Ladies and gentlemen, good day and welcome to the Q4 FY 2025 earnings conference call of Shoppers Stop Ltd. 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Mamta Samat from Dentsu Creatives. Thank you, and over to you, Ms. Samat.
Good morning, and thank you all for joining us on the Shoppers Stop Q4 FY 2025 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 risk 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 would now request Mr. Kavindra Mishra for the opening remarks. Thank you, and over to you, sir.
Thank you, Mamta, and thank you, Michelle. Hi, good morning, everyone, and hope you all are doing well. I have with me Karunakaran, our CFO; JP, our FP&A lead; and Rohit, our IR lead with me. We will also have Devang, our interim lead, at a later stage. The investor presentation is available on our corporate website and on the stock exchange website. I request you to go through the same if not already done. Similar to last quarter, we have a few slides with immersive experiences on our different campaigns. I would like to begin by sharing a perspective on the operating environment during the quarter, followed by our performance and the strategic objectives going forward. The overall sentiment improved as we progressed, despite the continuous advancement of end-of-season sales every year.
I'm sure you all would have viewed the slides of H1 versus H2 performance of Shoppers Stop, which we had kept at the beginning of the investor deck. Especially for Shoppers Stop, the secular trend of premiumization remained resilient with premium products going ahead. This also indicates that consumer needs and aspirations to upgrade continue to evolve, and the aspirations remain high. Let me cover this quarter's performance with key KPI metrics. First, let me start with customer entry. There has been a steady progress in the customer entry in the last six months. We had a marginal decline of 4% in March, as against a 9% decline at the beginning of the year. As I speak in April, we are witnessing customer entry at the same level as last year of April. Our ATV has been consistently increasing with 8% growth in quarter four.
In the last two years, our ATV has increased by 17% and with 8% CAGR. Similar to ATV, our ASP has also increased by 4% and IPC by 4%. On the financial performance non-GAAP, sales increased by 4% with 3% like- for- like. Our EBITDA had a marginal growth of 2%. Our sales growth has been consistent in departmental stores, and profitability trends are improving. Our new business Intune had a tough January and February month due to the overall slowness in value fashion, and that partly offset the profits; otherwise, we would have made this quarter. On the GAAP accounts, due to the large store opening, particularly Intune, we have additional depreciation in interest as per Ind AS 116 of INR 15 crores. If you need any specific details, Karuna can provide that post my speech.
We had a marginal decline in beauty segment for the first time in the last eight quarters. This is primarily due to aggressive offers in the market on value and market products. We preferred full-price sales with sustained profitability. We opened 21 stores, which includes 15 Intune stores, five departmental stores, and one beauty store. For the full year, we have opened 73 stores comprising of 51 Intune, nine department, seven beauty, and five [Shoppers Stop] stores. In summary, we invested INR 52 crores for the quarter and INR 160 crores for the full year in Capex and INR 32 crores in deposits for the full year. For the full year, we reported revenue of INR 5,427 crores as an increase of 4% over last year. Our beauty reported sales of INR 907 crores is an increase of 2%, and private brands reported sales of INR 639 crores declined by 7% versus FY 2024.
Though for Q4, it remained flat. For the full year, we reported an EBITDA of INR 183 crores, PBT of INR 18 crores, and PAT of INR 23 crores. Our margins have increased in private brands, helping us to achieve an overall increase in margins by 730 basis points in Q4 and 530 basis points for the full year. This is primarily due to increased price sharpness in positioning and better inventory control. In the last two quarters, our departmental store business has outperformed with improvements in customer entries and other KPIs. I'm extremely glad to share that the larger format has managed to achieve growth in all parameters. I have been saying for the last two, three quarters that we are rationalizing costs. At the like-for-like level in departmental stores, the costs are largely contained except marginal increase in rent.
We have taken a conservative view of some of the expenses while creating tax provisions. However, post the tax audit and based on past assessments, we are sure that these expenses can be claimed as reduction, and consequently, we have one-time favorable impact in creating deferred tax assets of INR 7 crore, resulting in negative tax for this month. I've covered the performance and KPIs. Let me now dwell on premiumization and marketing campaigns, which resulted in enormous success for FY 2025, especially in the second half. I am confident this will yield further improvement in overall revenue and other KPIs in FY 2026 too. Our first key driver for a momentous change in India's consumer landscape is undergoing a remarkable transformation driven by demographic changes, economic growth, and evolving aspirations.
