Ladies and gentlemen, good day, welcome to the Shoppers Stop Limited FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I now hand the conference over to Ms. Mamta Samat from Perfect Relations Private Limited. Thank you, and over to you.
Thank you, Rohan. Good morning, and thank you for joining us on the Shoppers FY 2023 Earnings Conference Call. Today we have with us the senior management represented by Mr. Venu Nair, Customer Care Associate, Managing Director and Chief Executive Officer, Mr. Karunakaran Mohanasundaram, Customer Care Associate, Chief Financial Officer, and Mr. Jaiprakash Maheshwari, Customer Care Associate, Vice President, Finance and Accounts.
We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I must remind you that the discussion in today's earnings call may include certain forward-looking statements and must be viewed therefore in conjunction with the risks that the company faces. Please restrict your questions to the quarter and yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. I would now request Mr. Venu Nair for the opening remarks. Thank you, and o ver to you, sir.
Thank you, Mamta and Rohan. Good morning, friends. Thanks for joining us today to discuss our financial results for the fourth FY 2023. Along with me, I have Karuna, our CFO, and Jaiprakash, our FP&A lead. It may sound as a cliché, but we have achieved our highest quarterly sales for 8 consecutive periods now. Our other KPIs such as gross margins, EBITDA and PBT have significantly improved versus last year. Our Q4 and full year results, investor deck and press release have been shared on our website and the stock exchanges. I'm sure you would have read this. Let me now talk about the Q4 performance and the way ahead. I will also brief on the full year's numbers as we go along.
In these slightly muted times, we have been growing and achieved our highest sales for the quarter. As I had said in my last quarterly speech, we witnessed moderation post-Diwali. December and January were better. The Indian economy is showing signs of resilience while the global uncertainty remains. Geographically, all the leading indicators are pointing towards sustained momentum in economic activity in the country. However, higher inflation in advanced economies and tightening financial conditions in India, has had some impact on demand, particularly in tier two and tier three cities.
Last year during these times we were witnessing pent-up demand in March and April, and that has been considerably moderated this year. This had impacted our sales in February and March. However, we have seen green shoots in April, and I will speak about that in the way forward. With that background, we had robust sales growth of 32%. Our gross margin improved by 120 basis points. We posted EBITDA of INR 55 crores against a loss of INR 13 crores for the similar period last year. Our EBITDA also included other income, which has been marginally higher against last year.
This is due to the increase in the income from our loyalty program and the income we received from banks and vendor landing, sharing of our physical space. Income we received from our loyalty members is the highest in the history of the company in this quarter. Elaborating on the other KPIs, our average transaction value, or ATV, grew by 6% versus last year due to the mix of purchasing bridge to luxury products. I must flag that this is now the 12th quarter of consecutive growth in our ATV year-on-year.
Our ASP grew by 7% and the ASP growth is driven by product mix and not just price. We are conscious of premiumization which is in line with our strategy. Our items per FY 2022 remain flat. Just to remind you, March 22 did have pent-up sales post-COVID. Our overall count of bills increased by 27% versus last year. These significant improvements in KPIs indicate the strong undercurrent of the business and our ability to deliver results for nine consecutive quarters now. Let me share some details on the operational costs.
On a like-to-like basis, our costs have increased by 13%. The biggest increase is from investments in marketing, which grew by 41% both online and offline. On an organic basis, in addition to marketing, other costs such as rent, electricity has increased due to the opening of newer stores in Q3 and Q4. These are the investments that we make to deliver a sustained growth. Having said this, we have been extremely prudent on the discretionary spend and we did not spend unless there is a marked return. With the strong sales and tight control on costs during the quarter, we reported an EBITDA of INR 55 crores, as mentioned before.
On GAAP financials, our EBITDA grew by 86%. During the quarter, we opened two new departmental stores and one beauty store. As always, due to regulatory approvals, opening of stores has got delayed, and we have now opened one in the month of April, and we will have a second one in the first week of May. For the full year, we reported revenue of INR 5,066 crore, an increase of 63% over last year. Our private brand reported sales of INR 723 crore, an increase of 70%, and beauty an increase of 54%. For the full year, we reported EBITDA of INR 324 crore, PBT of INR 178 crore, and a profit after tax of INR 121 crore.
I'm happy to say that these are the highest numbers on all the parameters in the history of Shoppers Stop. From operations, I will now move on to the performance of each of our strategic pillars. The first strategic pillar of First Citizen. It would be fair to say that the success of Shoppers Stop has always been scripted by our First Citizen loyal customers. It's no different this time too. The demand for personalized retail experiences is still growing. Our customers now expect fashion and beauty retail businesses to accommodate their preferences, with brands turning to technology to reshape their customer experience.
At Shoppers Stop, we have been dialing up the personal experiences and personalization. We have always been a pioneer in offering innovative experiences and personalization. Due to this sustained and multiple engagement with our customers, our loyalty contribution has been sustained at 75% and above. For the fourth quarter, our loyal members contributed to 78% of our total business. Specifically on our First Citizen Black Card, our average bill value has doubled from the normal customers, and the total shopping is three times that of a normal member. Our base increase on Black Card has been consistently in double digits, and that sustained this quarter as well.
Shoppers Stop has believed in creating value for its customers. A calendar of customer engagement activities for our First Citizen Black Card members, which included adventure and sports, like golfing Sundays, sailing Sundays, cocktail mixing, farm to fork experience, grape stomp, wine carnival, and shopping extravaganzas with exclusive shopping hours for Gudi Padwa and Ugadi, have all been special occasions created for our Black Card customers. We have, apart from the Black Card and the growth in our Black Card customers, the other segment that we specifically targeted in the last quarter was inactive customers or inactive loyal members who haven't visited us for a while.
I'm delighted to say that we had a 30% redemption on the inactive member base of over 300,000 customers that we had targeted, and this increased the revenue by 3% for the quarter. Moving on to the second strategic pillar of private brands. Our private brands grew by 35% during the quarter. We achieved INR 158 crores in revenue for the quarter and INR 723 crores for the full year. This is the highest annual sales that we have achieved in the history of Shoppers Stop. For year-to-date, we grew by 70% on private brands, and we've had a growth of circa 30% in all the 4 quarters during the year.
