Organized retailers witnessed a good December quarter. The recovery in growth, lower commercial rentals, a rising stock market and positive consumer sentiment contributed to a higher top line for two of the bigger retail players – Pantaloon Retail and Shoppers Stop.
Thanks to the rising operational efficiencies in supply chain and cost management, both companies saw an improvement in profits. Pantaloon’s net profit grew 51% at Rs 50.7 crore while Shoppers Stop reported a 30-fold jump in its net profit at Rs 13.6 crore for the third quarter of FY10. A conscious effort to reduce interest costs further boosted margins.
At Rs 1,913 crore, Pantaloon’s topline grew 25%, aided by a higher share of lifestyle segment in total sales. With a 29% share in the lifestyle segment, the company expects to further increase the share of this high-margin segment in overall sales. The home retailing segment which was a bit of a laggard in terms of performance until the past few quarters has reported a YoY growth of 11.2% this quarter.
The company’s expansion plan is back on track with the local consumption-led growth story playing out. Pantaloon increased its geographic reach from 8.4 million sq feet to 10.4 million sq feet, which includes a larger number of Big Bazaar and Food Bazaar stores. The overall same store sales (SSS) growth is expected to be 8-9%, with lifestyle retailing growing in double digits.
Shoppers Stop was not far behind its counterpart. It reported a 13% increase in revenues in the December 2009 quarter. Though the conversion ratio fell by 1.8%, a significant increase in average ticket size as well as average sales price kept the sales register ticking. The company improved its operating margins on account of lower power cost and depreciation. Going ahead, the company expects to open about 18 more stores in a span of 30-36 months.
Once the full roll-out is in place, the company will see a significant improvement in its current SSS of 2.1%. It has plans to raise about Rs 250 crore through warrant issues to promoters and through a QIB offering. These funds could be utilized to raise its stake in Hypercity. The company will continue to increase the share of high-margin brands amongst its sales mix in the future.
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