Ladies and gentlemen, good day, and welcome to the Shoppers Stop Limited Q2 FY25 Earnings Conference Call. As a reminder, all participants in line will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Mamta Samant. Thank you, and over to you, ma'am.
Thank you, Sejal. Good morning, and thank you all for joining us on the Shoppers Stop Q2 FY 25 earnings conference call. Today, we have with us the senior management, represented by Mr. Kavindra Mishra, Customer Care Associate, Managing Director, and CEO. Mr. Karunakaran Mohanasundaram, Customer Care Associate, Chief Financial Officer. 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 performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. I will now request Mr. Kavindra Mishra for the opening remarks. Thank you, and over to you, sir.
Thank you, Sejal, and thank you, Mamta. Good morning, everyone, and thank you for joining the conference call of Shoppers Stop Limited today. This morning, we will cover the results of Q2 and first half of the financial year, FY 25. On the call with me, I have Karuna, our CFO, Jayaprakash, who is our FP&A Lead, and Rohit, who is our IR Lead. We also have with us Biju, who is our Beauty CEO, who will come at a later stage to answer any specific questions on beauty. As always, I will begin with an update on the operating context, post which I will cover the overview of the performance in detail for the second quarter, KPIs and our strategic pillars. Thereafter, we'll open for Q&A session.
I'm sure you must have read the investor presentation, which is available on our website, and it has been sent to both the stock exchanges. Let me first start with an overview of the operating context for this quarter. The external factors weren't conducive in the first two months. We had an early EOSS impact in July sales, and in addition to that, we had excess rains, disrupting the consumer traffic. Demand remained muted in July and largely in August. The discretionary spending was lower, besides fewer wedding dates this year. This impacted our sales in July, wherein we declined by 7%, in August, where we had a lower growth of 5%. However, we have begun seeing green shoots from September. Our sales increased by 12%, particularly in East, which grew by 9% like-for-like.
You are aware Q2 is conventionally a slack season. With two out of three months muted sales, new businesses, and stores having a longer gestation period, we had a lower EBITDA non-GAAP for this quarter. However, as I said just now, we have been seeing a lot of positives from September to as of now, which I will cover in detail in my outlook. Let me cover this quarter's performance with key KPI metrics. Our customer entry in Q2 declined by 8%, largely in July and August, with sequential improvement in September. Our beauty business continues to outgrow with all the KPIs, not only outperforming within Shoppers, but within the industry as well. Beauty continues to add significant profits in our bottom line. We opened 25 stores, including 19 Intune stores. We opened our 50th Intune store on October first.
On the departmental stores, it's a mix of cautious optimism from our end and regulatory delays, which may defer some of the large departmental store openings from this year to next. However, we remain committed in opening the stores to enlarge our footprint. Our efforts to premiumize the departmental stores have begun delivering consistent results for the last one year. We are in an era of premiumization, driven by demographic shifts, digital innovation, and economic changes. These factors have reshaped consumer perceptions across India. The rise in premiumization is evident. I have said before several times that the future of premiumization in India appears bright. As consumer incomes rise and aspirations evolve, the demand for premium products and experiences will persist. We at Shoppers understand the consumers' changing needs and offer innovative premium products that cater to their aspirations.
We recently renovated our Malad store and opened it a month back. In the investor presentation we have uploaded, there's a web link, and you can virtually view the store and the offerings. In addition to that, I invite everyone, particularly those based in Bombay, to visit our renovated Malad store, and witness the change in our store look and feel and consequent increase in customer entry. We are still renovating the Gondko, and that should be operational in a month from now. We are experiencing a 70% increase in productivity in the current format. In addition to this, we launched premium watches such as Titan Limited Edition, Swarovski, Aigner, Cerruti, Aldo handbags, D&G, Jimmy Choo, Versace and sunglasses, ECCO Footwear, and in apparel is the most premium brand, Armani Exchange, True Religion, Elle, Iconic, Gant, et cetera.
With these premium brands, our sale on premium brands has increased from 60% to 64%. Our premium categories grew by 6% like-for-like in quarter two. We'll continue to launch aspirational brands to increase the premiumness within our store, and not only to sustain it, but become a leading premium departmental store. In my last speech, I said that our strategies are giving us desired results. We were expecting the market to be favorable. I can confidently say now external factors are improving, and it gives us a path to recovery. Here are the snippets on our KPIs. First, our Q2 sales were INR 1,296 crores with a growth of 2%. I already informed you that July and August were not favorable, but September we grew by 12% with 9% like-for-like.
Our Pujo sales in East had an exceptional performance with a like-for-like growth of 9%, which led to overall growth. Specifically on categories like watches, beauty, and home, we outperformed other categories with high single digit growth. During the quarter, our gross margins are largely flat compared to FY 2024. On some of the other KPIs, such as ASP, ITP and ATP, they grew by 7%, 2% and 9% respectively. As you observe, our ATVs on a constant increase. In the last three years, our ATV has cumulatively increased by circa 20%. Our EBITDA was impacted by fixed costs in new business and incremental investments, which we have made in technology. I had briefly spoken about cost reduction in my last speech. Our like-for-like store costs absolutely remained constant, despite large inflation in every vertical.
