Shoppers Stop – 2QFY2011 Result Update -Angel Broking

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Shoppers Stop – 2QFY2011 Result Update

Angel Broking maintains a Neutral on Shoppers Stop.

For 2QFY2011, Shoppers Stop (SSL) reported a disappointing set of results, on

account of high losses in HyperCity. The company’s top line grew by 59% yoy to

`674cr, backed by robust growth in same-store sales (SSS) and volume growth.

EBITDA margin came in at 3.4%, consequently PAT increased by merely 11% to

`10cr. We maintain our Neutral view on the stock.

Higher sales growth coupled with lower rental helps increase profit: During the

quarter, SSL reported 59% yoy growth in net sales to `674cr. OPM declined by

140bp yoy to 3.4%. EBITDA during the quarter grew by 13% yoy to `22cr from

`20cr in 2QFY2010. Higher depreciation on account of opening of new stores

coupled with higher interest outflow led to 11% yoy growth in PAT.

Outlook and valuation: We are bullish on the long-term growth prospects of the

retail sector. Considering the revival in demand for lifestyle category goods, SSL’s

store roll-out plans and the continuing cost-rationalisation measures, we remain

positive on the company’s growth prospects. At `707, the stock is trading at 34.4x

its FY2012E fully diluted earnings and at 5.5x its FY2012E P/BV. Considering

SSL’s current valuations, we maintain our Neutral rating on the stock.

Key business highlights

On a consolidated basis, SSL reported 59% yoy growth in net sales to `398cr.

During the quarter, the company witnessed 13% growth in SSS, with stores over

five years of operations witnessing an 8% increase and those with less than five

years growing by 25%. On an overall basis, the transaction size improved by 6%

and the average selling price grew by 3.5%. Customer entry during the quarter

improved by 30%.

In 2QFY2011, SSL added four outlets of its Shoppers Stop departmental store.

With these additions, total retail space expanded to 2.23m sq. ft. across 33

Shoppers Stop stores, 4 Home Stops stores, 21 Mother Care stores, 12 MAC and

Clinique stores, 3 Estee Lauders stores, 33 Crossword stores, 1 Arcelia store and

2 airport stores.

HyperCity update

During the quarter, HyperCity’s total sales grew by 94%, while SSS grew by 25%.

Sales per sq. ft. stood at `1,803. Total customer footfall increased by 120%. Total

net sales stood at `138cr, with EBITDA loss of `5.7cr and net loss of `13.8cr.

Outlook and valuation

We are bullish on the long-term growth prospects of the retail sector. We expect

organised retail, especially lifestyle retailing, to continue posting a decent

performance going ahead. Considering SSL’s store roll-out plans, improved SSS

growth expectation and the continuing cost rationalisation measures, we remain

positive on the company’s growth prospects. At `707, the stock is trading at 34.4x

its FY2012E fully diluted earnings and at 5.5x its FY2012E P/BV. Considering SSL’s

current valuations, we maintain our Neutral rating on the stock.