The shift towards premiumization reflects deep socioeconomic trends as consumers transition from prioritizing value for money to embracing quality, innovation, and aspirational products. We at Shoppers recognize this 18 months back and have constantly increased our premiumization in our stores through offering to customers. Changing the store image to have customers as one-stop destination to purchase all the premium products from apparent to non-apparent. We approached premiumization in following ways: personalized campaigns that align with premium customers' preferences and habits, diversified the product range with new product lines in opportunity categories, and improved customer journey to the premium-picking customer. Cross-selling to increase the overall basket size, and lastly, adverse promotion strategies to align customer preferences. This has resulted in two significant changes for us. On ASP and ATV, as I spoke a few minutes back, has increased significantly.
I also request you to please go through the page number four and five of the investor deck, wherein we had listed the premium products listed in the last 24 months in Shoppers Stop. I also want to add that there are two marketing campaigns which are extremely successful in FY 2025. First being India Bride Shoppers Stop, a comprehensive initiative offering a wide range of wedding-related products and services. The campaign aims to be a one-stop destination for all wedding-related shopping needs, catering to brides, grooms, and guests. It includes a curated collection of wedding attire, beauty products, fragrances, gifts, as well as personalized assistance through wedding concierge services. We enrolled 25,000 customers with an aggregate sale of INR 106 crores in the last quarter and ATV of INR 44,000. Gifts of Love campaign is a selection of gifts suitable for various occasions to express affection.
The campaign focuses on celebrating different types of love with a diverse range of products available online and in store, including apparel, beauty, home decor, and accessories. Other than this, we also collaborated with ZTV for a Shaadi Mubarak show. The show, which airs on &TV and ZEE5, features influencer couples and highlights Shoppers Stop as a go-to destination for wedding shopping. The collection includes outfits and gifts, and viewers are encouraged to visit Shoppers Stop stores online to explore the offerings. Let me talk about the capital allocation. Overall, for the year, we had invested INR 192 crores in fixed assets and deposits and another INR 126 crores in working capital, primarily in our businesses of Intune and beauty. This has resulted in an increased borrowing of INR 137 crores during the year.
The increased borrowings are primarily to finance our new business working capital via Intune and Global SS Beauty, besides a few brands which we have onboarded as Shoppers. However, we are planning to reduce the working capital by INR 100 crore, and for FY 2026, our entire CapEx will be funded through internal accruals. We expect the borrowing to reduce significantly by the end of this fiscal. First Citizen. Our First Citizen contributed 82% with 12.3 million First Citizen customers. Our repeat customers are now 69% and improved by 3.3% versus last year. As you observe, the contribution from FC customers has been consistently at 80% throughout the year. Our premium black card customers contributed 19% with a growth of 38%. We had the highest enrollments of First Citizen black card and silver card during the quarter.
We had several programs for our First Citizen members to engage them and have a unique customer experience. This would increase customer entry, augur well for future growth, and the confidence of customers in Shoppers Stop. Personal Shoppers. Our Personal Shoppers continue to contribute 24% of total sales, with an increase of 48%. Our faith in investing in this program has yielded satisfactory results with the sales from Personal Shoppers exceeding INR 1,000 crore last fiscal. As we are on the journey of premiumization of customer experience, we believe Personal Shoppers is an important asset to drive revenue and experience growth. Department Commerce. Let me talk about Shoppers Stop first. I have discussed the premiumization of our departmental store. Our Malad Store post-renovation has improved its productivity significantly.