During the quarter, we opened 25 new stores, comprising 19 Intune, five HomeStops and one departmental store. From operations now, I will move to the performance of our strategic pillars. First Citizen. I'm extremely happy to say that our loyalty contribution to sales has been the highest ever in this quarter at 81%, an increase of 240 basis points against last year, and sequentially it increased by 100 basis points. Our repeat sales was also at 70% - 67%, indicating strong bond with our consumers. Our First Citizen customer base is now close to 11 million. Our premium black card customers contributed to 14% of sales mix, and they grew by 17%. We had a number of campaigns during this quarter, including the Pujo campaign in East. Specifically, our conversion rate of the AI personalized message and WhatsApp campaigns were much higher and has yielded positive results.
Now let me talk about private brands in Intune. I will briefly speak about private brands. Private brands is turning around with all strong performance across all categories. And as we had discussed in the last quarter, I think we are in this journey of making them really, really strong. We had a healthy volume growth of 6% from Autumn Winter 2024 merchandise. In addition to that, apparel, men's and women's western grew by 24%, Kashish by 21% and Bandeya by 90% for Autumn Winter 2024 season. Overall, the private brand volume in apparel grew by 9% in September. Lower markdowns with a higher full price sales is retained margin expansion of 6% in private brand apparel. This has helped us to reduce the inventory by circa INR 40 crores versus last year.
Our Autumn Winter 2024 had a great beginning with improved offerings at competitive prices. Our new merchandise planning system, Goldratt, is operational now and has begun to yield positive results. From private brands, I will move to Intune. I'm extremely happy to inform you that we opened 19 stores during the quarter, taking the total stores to 50. The last two open, which opened, was on first October 2024. We had impact on sales with competitors offering EOSS in July, which we deferred to August. Our September and October as of now seems to be on track. As I said before, we should open our 100th store this fiscal in Intune. Now let me talk about beauty. Our beauty revenue increased by 10%, with quarterly sales of INR 218 crores.
If we include a 100% subsidiary, Global Essence Beauty, then our consolidated sales in beauty was at INR 257 crores with a growth of 19%. We had 11% ASP growth leading to premiumization journey. Our fragrances grew by 17%, clocking highest quarter turnover. Our beauty contribution, excluding the subsidiary, is at 17%. Our H&M event, Beauty Story Events, primarily for H&M, had increased participation. Overall, our campaigns, such as Ace the Base, Fragrance Couture, and many brands, brand campaigns, helped us not only to increase the revenue, but overall customer base. We launched many new brands such as Mars Cosmetics, Forever 52, Inglot Cosmetics, Pantheon Roma, Women's Secret and own skincare, namely, Trilogy and Uniq. Our 100% subsidiary, Global Essence Beauty, business delivered INR 52 crore sales with a growth of 130%.
We have launched Reebok, Pepe Jeans, FCB, Women's Secret and Ajmal. HomeStop. We opened five stores and re-renovated our SS, both in Malad and Inorbit Vashi. With an improved store outlook and increase in black card contribution, we had a very healthy quarter-on-quarter growth of 18% in home. Now let me talk about departmental stores and national brands. At the beginning of the speech, I discussed premiumness on our departmental store. Our departmental stores generate largest revenue and profits. Akin to Malad, we plan to upgrade a few of our top-performing stores with international look to elevate our customer experience. During the first six months, we also have decided to exit some of our low productivity stores. We will close circa five to six stores during the year.
With festive season in the offering, our elevated pitch on premiumness, state-of-the-art customer journey, we are confident that Shoppers Stop departmental store should be a destination for our premium customers. Our departmental stores had a strong like-for-like growth in September of 9% across all the categories. During the quarter, our marketing department launched many campaigns, such as Gifts of Love, Pujo, and for the first time, launched a fashion show just ahead of festive in few cities to display our impressive and grand range of products. We are launching India Weddings with Shoppers Stop, a marquee event in November. The objective is to establish our stores as a preferred wedding shopping destination. Let me talk about CapEx and working capital. As I said above, we added 25 stores across all formats during the quarter. We had spent INR 43 crores on CapEx for additions and renovations.
Our working capital has reduced by INR 30 crores, with significant reduction in private brand inventory of INR 40 crores. Finally, the outlook. First of all, our optimization drive will continue. With 4.8 million weddings to happen in second half, we are confident our store should be one of the key destination for our consumers. September was good, and as I speak to you, October is turning to be better than September. We expect a mid-tier, mid-teen growth in the month of October. I'm confident that the muted performance in the first five months is slowly weaning away, and we should be able to grow by mid-single digits, like for like, in the next six months. We'll continue to invest in capital. We should open circa 60 to 65 stores across all the formats in the next six months.
At the operational level, we'll also invest in marketing through our campaigns to drive both our short and long-term strategic strategies and build Shoppers Stop as a destination. We are continuously rationalizing the cost. As you observe, sequentially, operational costs for Q2 was lower than Q1, though we opened 25 stores during the quarter. With this, I would like to wish everybody a very, very happy Diwali and a great Samvat 2081. We can take the questions now. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Resham Jain from DSP Asset Managers. Please go ahead.
Yeah, Resham Jain here from DSP. So I have three questions. First of all, in the presentation, I couldn't see the revenue from the online or the omni-channel business. I don't know till last year we used to give this number, but I couldn't see that in the presentation. Is there any specific reason why it is not given?
Resham, nothing of that sort, Resham. The net revenue, I mean, net of GST is around about INR 30 crores, and including GST is around about INR 34 crores. I mean, there is no specific reason we have. I mean, we thought with the other verticals growing, and that's the reason we have not included. That, that's it. Nothing. I mean, there is no specific reason why we have not included, Resham.