Our private brand share has been 13.5% for the quarter, an increase of 30 basis FY 2022. For the full year, it is 14.3%, an increase of 60 basis points. On share of a balance for the quarter, it is at 20%, and for the year, full year, it is slightly higher at 20.3%. During the quarter, we launched a new private brand called U R You, a brand focused on the plus size. This has been received extremely well, we are now, after the initial pilot, expanding it to over 50 stores.
Our stock brand is the single largest brand in the business and crossed 200 crores, and second largest Life crossed 100 crores during the year. Our newly launched private brand, Bandeya, recorded robust sales and was one of the best performing brands in the menswear category. Moving to the third pillar of beauty, and beauty had one of good quarters. During the quarter, our beauty sales registered 197 growth, a growth of 29%. Again, this is the highest sales for beauty in the quarter.
Our overall mix of beauty sustained at 17%. Hyper-personalization is critical for beauty. We had endeavored to make a difference of the omni-channel experience that we are able to offer because of the large physical presence that we have in our stores. We did 112,000 makeovers during the quarter, which helped us to increase the sales by INR 40 crores. As you would appreciate, makeovers is a very personal engagement with our customers, and this is something which we are dialing up consistently. For the year, we did more than 400,000 makeovers, and this is helping us to increase the loyalty of our beauty customers.
We launched 40 new SKUs in our private brand, Arcelia, and the growth of Arcelia is very encouraging. On our distribution business, we added three international businesses into our exclusive range of brands that we offer into the country. We now have 15 premium exclusive brands through our distribution business, and we have now tied up with over 10 key retailers, and we expect to add another 10 during this coming quarter, growing our distribution business robustly. Finally, we opened one beauty store during the quarter, and we have also now launched our exclusive beauty site, SSBeauty, ssbeauty.in, as well as the app called SSBeauty, which has been launched for our First Citizen.
Moving to our next pillar of omni-channel. We are one of the first companies to invest in omni-channel, and we have continuously improved on the customer experience. As I just mentioned, the newest addition into that channel is SSBeauty, and it is a channel specific for our beauty customers in complementing the SSBeauty standalone stores that we have. Our growth through the digital sales, through the digital channels continued to be robust and registered double digit increase. As I have mentioned in the past, we have moved away from measuring digital sales separately as we are an omni-channel retailer, and what we looked at is the complete experience that we offer to our customers.
Moving on to expansion and working capital. Expansion is a key focus for us and a big growth engine. For the third consecutive year, we have now opened more than 10 department stores. To be precise, we opened 11 department stores and 11 beauty stores. Of the above 11, three are in metro cities and eight in tier one, tier two cities. Apart from the new stores, we also renovated 11 department stores. The CapEx for all of this has been funded by internal accruals. We have been expanding and growing in the cities where we do not have any store presence. The growth of new customers has been very healthy in these places.
On working capital, our inventory increased from INR 363 crores to INR 530 crores, an increase of INR 167 crores. Let me elaborate on the reasons for this. First, we are in a high growth period and comparing against a COVID impacted period. The periods are not strictly comparable. We added 11 FY 2023 and another FY 2022. Increase in stores would automatically increase the inventory, as you would know. We are growing our private brand business and that requires a higher inventory. Third, we have now onboarded beauty brands and for some of the beauty brands we have moved to an outright model wh ich helps us with higher margins.
Last, some of the brands which have been converted to outright in fashion as well, and that's again margin accretive, and we are factoring in the carrying cost as we do that. All of this is visible in the improvement in margins that we have seen. To conclude, we will follow the three Cs for the way forward framework: consistency, customer centricity and capital allocation. On consistency, we have been consistently delivering year-on-year growth across all KPIs for the last eight quarters on revenue, PBT and margins. Our strategic business pillars have given consistent growth, and we will continue to focus on that.
On the second C of customer centricity. Our customer is at the center of everything [audio distortion]. Needless to say, due to this, we have consistently had over 75% loyal customers blessing us with their custom [audio distortion]. We have taken various customer-centric initiatives to attract new customers. Makeovers which I spoke about. The experiences and engagement in-store, combined with events in-store and active social media handles, connecting with customers consistently, sharper targeting and enabling us to communicate the experiences and engagement that we offer and the personalization that comes with it.
We understand the changing consumer needs and sharpening the offer accordingly as India gets younger. Globally, India has the highest [audio distortion] nation, and as the consumer trends change, we are staying ahead of it. Gender fluid fashion is one of the new changing trends. The fact that we are a multi-category department store focused on fashion, focused on new trends, we are benefiting from it. Combining with that and stressing on the engagement, we now have 142 beauty doors. The makeovers that I talked about, combined with personalization in these beauty doors, combining further with the SSBeauty app, makes us a very strong player on beauty, focused on our beauty customers.
The last C is capital allocation. We have been nimble, and we have one of the leanest balance sheets. Our net debt is negligible. We have repaid the term loans, and we have been investing completely from internal accrual for increasing our footprint across the country, existing and new geographies included. Renovating our new existing stores, investing into digital tools and omni-channel experience for our customers, and partnering with international brands to bring in exclusive relationships for our distribution business. We do all of this staying prudent with our capital. Shoppers Stop is future ready. Our strategic growth pillars is in acceleration mode for sustainable revenue growth.
Customer footfalls have crossed pre-pandemic levels, and we are continuing to focus on increasing our conversion from the customers who come into our stores as well as online. As I conclude, I strongly believe that the slowness is temporary that we have seen in the last two months of February and March. We are offering our customers a renewed taste for fashion, lifestyle and beauty needs, giving an exclusive shopping experience to the customers. Experience and engagement is the key, and Shoppers Stop is placed in a very unique position to be able to offer a distinctly superior experience on that. With that optimism, I conclude my speech and will now be happy to take questions.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Varun Singh from ICICI Securities. Please go ahead.