As I speak to you, we are engaging with a number of international brands to have in our departmental stores to increase the premium quotient. Our departmental store for the quarter had a strong like-for-like growth of 3.5%. The investments made in marketing campaigns, renovations, and contemporary brands continue to have positive results, such as two quarters of mid-LFL profitable growth. We are witnessing revival in departmental stores with increased customer entry and conversion due to our unique customer journey, a key pillar of profitable growth for FY 2025, and is expected to increase in FY 2026. As I said before, for the last two consecutive quarters, this format has achieved all the KPIs. Beauty. On a standalone basis, beauty revenue declined by 6%, but at consolidated levels, it has increased by 3%.
At a consolidated level, our beauty sales were at INR 264 crores for the quarter, and for the full year, it was approximately INR 1,100 crores. We had several customer engagement programs such as Beauty Carnival Ino rbit Malad, 10 Beauty Fair events, and beauty workshops. In addition to that, we have increased our social media presence on YouTube, Instagram, and all the relevant channels. Let me talk about Global SS Beauty. Our 100% subsidiary started two years back has reported nearly 100% increase in sales this year, with a sales of INR 236 crores, with EBITDA increasing by three times. We've added four boutique EBOs of the above, including three for Armani and one store for Prada, besides POS counters with our retail partners. We've also partnered with Zepto to ensure that these products are available in shortest time and Wellness Forever for wider distribution. Let me talk about Intune now.
We had a challenging Q4 for Intune. We had high offers in January, leading to lower margins. You are aware that this is the first full year of Intune and we'll be able to do the post-selection as we increase the sales. As I said before, during the quarter, we opened 15 stores and plan to open another 12 stores during this quarter. I reiterate that we are staying firm and will continue to invest in Intune. We believe that there are significant opportunities in value fashion as they are largely unorganized and untapped. We are fairly confident that fiscal 2026 will be a stronger story. We also, and I think Devang will talk about it, that how the business has grown and how the business has picked up in the last two months. Now, we'll talk about the outlook for the coming year.
I firmly believe that our industry is expected to maintain the growth momentum in 2025 driven by rising disposable income, urbanization, and the growing middle class. We'll focus on premiumization, focus on customer-centric experiences, and the increasing adoption of technology, particularly artificial intelligence and automation. IMD has forecasted a good monsoon, which augurs growth momentum for industry. I believe from Q2, retail growth should gain further momentum. We'll focus on key strategic pillars such as brands, beauty, and expansion. We are confident our beauty business will continue to grow, and our 100% subsidiary Global SS Beauty will have another record year in FY 2026. We are planning to expand this fiscal by opening six to seven departmental stores and with market conditions improving, close to 40-60 Intune stores.
At the operational level, we will also invest in marketing through our campaigns to drive both our short and long-term strategic priorities, as our past results have been very encouraging. We are continuously rationalizing the cost, and we are confident we'll sustain this year as well. I will conclude with this now and take the questions from you. Thank you.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on the touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only hands 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 Sameer Gupta from India Infoline. Please go ahead.
Hi sir, good morning and thanks for taking my question. Sir, I just wanted to understand on the margin bit. Now, this year, if I look at the other expenses line item, it's seen a 20% increase, and this year has not been a very large year in terms of area expansion. Even if I look at overall area, including Intune, it's up just 5%. I just wanted to understand what is the nature of these other expenses over the year, and can we see a moderation going forward and some bit of color on that?
I think you are referring to the GAAP numbers. I mean, if you refer to the non-GAAP numbers, the increase is 10%, primarily coming on your new businesses. I mean, more than half of them is coming in on Intune businesses. That's the reason there's an increase of expenses in 10%.
As Kavindra said, at the LFL level in the departmental store, we are largely flat, probably 1% or 2% increase, and that is also coming from the departmental stores. I mean, just to conclude, the increase is primarily because of the new businesses what we have.
Got it. Got it, sir. Just to follow up on that, this year, full year is around 3%, even if I look at the non-GAAP margin overall, and I do not include other income in this, so there could be some differences in our both calculations. How do you see this going forward? Let's say the LFL growth pickup, which is contingent on overall demand, that does not happen. Do you see further moderation in this number, or we are good at this number, at least maintaining this number, even if it is a soft year for us?
