confidence and increase in disposable income. With the ongoing festive season, earnings are bound to improve, starting from the September 2009 quarter. Even the decline in same store sales (SSS) has been contained.
The YoY SSS decline in August was a small 2.5% against the 7.5% decline in the June 2009 quarter.
Losses from other formats such as Crossword, Mothercare and HomeStop have also come down. As most of them are nearing the break-even levels, they would start contributing to the earnings of the company in the next few quarters.
During the realty slowdown, Shopper’s Stop has been able to renegotiate new properties at lower rentals, thus lowering the burden on EBIDTA by around 50-100 basis points.
The company has also changed its depreciation policy of writing down its assets over a period of 5-10 years. This move would reduce its annual depreciation allowance by Rs 24 crores and this may help its bottom-line.
Rationalisation of staff costs and expansion plans on track is also bound to help.
Have you read?:
- Shoppers Stop Plans Rs 400 Crore Expansion
- Paris Hilton Bags At Shoppers Stop Next Month
- Shoppers Stop eyes around Rs 1,000 crore revenues from Hypercity
- Shopper’s Stop will invest Rs 350 cr in 5 yrs
- Future Group, Hypercity, Spencers, Shoppers Stop happy with annual sales: Retailers
- Shopper’s Stop Raises Rs 130-Crore Through A QIP
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