Shoppers Stop - Departmental Stores Lackluster; Hypercity Shines; Result Update Q3FY15 ::Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Shoppers Stop’s (SSL) Q3FY15 revenue came in slightly below our estimate, while PAT surpassed it. Like-to-like (LTL) sales growth was flattish YoY (0.8%) in departmental stores impacted by early festive season and onslaught of online retailers (spent ~INR3bn on advertising; 10x physical retailers put together). Other formats clocked better LTL with Hypercity and Crossword growing at 9% YoY each and Homestop at 7% YoY. Hypercity posted company level EBITDA breakeven for the second consecutive quarter with first ever company PAT breakeven (INR0.5mn). SSL will see 90bps EBITDA margin improvement from implementation of GST (due to offset on service tax on rent). The company will be one of the key beneficiaries of recovery in urban consumption.

Departmental stores LTL growth sluggish; Hypercity sturdy

SSL’s departmental stores reported 22 quarters lowest sales growth of 5.8% YoY. EBITDA margin dipped 35bps YoY as lease charges surged (45bps YoY). However, it reported highest ever transaction size (INR2,935) and average selling price (INR1,292). Hypercity reported 6.5% YoY LTL growth (4% in Q2FY15; declined 0.3% YoY in Q1FY15).

Q3FY15 conference call: Key takeaways

LTL sales grew 6-7% in January 2015. Online players are expected to be aggressive in discounting since they have strong private equity funding (likely to continue in FY16 as well). Online retailers caused more disruption in menswear and accessories segments. Total number of days of sales season has increased from 34 to 65-70 days annually. A few brands have decided not to sell products at more than 5-10% discount. Management expects to increase private label mix to 19% by FY16 and 22% by FY17. Of 15 Hypercity stores, 10 have achieved breakeven at the EBITDA level. Homestop’s current EBITDA margin of 6% to will jump to 8% in 2 years.

LINK
https://www.edelweiss.in/research/Shoppers-Stop--Departmental-Stores-Lackluster;-Hypercity-Shines;-Result-Update-Q3FY15/28211.html