Sameer, this is a very hypothetical question, Sameer. We do expect a decent LFL growth this year. As I said, I think, again, Kavindra said during the entire, we have rationalized all the costs. Last year was a, we had a good reduction in the cost. If something does not come up to the expectations, we will go back to the drawing board, and then we will see what best we can do about that. At the cost level, we are almost flat this last year.
Sameer, just to add what Karunakaran has said, if you look at the first half versus second half performance for Shoppers Stop, and especially for the box, we can really see a lot of momentum happening in terms of the like-for-like, and the customer entry is also going in.
I think we are in a very good, in the right way in which we should be in our business.
Got it. One last, if I may squeeze in.
Please.
Intune, I heard you have mentioned 40-60 store additions in FY 2026. Now, when we started FY 2025, we had planned 75 plus stores, if I remember correctly. We have ended up with some 50 stores. Going forward, the guidance is around 40-60. Is it because, I mean, your initial calibration, we had assumed things which have not panned out? Are there logistical constraints in opening that many stores? Just wanting to understand.
Hi. Thank you, Sameer, for the question. First of all, the FY 2025 closure was more an environment constraint. I think we were all aware of the environmental limitations that were put on the NCR territory as far as construction was concerned.
That set us back by 45 days, which is why we ended at a few stores short of what our estimate was. Otherwise, the pace continued consistently throughout the year. Going forward also, the intention is now we have got a strong network of stores, and we have our job cut out in terms of improving productivity of operating stores and incorporating our learnings on an ongoing basis. That is what we are doing. While at a management level, we stay committed to expanding Intune at a fast pace. I think Kavindra mentioned 40-60 stores this year, and I think that number does not have a constraint of getting increased in the middle of the year as the outlook improves. I think 40-60 is a bare minimum expectation that the management has put. There is no upper limit to how many stores we will open.
I hope that addresses your concerns.
It does. It does. Thank you so much. I'll come back in the queue for follow-up.
Thank you. We'll take the next question from the line of Gaurav Jogani from JM Financial. Please go ahead.
Hi sir. I hope I'm audible.
Yes.
Yes, you are. Hi, you're audible. Y
eah. Sir, my first question again is with regards to the margins. By margins, if I put Sameer's question the other way around, hypothetically, if we do achieve a mid-single digit kind of SSSG for the coming year, that is FY 2026, what kind of margins at least can we expect, given you already work so much on cost, and then the other environment also kind of picks up? What kind of margins would you be targeting over the next couple of years?
We would be targeting slightly higher than mid-level EBITDA margins.
Again, I'm talking about non-EBITDA sort of. Not EBITDA, sorry.
Not EBITDA. Sure, sure. This would be largely driven by the leverage benefits, right?
Absolutely right. It would be primarily driven by the leverage benefits. You are spot on.
Okay. Okay. Sir, my second question is with regards to Intune. I mean, I did hear in the opening remarks you mentioned that due to the higher discounting, the profitability in Intune was impacted. In general, also, would like to understand your perspective of the overall environment, because if you look at the other value apparel retailers, they have reported very strong SSG growth numbers. In fact, their store additions have also remained strong over the last quarter as well. Any differentiation that we see, what is the reason for the same here?
Thank you, Gaurav.
I think if you look at the 71 store network that Intune has, the majority of those stores are less than six months old. When we try and break this down into stores which are more than a year old, more than six months old, and less than six months old, there is a very clear trend line of improving productivity that we see. I think the broader sense that you have of the value fashion retail, we are also seeing, is just that our network average age is a lot younger than what the mature brands have. That is point number one. Point number two, I think pertaining to the outlook, we are also equally confident of Intune matching, if not beating, the industry standards. I think Kavindra also echoed that in his initial comments.
Sure.
Given that by next year, a good chunk of your stores will be completing a year, and given the overall momentum that we are seeing in the value fashion, there is a high expectation of at least high single digit to low double digit kind of an SSSG. Would you echo with that sentiment, or would it be any different for you?
We would. I think that's what we are seeing also. I think as we age, the LFL growth will become more and more relevant for us, and we are seeing the trend of older stores becoming much better as they age. I echo that sentiment wholeheartedly.
Okay. Just lastly, again on Intune, if you can throw out what kind of revenue per sq ft numbers you would be clocking in stores at least with a six-month or older?