I specifically asked this because over the last five, six years, I think we have spent a lot of money on omni-channel, on online, and I couldn't see in the whole presentation in KPI that is being talked about, so has there been any change in priorities over here? Because if I look at the most of the retailers, probably the amount of money we have spent on the digital and on the technology side has been quite high, but from the numbers perspective, we are still not able to see it flowing through.
Resham, Kavi here. So in our vision and the way we want to drive the organization, I think the number one priority is to be an omni-channel retailer. I think that's something which, as a strategy, we have put it, as you rightly said, five or six quarters back or five or six years back, and we continue to drive it. Right now as we speak, and I think I mentioned it in the last investor deck or investor call, that we are in the process of upgrading our platforms and getting into the new version of both SS Beauty, which has just become stabilized, and then we will also have an upgraded platform, so ss.com.
So for the beauty part of it, I think we have not only upgraded the platform, but we have also onboarded talent who will focus specifically on growing the beauty online and omni-channel business. I think that's a clear thing, both from platform and human resources as well. In case of ss.com, the new app or the version 2.0, which is on a headless architecture, is already up and live. We are right now in a testing phase, and I think by the end of this month, we should be able to roll it out for the entire 100% of our consumer base. The day that happens, we will start seeing a lot of positive numbers around that piece as well.
So the investments have been made, I think, in the last stage of rolling out the app after ensuring that all any errors or any ticks are taken care of. So the priority remains the same, Resham. There is no dilution in that.
Okay, the second one is on Intune, and I presume that Intune in its initial years would have an impact on the overall consolidated margins. So, let's say if we just look at FY 2025, 2026, next one, two years, how much margin impact Intune could have on the overall margin for the company? Because earlier we used to mention seven to eight percent, nine percent kind of range of EBITDA margin pre-Ind AS. With Intune coming in, how is your overall margin trajectory looking like?
The overall margins, EBITDA level, Resham, for the company, it should, we are still, giving more or less the same guidance. Specifically on Intune, we do expect the store level, it should be positive, at the end of this fiscal. While it may not be able to contribute the same level of the overall company, it should still contribute a mid-single digit, in the next two years, contribution. So it should not. See, please understand, from the overall context, Intune is still probably 6 or 7% this year, and, it will go slightly higher, when it will go to the double digits next year. So the, in the overall context, it should not impact, though the EBITDA margin of Intune will be lower.
Okay, understood. And the last one is on the beauty business. I think you have done quite a good work there. How are you thinking about, let's say, next three years, five years kind of plan here in the overall beauty business? What will be the levers of growth, and what are your overall midterm plans in the beauty business?
Yeah, hi, this is Biju here. On the beauty part of it, you know, clearly, we are confident that we will continue the growth trajectory. Particularly in the near term, we will look forward to consolidating the good progress that we have achieved. You know, as I always say, we are quite focused on three levers. One is the expression, one is the engagement, and one is the education. Also, to the benefit, the distribution business is also really, you know, scaling up well. Quite some progresses that we have achieved with the brands that we have brought on board. Some good work that has happened in the short term, but again, this is a good testimony for the important things to come.
More importantly, we are just launching our private label, 100% private label, by the name Geology, and this is another important lever that we thought, along with e-com, Kavi spoke about the e-com piece, should help us really accelerate the momentum that we have achieved in the beauty space for a moment.
So from growth perspective, any numbers which you can give? Will it grow at any specific rate?
I can only tell you that it should get better. Around the same or better, that's the view I can give you.
Okay, thank you. All the best. Thanks.
Thanks, Rishan. Thank you.
Thank you. The next question is from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go ahead.
Hi, thanks for the opportunity. Couple of questions. Could you please share some initial insights or operational data from Intune? And, additionally, which key operational parameters are you tracking internally to monitor the format's acceptance and whether the product market fit has kind of worked or not?
Thanks, Tejas. I think for a business which is now close to a year old, with most of the stores, I think, which we have opened over the last six or seven months, Intune has had a good start. I think for us, two parameters are very important. One is: How is the IPT trending, right? And how are the conversions? Because they actually show the love which the customers have for our products. So we are seeing a strong trend in both IPT and conversions. They continue to remain steady. That's one part of it. Secondly, when we thought about Intune, we had envisioned a business or a brand which is kids first, and it's for a family with a strong kids' appearance.
I think this is something which we see that it is continuously doing well. Kids as a category continues to outperform, has a substantial contribution vis-à-vis other players in the market, and I think that's something which we also look at very, very strongly. If I look at specific product categories, there are product categories like T-shirts, where for which eventually we are becoming a destination, and that's the data which we keep on tracking very, very closely. But to answer everything put together, the love of the customers are shown by two things. One is the conversion and second is the bill value. And we are seeing that both in terms of IPT and conversion, there are very, very strong tractions which we are seeing.
Super. And last one, what are the plans for the Intune rollouts for next year or next three years? Where do you see this number kind of going to?
So for sure, we should be in a situation where we'll be our earlier guidance when we started the year was around 80, but we look at close to 100 stores by the end of this year. FY 2026, we should be opening another between 120-125 stores, and my sense is it will be a greater number in FY 2027. So we see this lot of opportunity sitting there. We have just started with clusters, so we have just entered very few markets. I think there is lot of potential which is there. And slowly, as we understand the consumers, learn the markets, also learn from what our competitors are doing, I think it becomes a good learning ground for us to break.