Thanks for the opportunity. My first question is on gross margin, which is very much impressive at 43%. I mean, I was looking at last seven- year quarterly average, which is, that comes around 39%. I understand that there has been improvement in the revenue mix, et cetera. When you say, like, do you think that 41% to 43% is a sustainable kind of gross margin given the improvement in mix that you are expecting even further from here going forward?
Yes, Varun. We have been consistently increasing the gross margins on number of reasons. One, our private brand share is increasing. Second, we have negotiated with the vendors for higher margins. Third, if you remember last year, we had a higher picks, what we call the upsell. That also played some role in our lower margin last year. All these things factor, we should see an increase in margins, and we should able to sustain this, Varun.
Sure, Karuna sir. Thank you very much. So my second question is, if I look at the revenue CAGR from last four-year perspective, I mean, correcting the base for COVID impact. We see that revenue CAGR is around 4%, and the retail expansion CAGR is also around 4 CAGR. So 4% CAGR. Over last three year, we have added more than 30 stores. I mean, back to back more than 10 store addition is quite impressive.
Can you also throw some light with regards to how many stores we would have closed over the last three years? a lso maybe if you can give some reasoning regarding why we have closed that stores and hence, I mean, assuming that for rationalizing or optimizing the store sizes, et cetera, that should boil down to a margin expansion thing, if you can give some color on this, sir.
It's a very good question, Varun. In terms of absolute number of store closures, it is 14, and the majority of them happened during the COVID period, and subsequent to that, in the last year, we closed two stores. That number of store closures will continue, but it'll be much muted because the major loss-making ones were the ones that we tackled and we closed during the COVID year. Obviously, these were all loss-making and hence, helps in the overall margin expansion.
Under-understood, sir. Sir, just one last question, if I may. That in the beauty brand, given that we have launched online website and apps, I mean, as for the timeline that you alluded during last quarter conference call. Sir, just wanted to understand that how are we positioning ourselves compared to Nykaa in the beauty space?
Our SSBeauty stores and the SSBeauty app is positioned sharply in the premium space of beauty. What we focus on is catering to the upper middle-class customers and offering them a complete experience of the brands that they love as well as they would love to discover. With some of the new brands that we are bringing in, focused on the premium and virtual luxury segment, we are offering a much more curated experience for our beauty customers.
Understood, sir. That's it from my side, sir. Thank you very much and wish you all the best.
Thanks, Varun.
Thank you. Our next question comes from the line of Pankaj from Kotak Mutual Fund. Please go ahead.
Good morning and congratulations to the entire Shoppers management team on a very consistent performance and delivering on what you guys had promised two years back. As it's a year-end, it's a time for reflection and also looking forward. Going forward in the next two years, Venu and team, if you can guys quantify what are the key deliverables you are targeting from here on? It will be very helpful from an overall strategy perspective. You talked about the three pillars, 3 Cs, but if you can quantify it more, it will be helpful. Thank you.
Pankaj, thanks for the compliment and appreciate it. Over the next few quarters, our focus will be on implementing the strategy that we have put in place. We have a very clear strategy, and the performance over the last two quarters is a reiteration of the success of that strategy, and we will continue to delve down on that. Specifically within each of them, private brand is our first focus, and we would expect to continue growing our private brands. And the private brands currently contribute to 14% of our sales.
As we grow, we would expect that to grow ahead of the total business, taking it to probably around 20% of our total sales and close to between 25%-30% of our apparel sales. The second strategic pillar on beauty, and in beauty it is a combination of the department stores as well as the SSBeauty stores that we have opened. We now have 11 SSBeauty stores. We will continue to grow on that. Along with the SSBeauty stores, we will also be doing boutique standalone stores for some of our key partners like Estée Lauder, and going forward, NARS, with whom we have signed a exclusive relationship.
The SSBeauty app further enhances that customer experience, and again, we would expect beauty to grow ahead of the company average. The third area of growth would come from expansion and new stores. As I said, we have committed to doing between 10 to 12 department stores every year, and the pipeline for this year and next year is robust enough for us to be able to achieve that.
Great. Just one more question, sir. In a decade, this is for the first time that you have maintained the ROEs, which is much higher, after last year, in double digits. You spoke about one of the Cs, which is capital allocation, and [audio distortion]
Pankaj, sorry. Pankaj, we lost you for- there was some disturbance. Could you repeat?
Yeah. No, what I was saying was that after a long time, return on capital seems to be now looking healthy, which was not the case for almost a decade. You spoke about one of the Cs, which is capital allocation, which is very closely linked to ROEs in a way. Can you help us understand, from that perspective, how you are looking at things going forward? Because the challenge earlier for all the shareholders have been, capital allocation. Just can you give us some comfort on how the ROEs could be defended, what you have achieved now over the last couple of years now? Thank you. That's my last question.
Thanks, Pankaj. Thanks once again. I think that's a very good question. You almost answered when you started it. Our endeavor is to consistently improve the return on capital employed and return on net worth. In fact, if you have seen it, our balance sheet has been pretty lean. Like, the loans are just net of INR 30 crore. Even our on the store additions, we have been quite aggressive. Plus, even the cost per sq ft has also been pretty low consistently in the last two-three years. To answer your question specifically, we are expecting the return on capital employed between 20%-25% in the next one-two years.
Further to that, Pankaj, as you would have seen, one of our biggest areas of capital deployment is on expansion and new stores. This is an area where we have had a significant reduction in the spend per store, and this has been achieved by a lot of reengineering without compromising on the quality and actually enhancing the overall customer experiences. I do hope you've had a chance to look at some of our new stores specifically in Bombay. Both R City and Bandra have just been renovated and it's worth looking at. To be specific, our CapEx spend has reduced by as much as 35% per sq ft. Further to that, the bulk procurement that we are now enhancing on would reduce that further.