Older stores, Gaurav, are north of 10,000 SPS on an annualized rate.
Okay. Okay. Thank you so much. That's all for me.
Thank you. We'll take the next question from the line of Ankit Kedia from Philip Capital. Please go ahead.
Yeah. Hi. My first question is on the departmental store opening. Initially, last year, we had guided for 12-15 store openings. We ended with nine stores, and we closed nine stores. Now, FY 2026, we are guiding six gross store openings, and I'm assuming there will be two-three more store closures. So again, we will be ending up at three or four store openings, which is less than 4% of area addition. On that, if you're talking of 4-5% SSG growth, the growth in departmental stores will be single digit. Is that a good understanding despite premiumizing? Footballs are still weak, and ATVs are increasing.
KPIs are doing better, but the growth is going to be single digit in departmental stores?
Yeah. I think, Ankit, see, as you mentioned, the KPIs are all looking good. My sense is that the customer entries have made a big U-turn. From where we were at the start of the year, we have actually turned it completely around, and April, as we speak, would be a 0% or a little bit in positive. In terms of number of opening of stores, we are guiding at six to seven. We are always open to any opportunistic thing, but I think we just want to be very careful that the departmental store business for us is a profitable growth channel. While we are investing aggressively in beauty and Intune, the profits should be thrown by the departmental stores. I am not worried on that extent.
Also, what we are trying to do is, and as we speak, most of our bulk of our store closures has already been done. You will see the positive impact of that coming in the profitability as well. I think the right way, and if some great store comes in, because here we are also, because departmental stores being departmental stores and big projects, we are also at times hampered by the availability of the right location, right mall. I think fundamentally, because this piece is doing well, we are not limiting it. The visibility right now in terms of what we can open for sure is this.
Kavindra, just a follow-up on that. If I look at Westside, they opened 40 stores with an average incremental store size of 30,000 sq ft.
What is the difference between their stores and our stores, and why are they getting availability? Is the rental difference, or are we looking only at malls, and they are looking at high street locations, and are we adverse for going to high street given that we want captive footfalls of the mall? Is it a balance sheet trend where we do not want to take debt and grow and only some internal approvals, and hence we are opening single digit stores?
I think this is an amazing question, Ankit, but truthfully, on parts of it, once the nature of the product which they sell versus us is very different, the price concept which we operate and vice versa is very different. The catchments are very different, number one.
Number two, we would prefer to open in the mall because I think that's somewhere where we get the captive footfalls, and I think that's very positive for us. Third, I think most importantly, as I said, Shoppers is a profitable growth business, and we will obviously look at the balance sheets and say that we want to grow through internal accruals and reduce our debt. I think that's a clear plan which we have for this year, and we would like to work around that.
Sure. My next question is for Devang. Devang, within the half, one and a half years operation, we have closed some Intune stores as well. What is the learning which we have in the last one and a half years on these store closures?
Which type of stores are working for us, be it malls, high street, tier two, metros, and incrementally, where is the addition coming? Because in 71 stores, we are already in 30 cities. We have a good knowledge of Pan India presence where we are. Where will we incrementally add new stores?
Thanks, Ankit. Ankit, the learnings, as you said, are very clear and deep. I think what we've seen is one good part for us is north, west, and south, all the three regions where we have a strong presence. We are equally doing well in each region, so it doesn't come across as a region is very good or very bad for us. That's a good starting point. Secondly, we've seen that malls tend to be a lot better than high street or standalone stores for us.
The gestation period is lower, so I think we've consciously tried to over-index malls. That's the second point. The third point is on learnings around the store closures. I think all the three store closures that we've had were predominantly catchments where organic walk-in flow was very, very low. Even though internal efficiencies were significantly better than the average efficiencies that Intune stores have, the cost-benefit analysis of pumping in money to get their minimum number of walk-ins was just not making sense. I think going forward also, we will be ruthless about where we don't see the light at the end of the tunnel in terms of organic flow of walk-ins. We will take hard calls. These were the overall learnings. I hope this addresses some of your questions.
Sure. Just the last one, if I may, on inventory.
