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Retail
Still to feel the impact of inflation on consumption
Domestic retailers are yet to feel the pinch of high inflation. So far,
while customers are taking note of the prevalent inflationary
situation demand has not yet been largely impacted. Though a
marginal impact might be seen on volumes, price hikes taken to
mitigate the impact of higher input costs will aid revenue growth in
the April–June quarter.
Revenue growth to continue, albeit at a lower pace
We expect topline growth of 20% for our retail universe backed by a
combination of factors like space addition, promotional offers, price
hikes and revival in same store sales growth (SSSG). During the
quarter, Pantaloon Retail had a month long promotional offer – ’The
Great Indian Shopping Festival’, which will boost topline growth.
Shoppers Stop also awarded triple reward points to its loyalty club
members for all purchases during April 30-May 15, 2011. For Titan
Industries, we expect overall growth to be subdued (as compared to
FY11) due to the higher base effect.
Margins to remain flattish sequentially
We expect operating margins for Pantaloon Retail and Shoppers
Stop to remain flattish on a sequential basis. Retailers have taken a
price hike in the range of 10-15% in the apparel segment to make up
for the increase in raw material prices and also to partly set off the
impact of increased excise duty on branded apparel. We expect
Titan to return to ~9% EBITDA margin levels due to inventory gains
due to lower cost diamond inventory and also lower sales of low
end watches (Sonata) as that segment was highly affected by
inflation.
While space addition continues, revenue psf is likely to decline
The organised domestic retailers seem to be on track with their
space addition plans. However, the focus still remains on profitable
growth. During the April–June quarter we expect Pantaloon Retail to
add 0.82 million sq ft of space taking the operational retail space to
15.67 million sq ft. Shoppers Stop has also announced addition of
13 stores across various formats this quarter. We expect its total
operational space to increase from 3.37 million sq ft in March 2011
to 3.58 million sq ft (addition of 0.21 million sq ft) at the end of this
quarter. We expect a 5% YoY dip in revenue per sq ft (psf) for both
Pantaloon Retail and Shoppers Stop as newer stores will take some
time to stabilise. We expect Pantaloon Retail to report a revenue per
sq ft of | 1,799 (| 1,875 – June 2010) and Shoppers Stop to report a
revenue per sq ft of | 1,751 (| 1,842 – June 2010).
Company specific view
Company Remarks
Pantaloon
Retail
We expect 13% sales growth to | 2,818.8 crore led by space addition, ~15% price hike
taken in April to deal with rising input prices & also a revival in SSSG. We expect
EBITDA margin to be maintained at 8.7%. While PAT is likely to remain flat QoQ it will
look suppressed YoY due to higher other income in Q4FY10
Shoppers
Stop
We expect a 72.9% YoY increase in revenues on the back of 0.8 mn sq ft of space
addition (YoY) and increased average selling price. We expect the operating margin to
decline 160 bps YoY to 5.6%. However, sequentially we expect an improvement (60
bps) in operating margin led by improved HyperCity performance
Titan
Industries
We expect subdued growth in the watches & jewellery segment due to higher base
effect. We forecast 19% YoY topline growth to | 1,493 crore led by 12% and 23%
growth in watches & jewellery segment, respectively. We expect Titan to return to
~9% operating margin backed by lower share of low-end watches (Sonata)
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Retail
Still to feel the impact of inflation on consumption
Domestic retailers are yet to feel the pinch of high inflation. So far,
while customers are taking note of the prevalent inflationary
situation demand has not yet been largely impacted. Though a
marginal impact might be seen on volumes, price hikes taken to
mitigate the impact of higher input costs will aid revenue growth in
the April–June quarter.
Revenue growth to continue, albeit at a lower pace
We expect topline growth of 20% for our retail universe backed by a
combination of factors like space addition, promotional offers, price
hikes and revival in same store sales growth (SSSG). During the
quarter, Pantaloon Retail had a month long promotional offer – ’The
Great Indian Shopping Festival’, which will boost topline growth.
Shoppers Stop also awarded triple reward points to its loyalty club
members for all purchases during April 30-May 15, 2011. For Titan
Industries, we expect overall growth to be subdued (as compared to
FY11) due to the higher base effect.
Margins to remain flattish sequentially
We expect operating margins for Pantaloon Retail and Shoppers
Stop to remain flattish on a sequential basis. Retailers have taken a
price hike in the range of 10-15% in the apparel segment to make up
for the increase in raw material prices and also to partly set off the
impact of increased excise duty on branded apparel. We expect
Titan to return to ~9% EBITDA margin levels due to inventory gains
due to lower cost diamond inventory and also lower sales of low
end watches (Sonata) as that segment was highly affected by
inflation.
While space addition continues, revenue psf is likely to decline
The organised domestic retailers seem to be on track with their
space addition plans. However, the focus still remains on profitable
growth. During the April–June quarter we expect Pantaloon Retail to
add 0.82 million sq ft of space taking the operational retail space to
15.67 million sq ft. Shoppers Stop has also announced addition of
13 stores across various formats this quarter. We expect its total
operational space to increase from 3.37 million sq ft in March 2011
to 3.58 million sq ft (addition of 0.21 million sq ft) at the end of this
quarter. We expect a 5% YoY dip in revenue per sq ft (psf) for both
Pantaloon Retail and Shoppers Stop as newer stores will take some
time to stabilise. We expect Pantaloon Retail to report a revenue per
sq ft of | 1,799 (| 1,875 – June 2010) and Shoppers Stop to report a
revenue per sq ft of | 1,751 (| 1,842 – June 2010).
Company specific view
Company Remarks
Pantaloon
Retail
We expect 13% sales growth to | 2,818.8 crore led by space addition, ~15% price hike
taken in April to deal with rising input prices & also a revival in SSSG. We expect
EBITDA margin to be maintained at 8.7%. While PAT is likely to remain flat QoQ it will
look suppressed YoY due to higher other income in Q4FY10
Shoppers
Stop
We expect a 72.9% YoY increase in revenues on the back of 0.8 mn sq ft of space
addition (YoY) and increased average selling price. We expect the operating margin to
decline 160 bps YoY to 5.6%. However, sequentially we expect an improvement (60
bps) in operating margin led by improved HyperCity performance
Titan
Industries
We expect subdued growth in the watches & jewellery segment due to higher base
effect. We forecast 19% YoY topline growth to | 1,493 crore led by 12% and 23%
growth in watches & jewellery segment, respectively. We expect Titan to return to
~9% operating margin backed by lower share of low-end watches (Sonata)
Source: Company, ICICIdirect.com Research
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