In addition to that, we have also partnered as we go into some of the newer cities, where we are negotiating and getting significant CapEx spends from the landlord, and that, again, helps to reduce our overall investment, enabling us to improve our return on capital.
Fantastic. My only worry was that in the past year, we alluded about venturing into value format. Couldn't that just, you know, defocus us from the capital allocation part? I hope you will take care of that.
Absolutely, Pankaj. The value segment is a large market, and we don't play in that segment. We are conscious of that. We are looking at a small trial, but we'll be extremely prudent on ensuring that whatever growth we endeavor in that segment is done profitably.
Great. Thank you. Thank you, and all the best to the entire team. Thank you.
Thank you.
Thanks so much.
Thank you. Our next question comes from the line of Resham Jain from DSP Asset Managers. Please go ahead.
Hi. Good morning, team, and congratulations on good set of numbers. Sir, my question is on the overall investments other than the store CapEx. We have been doing this digital spend pre-COVID as well, the omni-channel, and then we implemented SAP HANA. I think our overall digital spend has increased. Earlier you used to mention that close to 100 basis point kind of margin impact because of that. How much impact is there because of the same, and are we seeing that coming down going forward?
The overall spend on digital has reduced in the last two quarters because a lot of the heavy lifting was done at the end of last year and the beginning of this year. SAP HANA and S/4HANA implementation is complete. Not only did we do the first phase, which was the base model, we also implemented the retail and finance modules of S/4HANA, which is helping our business and improving our efficiencies within the business.
The SSBeauty investment is also now done. The last area where we are now endeavoring is moving out the platform for shoppersstop.com, where we will get the benefit of what we have already done on SSBeauty, and hence, the total spend would be quite efficient. To answer your question, the overall spend has now tapered down, and you would see that in our total investment split.
Okay. Sir, on the overall economics of new stores, if you can just give a sense of, let's say a store which has completed one year, how are you seeing ramp up of the stores? From the payback period perspective, from CapEx perspective, how do you see the overall economics working out?
Hi, Resham. Thanks for the question. The payback period is between two to two and a half years. We are seeing a good growth from year two, anywhere between 18%-20%. Also giving a decent return on capital employed, again anywhere between 20%-25% from year two onwards ratio. The productivity is also close to 10% higher than the existing stores.
Okay. Perfect, sir. Thank you.
Thank you.
Thank you. Our next question comes from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Sir, three questions from my side. You mentioned, you're, you know, going into the outright models. We always follow the SOR model or, you know, returnable model, being a departmental store. While it has some positive impact on the margins, inventory is a bigger risk for us while we already have private label shares increasing. Just wanted to understand which type of, you know, beauty and ancillary brands are you taking on outright models, and how is the risk-weighted returns, you know, you're calculating there?
The major chunk on the inventory is for our own private brand, and obviously these are at significantly higher margins, and we have better control on the overall supply. In the existing business where we have switched to outright, it is fairly limited, and these have been with specific brands where we've had supply as an issue consistently, and hence it is to overcome that where we move to outright. All of these brands are. Most of them come with the agreement of exchange of stock at the end of the period, which minimizes any risk that we would have on a redundancy.
Sure. Sir, my second question is on your footfalls. If I look on YoY basis of footfalls, customer visits have grown, you know, by less than 2%. On a low omnichannel base where we have added 10- 11 departmental stores, we have added SSBeauty app. Still the customer visits is, you know, 2-3% growth. Are there challenges in customer footfalls you are facing, or the base was very high and hence we are looking at a low customer footfalls in the quarter?
The customer, it's not footfalls, Ankit. It is a combination of eyeballs plus footfalls that we have seen. As you rightly said in the base, there was a period where the stores were partially shut or had an impact because of COVID, that was the period where there was a massive surge in terms of eyeballs online. That is the segment which was muted. Footfall itself grew by almost 40%. Again, as an omni-channel business, we look, we measure the customers that we engage with across online and offline. That is the 2% that you are seeing.
Sir, from an age profile of a consumer, are you getting younger customers on the platform now, compared to the past? If you can just share that because, you know, Shoppers Stop is known more for a family store perspective historically. Now with more younger brands coming in, you know, the overall company, are you seeing that movement happen on a slower pace or at a much faster pace?
We do see a reduction in the shopping of family and families and groups, and a lot more of individual purchases that are happening. We recognize the shift in trends, and as I had mentioned in my speech, we are very cognizant, and we continue to bring in brands which cater to that segment. To be specific, we have an exclusive tie-up with GOAT Brands, who are an incubator of D2C brands, and we've got four brands which are now in our stores on an exclusive basis, and all of them cater to D2C. With these new brands coming into our stores, we attract a younger customer who has got used to a lot of the D2C brands. This is an area we will continue to invest in.
With the exclusive partnerships, we would bring in new brands that would be right for that segment. If I were to elaborate further, in the coming month, we are actually launching a streetwear brand called Breakbounce. Again, it is from the house of GOAT, and Breakbounce is a young streetwear brand, extremely popular on the D2C channels, which will for the first time be available anywhere in the physical stores. We continue to bring in brands that are right for the younger audiences, even as we see the shift in shopping happening. The opportunity that it brings in is also for us to be able to grow our conversions as we attract some of our younger customers.
Sure. Sir, my last question is on the beauty side of the business. Now for last 6- 7 quarters, the growth is lower to the company growth, which we have seen. While, you know, we are talking a lot positive about beauty business, but that is not reflecting in revenue growth for the beauty. You know, despite app being launched, despite SSBeauty in, you know, one and a half years being 11 store network. Just wanted to know, you know, while we had supply chain issues, you know, last two quarters, what are the other challenges you are facing in beauty, you know, for the growth to be above the company average?
The main challenge has been on the supply side only. To reiterate, beauty had made its highest sales ever. It continues to grow. Can it grow faster? Yes, it could. Definitely we're confident that it will. The focus. Initially, the beginning of the year, the makeup categories were still one of the last ones that rebounded from COVID. A number of brands were not offering makeovers and et cetera.