As I always keep on saying, the market size is very huge, and there is a lot of shift happening from unorganized to organized. So people who are able to offer great products at, or aspirational products at great pricing, which is what we want to try to improve, I think we are in a good space.
Sure. And the way you have designed the model and the way you are kind of planning the merchandise mix also, is it safe to assume that for this model to work, at least we should be clocking INR 8,000 or INR 9,000 per square foot throughput to make it profitable?
100%, 100%. And in the steady state, I think we are at a much higher number.
Perfect. And then last one, I'm not sure if it is relevant as on today, this question to your model, but the quick commerce, the way it is growing and the way they are diverting and the way they are envisaging themselves also in overall retail space by adding categories, do you see any threat coming from that point to your online ambition or omni ambition? And even to the offline, if they pivot very aggressively on fashion and general merchandise also, how do you see that shaping up for us, as the last one?
Yes, I think it's a brilliant question. So let me answer in two or three steps on this one. One, as we speak and even in the first question, I think Resham talked about our omni-channel ambition. So we are very clear that. So I will answer in two or three perspectives. One from the Shoppers Stop perspective, and then other from the Intune perspective. I think quick commerce is a great benefit for the consumer. We have to see how it evolves for fashion, and I think it's a very evolving thing. For us, we are looking it in two ways: One, for our departmental stores, we are looking at how we can offer within three hours, or how we can offer within the same day.
I think where our departmental stores become the center of service. So that's something which we are testing out. For our SS Beauty side, that's something as we speak, we are in the stages of testing, and I think by end of November, we should be able to drive that. And that becomes a very powerful statement from us, for the consumer. That is one. In case of Intune, little too early for us to comment, but but what we are seeing is, right now, when brands are engaging with the quick commerce sites, they are primarily engaging on certain product categories like, innerwear or I think solids or clothes, which become the point of it.
So we'll keep on evaluating and as and when we feel that we have to drive that piece, we will do that. So definitely, Tejas, this is evolving. It will impact all of us. We will see how to mitigate, and especially for departmental stores, we really want to drive it. And for us, I think quick commerce really, really expands the market size. So I think it's a great phenomenon and a good space to be in.
Thanks and all the best, and Happy Diwali to the team. Thanks.
Thank you, Tejas.
Thank you.
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, sirs, and thank you for taking my question. Firstly, wanted to just analyze the brand pull power of Shoppers Stop as a concept. So, and you could give any number or metric that you have handy, but specifically looking for, let's say, 90% of the stores are in malls, so the footfall of the mall and the footfall of the Shoppers Stop store in that mall, how has this ratio trended over time? Or any other thing that you track, which basically points to the pulling power of Shoppers Stop for footfalls.
Yeah. So I think two things, obviously, footfall is something which we look at. Then we also look at mall to store and how we go about it. Then the third KPI, which we look at, is the Net Promoter Score, right? I think if I talk about Net Promoter Score, it's quite high. It's one of the highest among the retailers. It's anywhere between 75% or 78% plus. I think that's a very positive score, number one. Number two, if I look at the mall to store conversion, that's also been steady and it has not deteriorated over the last two, three, four years. So I think that. And that's a KPI which we really measure continuously. I think the third thing which we always look at is also how are the conversions?
Whether, when the consumer is coming, are we able to convert it through the offer of brand and the offer of services which we have? And what we are seeing, Sameer, is that, our conversions are increasing quarter and quarter. So, as we spoke, in Q2, we grew in conversion, and we are seeing a higher number in October. So I think a lot of work is happening on that part. If I talk about the ATV, which is another thing which we look at, that has continuously grown for quarters. So I think there are a lot of these KPIs which we look at. And finally, I think, as a departmental store, we always want to drive the experiences. Experiences come through products, but it also comes through great service.
So we have a concept called personal shopper. And that, and I've spoken about this a lot, and because for me, you can get the best product, but if the experience is not good in the store, you won't be able to get that customer loyalty. So I, so for me, I think that's where the biggest KRI is, and we are seeing that our personal shopper contribution in our business has gone up around 22% last quarter, and that's the highest ever. And, and we see a higher number happening as we speak in the month of October. So I think there are these KPIs which we look at. And also we engage with our customers a lot. So there is a lot of customer listening, which we do.
In the last quarter, we must have spoken to around 40,000 customers, about their feedback on product, on the service, and trying to improve it continuously, so I think, Sameer, it's a mix of a lot of things. In retail, you need to look at all the aspects and drive it, and that's what we are doing.
Great, sir. Just a follow-up here then. So if mall to store is steady and SSS is not growing or is disturbed, then it's basically the mall traffic which is not coming through. Anything that you can do in this to drive, I'm not sure. So I mean, how to come back to that good SSS growth trajectory without depending on the mall?
No, no. So mall to store can be driven through various things. So we had a tech intervention, which was just called AR, where we were actually showing the fashion show for the new look, right? And those AR screens were kept in the center of the mall atrium. And when people used to see, then I think obviously things were driven around that. If you look at our September and October SSG, they look very, very promising. So it's also the entry in the mall, how we are converting them, how we are driving them. So there are multiple factors which we look at, right? And obviously, we are trying a lot on building the brand.