How is our inventory in Intune? Typically, we are working on how many terms at the store level, and from a supply chain perspective, because some of the other retailers are having weekly drops, their terms are more than one a month. Just wanted to understand that on Intune, how is that moving?
Yeah. I think from the very beginning, what we've used as a guidance is a six-week cover in the stores, and barring some blips on overall demand up and down, that guidance still holds on. As far as freshness, I mean, as far as the movement of terms is concerned, I think we've also mentioned at Beck's that we started doing weekly fashion drops, and I think that's something that this format needs to do.
We are seeing a significant improvement in the initial throughput of new launches now that we've got the cadence of weekly fashion in. I think six weeks at a store level is a guidance. We are more or less there, unless there's a bad month where on virtue of a lower sale, the cover shoots up. In absolute terms, just inventory at the store is pretty much what we intended for it to be from the beginning.
Thank you. Thank you so much and all the best.
Thank you. We'll take the next question from the line of Varun Singh from Alpha Accurate Advisors. Please go ahead.
Am I audible?
Yes, Mr. Singh, please proceed.
Yeah. Thanks for the opportunity. My question is on Intune.
I just wanted to understand maybe the similarities between our format and purely from the operations and the supply chain perspective with regards to how we are handling the inventory and even maybe the dead inventory or slow-moving inventory. I mean, what are the similarities between us and Zudio, if you can highlight that? That's my first question.
Thank you, Varun. I think the first similarities, we are in broadly the same space of value fashion. So all the aspects of the business which come on virtue of being in the value fashion space apply to us. Fast fashion, frequent drops, obsolescence on account of age, low margins, high volume, all of those factors are common. Right. On your question on how the dead inventory is managed, we do two end-of-season sales, one in January and one in July.
The intention is to pull back merchandise once it's past its full price prime, hold it in our warehouses, and relaunch it in the USS cycles to liquidate as best as possible within the branching of our business. Does that answer? At the back, yeah, yeah.
Basically, we are pulling out the inventory back to the warehouse, and then during January and July, we would be getting all those to the stores and then would be discounting. Will that understanding be correct?
Yes. Cut sizes will get pulled back so that we can make space for new launches during the full price period. Exactly. That's the correct understanding.
All right. Sure. With regards to supply chain integration with our existing Shoppers Stop store, will it be different for Intune, or will it be integrated for both departmental store and Intune?
We are using the same warehousing and logistics infrastructure. Doing that, it is giving us a lot of benefit because there is an existing system in place, and cadence is already in place. When it comes to the external part of the supply chain, which is the supplier base and the inbound, that is almost entirely unique from Shoppers Stop because the price points and the product is very different from the supplier base. Internal infrastructure is 100% common between the two.
Sure. Sure. Lastly, on the 71 count of stores that we have for Intune, roughly what percentage of that would be mall index stores compared to, and what would be that number for Zudio?
We will not know for Zudio. I do not think I would know the Zudio number, but for us, 60% is mall and 40% is high street or standalone.
Okay.
Sure. All right. Sir, on 15th of January 2025, we spoke about INR 11,000 per sq ft for matured store in case of Intune. In this call, you called out around INR 10,000 revenue per sq ft, but I think that 10,000-11,000, that number stayed intact, right?
Yes. I said it is upward of 10,000, and I think we mentioned that we had a month of poor demand, which is what pulled the average down, but I think we are on the same path when it comes to March and April, and month on month, we are becoming better.
Okay. From 10,000-11,000 to 14,000-15,000, that journey is quite possible, right?
It is possible, and it is also—
How comfortable would you be? Yeah.
It is very much possible, and the 10,000-11,000 is an average.
We've already seen that journey happen in a part of our mature store network, so that is something that we've already seen, and we know the route to taking the other stores also on that direction.
All right, sir. Sure. Thank you very much, and wish you all the best.
Thank you.
Thank you.
Thank you. A reminder to all the participants that you may please press star and one to ask questions. The next question is from the line of Jay Prakash, a retail investor. Please go ahead.
Hello? Can you hear me?
Yes, sir.
We can hear you, Prakash . Go ahead.