That continued pretty much till June, July, post which we had a few international brands with whom on fragrances where we had challenges. Then again, in the beginning of this year, we had some challenges on a few of the makeup brands, which all of which has now been resolved. One of the reasons and methods we have chosen to mitigate this is to move to outright. That's something which has helped.
Sure, sir. Thank you so much and all the best.
Thank you, Ankit.
Thank you. Ladies and gentlemen, in the interest of time, we request you to restrict to one question and one follow-up question per participants. Our next question comes from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. I have a couple of questions, if I may. My first question is if you can help us out, what of the INR 200 crore CapEx that we have incurred during the year, if you can break it up between the new store openings and also in terms of the omni-channel CapEx that we have done, or rather the online CapEx that we have done.
On the new stores, we spent around about INR 82 crores. On the stores which we refurbished, we spent around about INR 55 crores, Gaurav.
The remaining would be on the omni, is it?
Not necessarily. Around about the digital and omni would be around about INR 20 crores. There are for the distribution in some of the tools we have, there's around about INR 10 crores.
Okay. Thank you for that. Sir, my next question, you know, is with regards to the growth per se, if you see on a 4-year CAGR basis, if I FY 2023, the CAGR comes to around 4%. You know, as a earlier participant highlighted, you know, that even that matches largely the store or the square footage addition. Going ahead, also, Venu sir mentioned in his opening remarks that, you know, you are seeing some green shoots in the month of April.
How one should go ahead and build growth, given the fact that, you know, the CAGRs have been sub single digits, and given the fact that we will be adding around 10-12 stores every year, we'll be looking to do a 5% SSG. What kind of growth can we build in going ahead?
Specifically, Gaurav, for this year, I mean, it's too early to say. We expect the overall growth to be including the new stores should be in the mid-double digits. SSG growth should be at about mid-single digits, Gaurav.
Mid-single digits. The mid double digits total growth you are saying would be including this mid-single digit SSG growth, right?
That's right.
Okay. Okay. Okay, sir. Thank you. That's all, sir.
Thank you. Our next question comes from the line of Nihal Mahesh Jham from Nuvama. Please go ahead.
Yes, thank you so much, and congratulations on the strong performance. The first question was on the gross margin again. You did highlight three aspects to why it has improved. Would it be right to say that the change in the business model or the arrangements with vendors has been a large part of the contributor or if I compare it on a year-over-year basis?
Nihal, that contributed very small percentage for this fiscal. Next year onwards, it should contribute probably 30-40 basis points, Nihal.
Understood. That's helpful. Just a related question to this model change that while there has been a spike in inventory, there has been an increase in creditors also. net-net, how would this end up impacting the working capital for the business going forward?
Specifically for this year, if you have seen, there is a reduction in working capital of around about INR 147 crores. We have taken steps to reduce the inventory from Q1 onwards. We do expect a funding from working capital for the full year. The negative working capital should increase at the end of this fiscal year, Nihal.
Got that. If I may, just final question, you did mention the CapEx per sq ft for the new stores has gone around 35%. Ballpark, what is that number now that we are looking at for the new stores?
Anywhere between INR 2,200 to INR 2,300, depending upon whether we have beauty or not. If we don't have beauty, it'll be around about INR 2,200, and if we have beauty, it'll be slightly above INR 2,300. This is helpful. I will come back in the queue. I'll be sure of that. Thank you.
Thanks.
Thank you. Our next question comes from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity, sir. I just wanted some sense on the growth. You know, where is this SSG coming from? You know, in this particular quarter, if I see YoY footfall is up about 2% against 5% area at all approximately addition. Even ATB is up about 5%. You know, in a way implies that number of bills would have grown nearly about 25%. You know, that's a very significant increase probably in the conversion rate. Strategically, if you could just help us, you know, how I mean, you know, what is really changing that is driving this kind of an SSG.
Just one follow-up here, as you mentioned, mid-single SSG is what we are targeting going forward with 10+ store addition, in a way probably implying about, you know, mid to high teens growth. You know, I mean, we have been having earlier target to double our revenues in FY25. With that kind of an SSG, you know, I mean, probably we would need somewhere about mid-teens kind of SSG growth to, you know, achieve that target. You know, how are we seeing that getting achieved?
The total growth, as you rightly pointed out, a combination of like-for-like growth and also the total. As you would also appreciate with the increased number of the new stores in the mix, it would contribute to a higher same-store growth, and we would continue to see the benefit of that over the next two to three years as we continue to invest into new stores. The increase in the total bill value, and it is a combination of price and volume. The price increase itself has been fairly planned in terms of the product mix, and that is what has driven rather than an absolute increase.
If I were to be even more specific, the biggest increase or bulk of that increase in the price has come from the non-apparel category, and where we have moved to more premiumization. This, footwear as an example, where we've upgraded the brands that we retail, and that has contributed to the increase in price rather than the prices for the same product. Further, what will add to the growth is, apart from the door, new stores and department stores, the beauty doors and the addition of beauty doors, including the our own, plus the boutique stores for our brand partners that we talked about would contribute to accelerating that growth.
Okay. Just to follow up here is, ATB, what you mentioned, you know, volume plus price increases. ATB has grown about 5%. You know, I mean, when I see your revenue growth in this quarter, even if I adjust for that ATB, you know, I mean, it's a very significant growth in your, you know, number of bills, which is nearly about 25%. I was just trying to get some sense of what would have led to this kind of a big increase and, despite footfalls not growing, you know?
The overall, as I said, into stores, we did have a significant increase, we do get a much higher bill values in our stores compared to online. It is that weightage which constitutes that high growth in ATB.
Okay. Got it. We still stick to our target of doubling FY 2025, right, on FY 2020 base that we had earlier indicated?
It was FY 2026 that we had indicated, and we stick to that.
Okay. Okay. Thank you very much. This is very helpful.
Thank you. Our next question comes from the line of Sameer Gupta from India Infoline. Please go ahead.