So if you would have followed the brand for a long time, I think after a lot of quarters, we are focusing on Shoppers Stop as a brand and doing strong marketing campaigns and giving reasons for the customers to come and shop. So I think we need to get the customers within two, two shopper, and obviously, as you said, if they are in mall, the mall to store conversion will increase. If they are in high street, obviously, that's an easier one. So we are driving this. So we are not leaving it to chance. There is a lot of work happening on marketing and 360-degree marketing, right? So right, and customer, consumer activations to drive it.
Got it, sir. That's, that's great. Second question on Intune, specifically looking for the sales per square foot , which you used to share around INR 12,000, couple of quarters back. So I understand that you have opened a lot of stores, but specifically the 22 stores that existed before March 2024, if you can give that number, and also overall EBITDA drag of Intune, pre-Ind AS for first half of FY 2025 on the INR 75 crores of number that you have reported.
Wait, Sameer, I did not understand the last sentence. Can you please repeat if you don't mind?
Pre-Ind AS EBITDA loss in Intune for the first half of FY 2025 on that INR 75 crores of revenue that you have reported.
Okay. At EBITDA level, it's a very insignificant amount, Sameer. So I mean, you know that pretty well. We don't share, vertical wise numbers, but all I can tell you, it's a low single digit number. It's nothing, nothing, a significant number on that. Coming to sales per square foot , see, we can't compare, a slack season with a peak season. Like for us, October, November, December is a peak season. This is, July, August, September. So as of October, for stores, whichever we have opened last year, is anywhere between INR 11,000-INR 12,000 per square foot .
Got it. This is helpful. I'll come back and get you for any follow-ups. Thanks.
Thanks, Sameer. Thank you.
Thank you. The next question is from the line of Gaurav Jogani from JM Financial Limited. Please go ahead.
Thank you for the opportunity, sir. So my question is with regards to the October performance that you mentioned. So, did I hear it right, that it is growing in mid-teens, and you are doing, you're hoping for a mid-single digit kind of like-for-like growth for the next six months, going by the performance that you are seeing?
Hi, Gaurav. So basically, the thing is in the month of October, right now, the trending for like-for-like growth is very similar to September. Maybe it might end up a little bit more, but we will see, because we still have a very big week coming up, which is the main Diwali week. But we are seeing similar like-for-like growth, like the way what we saw in September and October, which will result in a mid-teen performance for the month of October, maybe, which includes new stores, all the concepts put together. That's one.
If I look at the entire H2, what we were saying is that, given the fact that there are weddings going forward, and even if there's a little bit of a drop, we are confident that we will touch a five to, or a mid-single digit like-for-like. So if you look at October, for sure, the like-for-like October would be very similar to September, if not more, and we will touch a mid-teen number for October. The other guidance was on for the full H2, where we said that we are confident that we'll be a mid-single digit like-for-like, at least, if not more.
Sure, sir. Thanks. Thanks for the clarification. Sir, the other thing is on the new brand, the beauty, that is Geology, the private label brand. So it will be, will it be only an e-commerce brand? And how different it will be from the Arcelia? Because I think Arcelia was another brand in the beauty space that, you know, we are trying out. So any updates on that and this new venture?
Yeah. So Biju here again. Geology is a private label in the sense that it is developed by us along with Intercos, which is one of the best-in-class manufacturers in the globe. This brand is going to be available across all retailers, e-tailers, including Shoppers Stop. So it's a brand that will be available in the trade, and this is something that we really want to build, because this area, particularly with a quality manufacturer, we feel at a sweet spot pricing, we think that there is a very big opportunity. And this will be working on a end-to-end label. I wouldn't want to say private label alone. It's a label.
It will be an independent brand, and it will operate across all e-tailers and retailers available in the country.
And sir, update on Arcelia. I mean, where are we on that journey with Arcelia right now?
Yeah. Arcelia is a private label currently available only in Shoppers ecosystem. Arcelia, the clear winner within Arcelia are the fragrance range, and Geology is a 100% makeup brand. We are just making sure that we have the right to win in each of these categories, and Geology will be focused especially dedicatedly in the beauty space. It's the color space.
Okay. Okay. Got it, sir. Sir, my last question is with regards to the margins again. You know, given that the first half has been impacted clearly due to the overall environment not doing well, but what will be your guidance then in terms of the margins for this year and the next two years, in terms of the three Ind AS margins, right?
...Thanks, Korov. We did mention the last quarter also. Our non-GAAP margins would be in the mid-single digits at the end of this fiscal. I am talking about EBITDA margins. Next year, we definitely see an improvement at least by a hundred basis points, if not more than that. It's a bit difficult to say that number right now, but let's see. I mean, we are internally targeting a high single-digit number for the next year.
So that means, you know, because the way the performance has been in the first half, and, you know, the way we are guiding margins for this year as well, do we see a significant acceleration in the H2 then, in that case?
Yes. Yes, I think H2, as we mentioned, H2 should be something which will be much stronger, Gaurav, for us, both in terms of-
My question was, the cost would largely remain, you know, where we are right now, and given that the leverage that we have, that is the underlying thesis for this.
Your voice is fluctuating, or a bit difficult to hear us.
Yeah. So, so what I was saying was, yeah, the margins wide. I'm, my question was more on the cost side. You know, so we expect that the cost overall, largely to remain now, under control, that would be, contributing to this margin expansion. Is that understanding right?
Absolutely right, Gaurav. In fact, again, in the last quarter we spoke, I mean, internally, we have taken a cost reduction exercise. So, I know that the numbers in the first two quarters are not significant, but the drive is already on. We are reasonably confident that will definitely improve the overall margins.
