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Space addition to be the key revenue driver…
Taking one step at a time…
• Shoppers Stop Ltd (SSL), a domestic retailer present across
various formats from departmental stores, speciality stores
(stationery, cosmetics, home furnishing and parenting products)
to hypermarkets operates through a network of 123 stores having
a total operational retail space of 3.4 million sq. ft
• SSL has grown ~6x from 21 stores in FY06 to 123 stores in FY11.
In terms of space covered, SSL has grown from 0.95 million sq ft
in FY06 to 3.4 million sq ft in FY11
• Due to a revival in the economy, SSL has witnessed an uptick in
the like to like (LTL) sales growth from the second half of FY10.
Going forward, we expect growth from space addition as well as
improving LTL sales growth
Going ahead
• The Indian retail sector is expected to grow from $353 billion to
$543 billion by 2014 (CAGR – 11%). The organised retail pie is
expected to grow at a much faster pace of 34% CAGR to $67
billion by 2014. SSL enjoys 2.5% share of the organised retail pie.
Going forward, even if we assume a slippage in the market share
due to entry of new players, SSL should be able to maintain ~25-
30% revenue growth on the back of the growing retail pie
• Over the next two years alone, SSL plans to add ~50% of the
current retail space to capitalise on the increasing domestic
consumption
• Incremental revenue from newly added stores and healthy LTL
sales growth from existing stores will aid strong revenue growth
• Due to a shift in business model from bought out merchandise to
consignment/revenue sharing, SSL should be able to bring down
inventory and, hence, reduce the working capital requirement
• We believe a turnaround of HyperCity, strategic business policies
(shift in merchandising model, revenue sharing with realtors) and
revival of specialty stores should aid EBITDA margin expansion
• SSL has consistently managed a debt/equity of =/<0.5. Going
forward, even if the business does not generate adequate cash
flows to fund expansion, SSL will be in a comfortable position to
leverage and fund its growth
Valuation
The robust space addition plans, improved operational efficiency and
focus on profitable growth augur well for SSL. We remain positive on the
long-term prospects of SSL bearing in mind healthy balance sheet,
experienced management and niche positioning of the brand.
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