Thank you. Thank you, sir, for taking my question. This is regarding the CapEx that you mentioned. INR 82 crore for new store additions is what I heard during the call, and this is area addition of around 2.3 lakh sq ft during the year on a net basis. This is translating into a CapEx per sq ft of around INR 3,500. You also mentioned that the CapEx per sq ft has been reduced, and now it is at around INR 2,200-INR 2,300. Just trying to reconcile these two data points.
It is the CapEx is not just the 11 department stores, it's also beauty doors. The beauty doors have these are smaller stores and also more premium, and hence the CapEx per square foot for those stores are much higher. To recap, we've opened 11 beauty doors and 11 department stores, the spend is for combination of both put together.
Okay. Okay. That makes sense. Just one follow-up or one more question if I can squeeze in. I just missed the SSS growth number reported by you for fourth quarter and full year.
For the fourth quarter, specifically Same-store growth is a bit complicated purely because it's not a true comparative. The absolute growth was 32% on last year. Again, as I said, because there was a period last year in the quarter where stores were partially closed.
Got it, sir. That's all from me. Thanks. Thanks for taking my questions.
Thank you. Our next question comes from the line of Resham Jain from DSP Asset Managers. Please go ahead.
Yeah, hi. I've just one more question on the stores which we are opening. Some of our peers have established a model whereby the full investment of the store is done by the landlord and a percentage revenue is being shared with them. In fact, some of the stores which where they have done a CapEx, they are transferring the complete kind of book value to the landlord just to free up the balance sheet. Are we experimenting with such models or are we experimenting with such models or seeing such kind of deals?
Resham, that's again a very good question. To answer that question, yeah, we are exploring whether we can get the partners either to part fund or fully fund our CapEx. We've just started doing it for some of the new stores. Probably, in 3 months or 4 months down the line, we should able to give a definite answer for that.
Okay. I'm specifically harping on this is because one of our peers has basically significantly ramped up the store expansion through this model because it frees up the balance sheet. I don't know whether that's a correct model or not, but yeah.
It does, Resham. To answer that question, the only difference is the CapEx, what we are investing in our stores is anywhere between INR 7 crore to INR 10 crores, depending upon the size of the store, depending upon the offerings, what we have. Whereas the store, what you are mentioning, I mean, I don't want to go to those numbers. I know the company which you are talking about. Those numbers are significantly different from the investments what we are making.
Okay. Perfect, sir. Thank you.
Thank you. Our next question comes from the line of Priyanka Trivedi from Antique Stock Broking Limited. Please go ahead.
My first question is that, you know, we've been highlighting that, you know, the beauty supply chain issues would be streamlined by the first quarter that has gone by. You know, still you have indicated that, you know, the issues are persisting. What is your commentary out there? We shifted to the outright model, but do you see any streamlining on that front going ahead? What would be the margin differential between the outright model and, you know, let's say, the PG model?
Priyanka, thanks for the question. Appreciate where you're coming from. In a rapidly growing market, especially in a category which is quite heavily dependent on imports, some of the supply chain issues would be expected, and that's something which we need to deal with. The outright was one of the ways we have dealt with it. The second is moving with the distribution channel that we have launched and the subsidiary that we have now established, we are able to, again, get a better handle on our own supplies.
The third area is also we are slowly growing on our private brand, which again helps. Fourth, also with partnering with a number of- where it is appropriate, which again helps that the supply chain issue or mitigating against that. Those are the four different ways by which we are managing and ensuring that we continue to be on the high growth trajectory that we have embarked on for beauty.
Okay, sir. Thank you, sir. My second question would be that, you know, you highlighted that, you know, we have been witnessing green shoots in April. Could you give us a sense, like what categories are doing well? How is apparel performing on those lines?
I wouldn't want to get into specifics. It's still early days in the quarter. It has been quite mixed specifically because we are, the comparative period last year was the initial surge that we had from pre-COVID combi- and also where there has been a shift in the date of, dates of weddings, et cetera. What I would say is that we are managing to ride that and come up ahead, and quite reasonably pleased with the way we are progressing on that.
Okay. Thank you. That's it for me.
Thank you. Ladies and gentlemen, in the interest of time, we request you to restrict to one question per participant. Our next question comes from the line of Devanshu Bansal from Emkay Global Financial Services Limited. Please go ahead.
Yes, sir. congrats on a good turnaround as well as thanks for the opportunity. Sir, you indicated that Feb and March were relatively slower while Jan saw a pickup in growth. If you could share growth trends across the three months for March quarter individually, it would be better to understand the macro weakness.
Devanshu, if I'm brutally honest, I wouldn't want to do that. The reason is because the periods are not comparative. Jan had end of season sale, Feb had different things going on, et cetera. It won't be a true indicator, and that's the reason I wouldn't want to do that. More so because, as I said, Jan, I mean, there were two things which happened. Jan, for the USA, which is normal, in Jan 2022 there was COVID. The comparatives are not really true.
Got it, sir. Sir, I wanted to understand this gross margin improvement. I know there have been multiple questions on this front. The drivers versus pre-COVID, our gross margins have improved by about 400 basis points. You indicated one of them being private label, as well as some negotiations with vendors for higher margin. In my view, this 200 base increase in private labels would have added about 100 basis points to your gross margins. Just if you could sort of help us understand the rest of the margin improvement, the drivers for rest of the margin improvement.
Devanshu, you. Thanks a lot for the question. You almost answered the question. See, as I said, private brand, we have negotiated better with our vendor partners. Third most important thing is we also had a one-time high obsolescence last year that has been rationalized right now. Last but not the least, even the discounts have been optimized over a period of time that has also reduced it. Those are the three or four large reasons where the margins have improved.
Karuna, from vendors you mean your vendors for private label business or for third party brands?
Both.
Okay. Lastly, sir, you said tier two, three is facing challenges, relatively more versus metros. Our expansion has been primarily in such cities. Do you foresee a change in strategy or slowed expansion, because of weak trends in these cities?