Okay, sir. Thank you. That's all from me.
Thanks, Gaurav. Thank you.
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi, thanks for taking my question. Festive greetings to the team, and all the best for the upcoming season as well. Kavi, I wanted to check on two things. One, you mentioned that 4.8 million weddings are expected in second half, right? So overall, I guess for full year, the country sees about ten million weddings. So wanted to check if this number I heard is correct, because H1 typically had a lower wedding season, right? So H2 should see higher number of weddings. So 4.8 million, is the number correct, that I heard?
Hey, 4.8 million weddings is in the second quarter.
Second half.
Second half. I'm sorry, second half. That's what it is reported in Economic Times, if I remember right, it's either second October or third October dated. So, it was all in the press, saying that the second half will have close to 4.8 million weddings. Whether that will turn to 10 million weddings for this fiscal, I don't think so, because the first half, the weddings were far and few.
Understood. Understood. Second, wanted to check that we are planning to open about sixty-five stores across formats in H2. Plus, we must have invested in inventory also for existing stores in preparation for the festive season. Do you foresee a rise in debt levels from H2N or we'll be able to sort of service this expansion through internal approvals?
No. We expect the debt levels to marginally come down from September 30th .
Understood. What would be the overall CapEx and working capital investments, Kavi, for these 65 stores, if you could just highlight?
Let me give you the number. For the full year-
Yeah.
We expect the overall CapEx to be anywhere between INR 200-INR 230 crores. Given, take here and there, because our CapEx includes not only Intune, departmental, beauty, home, plus also renovation. Like, for example, what we renovated in Malad almost costed us more than 20-odd crores, between 20 and 25 crores. So it includes renovation as well as all these things. In addition to that, we are also investing 20 crores in a new warehouse in Bhiwandi. So, I mean, if I add all these things, our total CapEx will be anywhere in the range of INR 200-INR 240 crores, Devanshu.
Any working capital investments, or is this included in this number itself?
No. Working capital will be different. See, working capital, by and large, will remain at the same levels. Except for Intune, we expect a marginal increase in the inventory. That's it. Other than that, you are aware, rest of the brands are,
Yeah, yeah.
That's not the issue at all.
Understood, Kavi. Thanks for taking my questions.
Thank you. The next question is from the line of Akshay Kothari from GHP Group. Please go ahead. Mr. Akshay, I would request you to unmute your line and speak, please. We do not respond from the current participant. We will move on to the next participant. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Kavi, just a question on non-app business. You know, we have seen a lot of global retailers, you know, position themselves, department stores to non-apps. You know, you are one of the biggest non-app retailers in India with more than 40% contribution.
...And non-apparel's margins are also significantly higher. So is it that in the apparel business, the pain is much more to you today versus the non-apparels? And three years out, how should we look at the mix between apparel and non-apparels for the departmental store?
Thanks, Ankit. You always ask strategic questions. So, okay, let me try to answer them. So as you rightly said, so if you look at Shoppers Stop journey, we started with apparel heavy, and then over a period of time, we have moved to 45% non-apparel and a 55% apparel contribution. If you look at the non-app business, it works for us in two ways, and there's a challenge. How it works for us is that in this journey of premiumization, it's always easier to premiumize to non-apparel. So I think we have picked up categories like beauty, watches, handbags, and we are seeing amazing benefit out of it. That's one. The sales productivity of non-app is much, much higher than of apparel business. The only challenge for non-apparel is the margins are lower.
But the fact that when we look at the business, we look at GMROPS or the net margins, which we get from the categories. I think non-apparel is the preferred category for us, and we'll continue to drive it. If you ask me how I see the business going forward, in the next three years, I see either a 50-50 or a 55% towards the non-apparel and a 45% towards apparel. I think that's the zone in which we'll be slowly driving the business. Obviously, it has to come through getting the brands which are only available with you, to doing tie-ups with your partners in beauty, in watches and handbags, which are exclusive for you. So it's a journey in which we are in.
In certain categories, we are already ahead in that journey, in certain categories, we have just started the journey. But I think non-app is a clear differentiator for us, and it's something we'll continue to drive. Other product category which really works very, very well for us is footwear. I think there is some amount of churn in the industry right now because of BIS. But as it settles down, I think footwear is another interesting category. As we speak, we have partners like ECCO, which have come to us very, very strongly, and I think we are looking at performance there. And obviously, we also, if you would have seen, we have just opened five home shop stores. We are seeing a lot of traction in home.
The early signs are very good, and I think there's a lot of opportunity there because the market size is huge, and we are a very small player there. So I think that's another area of growth for us going forward. But to broadly answer your question, non-apparel is an area of focus, and I see them growing much more faster than apparel.
So today, you know, how many consumers shop for non-apparel? Because the ASP would be much higher, so how are you targeting these consumers? No, because if you look at the malls' layout as well, they're also focusing on a lot more area to non-apparel guys today, right? So competition there will also increase, not from the apparel guys, but from a D2C brands perspective.
So as I said, because we are in this journey of premiumization, lot of the brands who want to be in a multi-brand environment and want to have a penetration across the markets, for them, Shoppers Stop is a great offering. We have seen across product categories, as we have premiumized, brands have moved them and have been able to get that customer, that's one. Second, I think we have got a very strong loyalty base. In a loyalty base of 11 million, we also have personas which focus and sell a lot of non-app. So I think through the mix of that, through our loyalty, we have been able to drive and target that customer. We also do a lot of, you know, we do also a lot of cross-category driving.