The softness that we are seeing in some of these tier two, tier three cities, we believe is temporary and definitely not something which is structural. Hence we don't see any reason for us to revisit our strategy of continuing to expand into markets where we are not present. Our new store strategy is always led by focusing on, A, the availability of our target customer.
To remind we are in the premium lifestyle space, so we are catering to the upper middle class, and we look for customer seg-catchments where there is a significant presence and we are not present. The runway for that, the pipeline for that is very, very strong. Again, to reiterate, we are being quite specific in terms of the store sizes that we go for to ensure that we have great productivity to compensate for the target customer base being smaller as we go into some of these newer cities.
Got it, sir. Thanks a lot for answering the questions.
Thank you. Ladies and gentlemen, due to time constraint and fairness to others, please restrict to one question per participant. Our next question comes from the line of Shrey from Swan Investments. Please go ahead.
Hello. Are you able to hear me?
We could hear you, Shrey. There is a lot of disturbance in the background.
Hello.
Yeah.
Sir, just wanted to understand, going back to last year, if I, if I read your commentary, you're saying Jan and mid of Feb was impacted by the Omicron variant, and had that not been there, we would have grown by about 28% odd. At that point in time, you had given a rough figure of about INR 1,050 crores of top line. On that number, we've done INR 1,175 this quarter, so that comes to about 11% odd. In that light, how do you see this 11% growth rate for your company, is my first question.
If I heard you right, what you're referring to is the Q4 of financial year 2022 and the guidance of what was the impact because of COVID, and that's how we have looked at it. Is that right, Shrey?
Yes.
Which is a fair assessment. The growth that we have seen subsequent to that, and even if we were to normalize for that, the growth continues to be robust. We are reasonably pleased with the growth that we have seen.
Sir, your line is not clear. I'm not able to hear you properly.
Okay, I'll repeat myself. Is that clear now?
Yeah.
Yeah. Normalizing for that, our growth continues to be robust, and we are pleased with the growth that we have seen so far, particularly as there has been a slowdown in the market, and despite that, we've been able to grow robustly.
All right. My last question is, sir, on your sq ft addition, if I'm not wrong, last year at this point in time we had about 3.72 million sq ft of total retail space. This year, we are at about 3.9 million sq ft. The net addition is about 0.18 million sq ft. That comes to about 18,000 odd sq ft in terms of store addition. Is my figures right or my sense was have we renovated existing stores and cut their sizes or how should I look at this number?
I don't think your numbers are right, Shrey. I think it might be because till last year we were reporting the chargeable area or the super built-up area, which we shifted to being carpet area as the industry norm. The 2, 90,000 square feet that we currently have is for the department stores is on carpet area. That's the addition we have. 2, 90,000 square feet is what we have added in this financial year.
Okay. I'll take it offline. Thank you.
Okay.
Thank you. Our next question comes from the line of Jignesh Kamani from GMO. Please go ahead.
Hello.
Yeah, you are.
Yeah. Congratulations for a good set of number. Just want to know this time winter was delayed, so it is anyway positive impact on the revenue and the margin and similarly how is the full prices this quarter versus the YoY?
Thanks for the compliments, Jignesh. Winter was decent without being great, if I put it that way. The onset of winter was delayed and hence we could not fully maximize on what we could have achieved. I wouldn't want to get into the specifics of full price and reduced, because that's not something which we would divulge.
And any idea on the how is the revenue and the profitability from the beauty distribution segment in the fourth quarter and some color for the next year?
We just started Jignesh in the month of March. We are in the process of appointing retailers. We have completed close to 10, and we may have to add another four or five in the next one quarter. The sales have been negligible in the fourth quarter. This year we expect anywhere between INR 180 crore-INR 200 crore for the full year.
Okay. Thanks a lot.
Thank you. Our next question comes from the line of Disha Sheth from Anvil Share and Stock Broking Private Limited. Please go ahead. Disha, your volume is not audible. Could you please speak up?
Now am I audible, sir?
Yes, please go ahead.
Sir, when we are targeting around doubling of our turnover year on. It will be a double digit, like a 15% CAGR growth. In the past so many years we have around mid-single digits CAGR growth. If you can throw some light. I know you have answered that question, but if you can still get deeper into it, since we have not performed in the past, what will lead to the mid double-digit growth around 15%?
Disha, thanks for that question. In a way you have answered your own question. I would reiterate what would contribute to the growth is implementing of our strategy. Our strategy built on the foundation of the strong partnership that we have with our national brands. We continue to grow on that using bringing in great customer experience and engagement. Within the strategic pillars, the three engines of growth that we would have are private brands, beauty and omni-channel expansion across online and offline.
Okay. Okay, sir. Sir, in terms of, when you said, this quarter we grew, 32% like-to-like growth. Am I getting that figure right?
That's correct.
That's correct. FY 2023, how was the like-to-like growth?
Again, not a true comparison. It was 63% was the total growth. Like-for-like w as, 57% growth.
Okay. sir, since we are expanding aggressively, if we can throw some light on the debt requirement or we'll fund through internal.
Disha, we don't foresee any debt for our expansion. We should be able to fund from internal accruals.
Okay. Your yearly CapEx will be around?
Between same, similar to this year, anywhere between INR 160 crore-INR 200 crore. Yeah, that's right.
Yeah. Okay, sir. Thank you. That's it.
Thank you.
Thank you. Our next question comes from the line of Tejas Shah from Avendus Spark. Please go ahead.
Thanks for the opportunity and congrats on good set of numbers. There's always a trade-off between private label strategy, which is positive on margins but kind of penalizing on inventory days. If I look at our numbers also on four-year CAGR basis that from 19 to 23, for roughly 4.5%-5% on CAGR growth, our inventory has grown at somewhere around 8%-9% CAGR. Just wanted to understand, though the benefits are visible on margin front, but how would you like to manage inventory on absolute basis and on overall working capital we are planning check, but on inventory days basis, how are you planning to manage that?
I did not get the numbers. Are you saying that the private brand CAGR is 5%?
No, sir. Overall value growth for 5%.
Okay.