For example, as we speak, one of the differentiating factors which we have is, we have a mix combining with apparel brands and seeing how we can drive revenue. So I think for us, the non-app is the ladder to start the journey of premiumization. And we provide that 112-115 stores base, which not many players have. So I think that's the whole thing. Also, if you look at our layout, as you enter Shoppers, you have beauty, and then you have the non-apparel. So to get a ground floor for a lot of these brands becomes very critical part, and I think that's how we are able to drive these partnerships with them.
Do you think in Intune, this non-apparel journey will start after a couple of years, once the app settles down, or Intune will be more of an apparel player, not a non-apparel player?
So definitely as we mature the brand, we will have the play of non-apparel as well. I think, as I always keep on telling people, that is just the start for Intune. As it settles down, we will also start getting learning. So I wanted to fix the... or we as a team want to fix the apparel and penetrate those markets. For example, if you're moving to north, right, you need to fix the piece of winter wear and how you will do in Intune. I think there are some lessons and learnings which we are capturing, but for sure, FY26 is when you will start getting the sense of non-apps in Intune.
Sure. And Karuna, just a question on debt, part. You know, our debt has increased, in the first half, you know, given obviously subdued performance. Do you think, you know, you had given us a 3-year target of INR 300 crore CapEx each year, and you are being debt-free. Do you think you're still sticking to that target of yours?
Not this year, Ankit. It's again, a great question. Not this year. This year, we will still have a debt of INR 120-130 crores net, but next year onwards, we should able to come down to lower level. And from year two, we should still see a surplus, because.
... I think you also made a statement, right? Because of the lower EBITDA, the debt is higher. Otherwise, we should be able to manage less than 100 crores next year and probably a debt-free in year two, Ankit.
From a CapEx perspective, are we exploring the franchisee route in Intune earlier than expected? Or do you think that will still be from next year onwards?
Ankit, I think in couple of quarters you will hear from the, from us on that. It's, it's WIP as we speak. In couple of quarters, I think we'll be able to share.
Sure, sure. Thank you so much.
Thank you.
Thank you. The next question is from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.
Yeah, thanks for the opportunity. So my first question is, how the company is trying to position itself in the market. Like, should we look at Shoppers Stop store as premium offering, competing in that area, and, Intune as fast value, fast fashion value offering, competing in that respective category? What are the thought process here?
Gaurav, thanks for the question. For Shoppers Stop business, we... The vision is that we are a omni, and what we try and drive every single day in the organization is be the India's largest and the best omni-channel premium retailer. That is the journey in which we are on, and every single management decision we take as a team is focused around that. In case of Intune, the focus is very clearly we are in the segment of value fashion, and that is where we want to be India's number one or and India's leading family first fashion retailer.
Okay, okay. And the other question is, you know, the appeal of the store matters a lot for many customers and impacts their decision making. Also, the efficient utilization of the space in the store matters for the business. How are you working on that front in terms of, you know, renovation of existing stores and new stores and make them more effective? Because, you know, these things will lead to improving footfalls and eventually higher sales for the company. So can you throw some light on that, please?
Okay. So there are two parts of it, and let Karuna will answer the CapEx part, but I will try and answer the decision-making part of it. So there are two things, Gaurav. One is we look at the brands and say that what are the brands which perform well for us and which don't perform well. So in the cases where we feel that the brands are not performing, we do a churn of brands. So that's one thing for sure we do. In terms of your, if you're looking at the store, we have this continuous tracker around the life cycle of a store.
So we know that after a certain period, the store starts having a trouble in terms of whether it's the throughput or the number of walk-ins, and that is when we go for a store renovation. Typically, as we speak, around 70-odd% of our stores are with the new identities. I think that's something which we do that. In fact, that's in that context only, which we spoke about in Inorbit Malad, which is where we have taken the whole store look and feel to the next level. And if you are based in Mumbai, Gaurav, we would love to show you the store, right? So I think that is the journey which we are on. And obviously, wherever feasible, we optimize space as a part of renovation.
So for example, Malad, we had three floors. We have got all the brands now on two floors, and I think the throughputs are really, really strong.
Yeah. Coming back to your next question, Gaurav, on renovation. Normally, we spend anywhere between 1,500, 1,600, or 1,700 per sq ft on the renovation. And every year, we internally evaluate which are the stores we need to renovate, and accordingly, we renovate anywhere between 4-8 stores every year. Sometimes it happens in the first half, and most of the time it happens in the second half, because February and March are the peak of slack season, so that is the time it happens. So there is a structured program within the company, which are the stores we have to renovate, and we do it without any phase.
Okay. Okay. Very nice, sir. Thank you. Bye.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Shalini Gupta from East India Securities. Please go ahead.
Sir, two questions at my end. One is that we found we would have found some amount of festive purchasing, which has happened during the quarter. Yet, we find that the gross margins have come off. So why would that be? Number one. And number two, we find that the other in- that the interest has shot up quite substantially. In fact, it's double what it was in the first quarter. So what is the reason?
See, in terms of gross margins, last year also, we had end-of-season sale, and this year also, we have end-of-season sale. Margins are other than, I mean, post-August fifteenth, it's a full price sale, so the margins would be something similar to last year, except there were some one-time benefits last year that did not come up, but that was not significant. That may be 30 to 40 basis. That may not be significant. I, I did not understand your second question. What you were saying?