Our inventory growth is somewhere around 8% CAGR, but from 2019 to 2023.
I agree. That's what Venu spoke at the beginning of the meeting. Our inventory is higher. See, let's understand the constitution of the business. We have close to 2/3 SOR and 1/3 is OR. We are focused on the OR inventory where it's a paid inventory. Three or four reasons. Our private brand has been growing between 50% to 70% last year, so that inventory will be high. Second, we also spoke about the some of the shift in model on apparel and beauty, and that's the reason the inventory is higher. In fact, the inventory CAGR is significantly lower than the private brand CAGR what we have achieved in growth.
Sure. How should we think about this in let's say next two, three years? Will it remain at the same % or because the strategy shift is there, It will accelerate in this direction further?
Bit difficult to answer that question, Tejas, because I mean, the dynamics are completely different. As we continue to grow on the private brand, the inventory will be higher. Largely depends on what our private brand share and the growth for the next two to three years.
Okay. Let me turn this around. Our ROI on private brand business is way higher because the inventory deployment is higher versus our third party brands.
The net margin, what we are getting from the private brand is also higher and commensurate with the investments what we are making.
Yes, sir, but that's what I'm saying, that the higher margin compensates for higher inventory, so does it culminate it to better ROI in terms of the business?
It more than, I mean, covers up for it, and hence, the investment is definitely worthwhile, and we are quite pleased as well as delighted with the progress we are making on that. Further to that, I think the other point which is also worth calling out is that as we grow our private brands, it also brings in the customer, giving them a different reason to come into our stores. Combining with the national brands and international brands, our own exclusive brands, gives a different reason for the customer to walk into our stores.
Totally, sir. Thanks a lot.
Thank you. Our next question comes from the line of Yash Bajaj from Lucky Investment Managers. Please go ahead.
Hello.
Yeah, Yash. Go on.
Yeah. Hi. Thanks for the opportunity, sir. Just trying to dive a little more deeper on the private brand business. I just wanted to understand versus our third party brands, what is the positioning of our private brands in terms of the style and the pricing? That is my first question.
Yash, our positioning of our private brand is in the good segment within our stores and online. It complements the national and international brands that we have. We are very clear that we don't want our private brands to be competing, but should be complementary to what we already offer. Hence widening the choice that we are giving to our customers. To evaluate or so to delve further into it, each of our brands caters to a lifestyle need. The brand ethos is very clearly defined. It is within the framework of that brand ethos that the brand grows to. If I were to again explain that even a little bit more, Life is one of our larger brands, not the largest, but one of our larger brands.
It's very clearly defined as a denim casual wear brand, and that's what the brand would cater to. This is one of the significant shifts which we have made over the last two to three years, where the definition of each brand has been sharpened, and by doing that, it is addressing a specific lifestyle need of every customer who walks in, and it is doing that by being better value within the box compared to the more well-known national and international brands that we would have in our stores.
Okay. Got it, sir. My second question was, the stores which we are adding, we are aggressively adding more and more stores in Tier two and three. Would the offering of the or the mix of private and third party be different for a Tier two, Tier three versus a metro Tier one?
The mix of brands that we would have in a new store is very strictly guided by the catchment that we are going into and the propensity to spend of the customers in that catchment. Having said that, the mix of private brand would be slightly higher than what we would have in the more established markets.
In the more established markets?
Yeah, the established stores that we have. When I said markets, I meant.
Okay.
stores that we already have. We do see that in our newer stores, the contribution of our private brands tends to be fairly high, much higher than what we would have in our current stores. This is further accentuated by the fact that we are opening more compact stores and hence the split or percentage mix of private brand within these compact stores would be even higher.
Okay, sir. Got it. Thank you so much.
Thank you. Our next question comes from the line of Padmini Dhruvaraj from Informist. Please go ahead.
Hi. Can you hear me?
Hello.
Padmini, we can't hear you. Can you come closer to your mic?
Still we cannot hear you. Your voice is cracking, Padmini.
Call recording has now ended.
Is this better now?
Yeah, it's better now. Yeah.
Okay. I wanted to ask if you are planning to explore more in e-commerce, maybe by partnering with some of the brands like Myntra or Flipkart?
As of now, we are, brands are available on Amazon and we are focused on ShoppersStop.com. As we have always emphasized, we have moved from a brick and mortar retailer to being an omnichannel retailer, and we offer a seamless offer across ShoppersStop.com and our own stores for our customer to shop from. In addition to that, we are currently present on Amazon and, While we wouldn't rule out further partnerships, really our focus will be on ShoppersStop.com.
Okay. Thank you.
Thank you. We take our last question from the line of Akshay Krishnan from ICICI Securities. Please go ahead.
Yes. Hi, sir. Thanks for your opportunity. Just one trying to understand, what will be the contribution or the quantum of bonus that we received from the brands at FY 2023? I think I, my understanding is like we get a bonus from these branded players once we achieve a certain target or volumes at Q4 every FY.
Akshay, thanks for that question, Akshay. They are all completely confidential, and we can't share because we do have a confidentiality agreements with our vendors. All I can say is they are consistent. It's not something that has happened only this year. It was there this year. We achieved the targets last year, that is effect particularly, we got it. We also have targets for this year. If we achieve the targets, we'll get this year.
Okay. Yes.
Thanks a lot.
One final question, sir. We just have with our ATV around INR 4,000 plus odd and for ASP around INR 1,500, is there any stress level that you're finding in any ticket size, say like maybe between a INR 2,000-INR 3,000 range or like in sub-INR 1,000 ranges as a consumer visiting the store?
We've now had 12 quarters of consecutive growth in the ATVs, and we are not seeing any resistance at any particular price points. As I would want to emphasize the growth in the ATVs is mainly because our customers are blessing us with more business. There has been some increase because of price, but that again is not just a price for same product, but because of the product mix. To answer specifically your question, none that we have noticed.
Sure, sir. Thanks, sir.
Thank you. Ladies and gentlemen, we have reached to the end of the Q&A session. On behalf of Shoppers Stop Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.