No, what I was saying is that in this quarter we find very high interest expense at INR 122 odd crores. So I'm just asking, what happened? What changed between first quarter financial year 2025 and what has changed now? Because the interest expense has doubled.
Okay. So, Shalini, the interest as per the GAAP includes the lease cost. If the lease cost goes up, the depreciation and the interest cost goes up. That's as per the accounting standard one one five. That has nothing to do with the actual interest cost, what we pay on the loans and overdraft. If you see our investor presentation where we have given financials as of FY twenty-five, we have clearly given both the non-GAAP and GAAP financials, and if you see the finance cost, it remained exactly INR 6 crores last year and INR 6 crores this year. So you have to see that, because the interest cost of the GAAP includes the lease interest. If the lease interest goes up, the interest, the finance cost will also go up.
I mean, why is it happening only in this quarter? It would have happened in the first quarter as well.
Yeah, it has. No, it could have, right?
But in the first quarter, we find an interest expense of around INR 61 crores, and that has shot up to 120-odd crores. That the lease cost would have been included last quarter also.
No, Shalini. You're seeing in the first quarter, the finance cost has gone up by... I'm talking about the GAAP numbers. The first quarter, the finance cost has gone by INR 6 crores, and the second quarter has gone by INR 9 crores. Totally, INR 15 crores has gone up in the first half. Again, I'm repeating, it's purely because of the lease rentals. If you see sequentially, our lease rentals are higher. That's the reason. See, when we open the newer stores, obviously the interest cost, which is nothing but disguised as a lease cost, will automatically increase. My only request would be, please go through the non-GAAP financials, where the actual interest costs remain constant at six and six.
Thank you. A reminder to all the participants, you may press Star and One to ask a question. The next question is from the line of Aditya Desara from Motilal Oswal Financial Services. Please go ahead.
Hello.
Mr. Aditya, I would request you to please use your handset.
Hello, am I audible?
Yes.
Yeah, you are audible. Go ahead.
Mr. A-
Aditya, hi.
Hello.
Yeah, so basically, as you mentioned in the last con call, that you have made a conscious effort to reduce private brand inventory by INR 65 crores, so can you elaborate on the specific strategies which are implemented to achieve this reduction?
Sorry, can you- reduction in private brand of INR 40 crores. Aditya, I, I missed it. I missed that. So can you please, can you please repeat the question?
Hello. Yeah. So in the last conference call, you mentioned a conscious effort that you have made to reduce private brand inventory by INR 65 crores. So can you just throw some light on specific strategies that you might have implemented to achieve this reduction?
That-
And how these strategies are expected to impact your trading margins in the coming quarters as well?
Okay. So Aditya, thank you for the question. I'm sorry I had missed it in the first go. So there are two parts of the strategy which we did.
Okay.
One is we looked at the brands and said, can we reorganize the brands and see whether some brands. You know, so especially in menswear, we had brands which were, of course, getting replicated in the format. So for example, we had a lines, and we had a jeans and a casual. We had brands replicating their presence, so we looked at the brands and made them cleaner, in the sense that each brand will talk to a certain customer and certain value. So that is one part of it. Second, we looked at our OTB buying the process. We have also implemented Goldratt, which is a merchandising software, which looks at the real option plan for each store, each unit, and then throws out the inventory requirement at option level and also helps us in the entire interstore transfer.
With the help of these, we've been able to put the right planogram, get the right assortment for each, which will help us order less but order right. So the idea is not to have a lot of inventory, but the idea is to have the right inventory in every store. Got implemented over Amar and, so Q1 and Q... And that is-
Oh, yeah.
We are seeing the benefit of that. In terms of margins, I think we will have a substantial impact of margin expansion, especially in Q3 from private brands. Even if we speak about Q2, we have seen that there's a margin expansion in private brands business, especially apparel, and we see that, and we forecast that it'll increase further as we go forward, so I think a lot of discipline has been put in terms of the way we are ordering and managing the business. We had some excesses of the past, I think, which we have now got over, so also very confident that this is something which will be an increasing in progress.
One of the key factors which we drive and after is the demand from the private brands, and we are seeing a strong expansion there.
Okay, understood. Thank you. And one last question from my side is, in light of, you know, growing competition from the EBOs, how is Shoppers Stop differentiating its department store experience and strengthening brand partnerships to attract retail customers?
So Aditya, this is something which we also-
Like beyond premiumization, what strategies are being implemented?
Yes, yes, Aditya. So if you look at the customer who comes and shops in our departmental store, he's the customer who is looking for options, and he wants to look at different product categories, different brands within the same product categories, people who want to shop across product categories. So I think that's something which we really build on. And if you look at each of our product categories, there are some leading brands which are clearly defining that customer journey. So I think that becomes an important thing.
In fact, we have been speaking to brands, and we are very happy to note that for most of the brands, especially in markets like Pujo, which has just finished, the departmental store business was more than, or growth are more than their own EBOs. That's one part of it. So our promise for the customer is based around service, experiences, engagement, the cross-category shopping, the personal shopper, which comes in and helps the customer to shop right, and for... and able to predict and satisfy that consumer need. I think there are a lot of elements which are there, Aditya, which is, of course, product category, expansion, service, right? Which helps us to differentiate from any brand.
Okay, understood. Thank you so much, and all the best.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question. On behalf of Shoppers Stop Limited, that concludes-