Good afternoon. Hi. Good morning, sir.
Good morning.
Sir, compared to last year, year on year, the profit has been almost down to more than 95%. Let's say your top-line growth or top-line is flat. You have opened many Intune stores and department stores also.
How would you expect the forecast in the next six months?
Yeah. Jay Prakash, thanks for your question. At the EBITDA level, if you have seen it on the non-GAAP numbers, it's down by 19%, and we have also given H1 and H2 slide at the beginning of the investor chart. Kavindra spoke in the last two quarters that H1, I mean, the quarter one and quarter two, because of a number of reasons. We had elections. Overall, the sentiments were low in the—and that's the reason the overall EBITDA had declined versus last year. If you're seeing the second quarter, the second half, I'm sorry, our EBITDA has increased by 16%. Even at the non-GAAP level, the PBT has increased by 10%. The sentiments are improving.
The customer demand has been improving, and we believe with this, this year we would have a decent growth on all the KPIs, that is sales, EBITDA, and profit.
Is the next six months, I mean, next two quarters going to be muted on because again, after festival, season will come in the October only. After seeing last year's performance, have you found any new strategies or anything that's going to attract the customers, new customers, to visit your weekly footprints? Is there anything on your table?
Mr. Jay Prakash, this is Kavindra here. We spoke about building the marketing campaigns, the India Bride Shoppers Stop, Gifts of Love. The idea is that we create, and we've been working on this for the last 18 months to create Shoppers Stop as a destination, which is for a specific kind of customer which you want to drive in.
I think we have been seeing some very good results of this over the last six months or so. Even April looks good and strong. My sense is that the action points in terms of driving traffic to the store, in terms of creating differentiation through different kinds of brands and products, and through our personal shopper, we have been able to get higher KPIs getting delivered. I think we are in a good—we are in a very good space right now in the departmental store business, and we expect H1 to be far better than what was it last fiscal and H2 to continue the growth which we are in. I think we are quite confident, Mr. Jay Prakash.
Okay. How about the borrowing, sir? Can you show some light on your borrowings in year-on-year basis?
Borrowing, yeah.
Again, see, if you've seen last year, we have increased the working capital because of two new businesses, plus some of the brands we had in our stores because of premiumization. This year, we have taken a conscious call, one, to reduce the inventory, and that should reduce our overall total borrowings. Plus, even the new stores itself, we have taken six to seven stores, so that will be primarily funded from internal approvals. To answer your question, we do expect our borrowings to come down significantly this year, Mr. Jay Prakash.
The ongoing tariff war, is it any impact on your—
Mr. Jay Prakash, I'm sorry to interrupt you, sir. I will request you to rejoin the queue for follow-up questions. There are others waiting for that. Thank you, sir. We'll take the next question from the line of Tejas Shah from Avendus Spark. Please go ahead.
Hi. Thanks for the opportunity. Sir, we are picking up from multiple sources and consumption basket, especially in this regional area, that Southern India and Western India are kind of lagging behind on, especially the urban markets on the viral side. Any such regional nuances that you can share from your numbers?
Good morning, Tejas. Yeah. I think when we look at the region-wide concentration of demand, what we are seeing is that North, West, and East continue to be strong. We do see some pockets of slowness in South, especially in the Andhra Pradesh-Telangana market, but otherwise, Karnataka continues to be strong.
We don't have much of distribution in Tamil Nadu, so we won't be able to give you a detailed view of that, but my sense is that, except the market which I just mentioned, demand continues to be strong, and we are very happy that North actually has really picked up, which was slow for the last two to three years. I think we can see some very good growth coming out from there, and in East as well. West continues to be steady for us.
Thanks. Second and last question is on Intune. 60% of our Intune density is actually in mall index. Very mathematically, if we do the math, the 30-35% range of gross margin is usually value retailers want to operate at.
Most of them, not all, most of them say that high street or very expensive high street or malls are not designed for that kind of construct unless you hit that INR 15,000 per sq ft kind of number. Just wanted to know with 10,000-11,000, are those mall distribution stores profitable, or they are margin-divided for us?
Thank you for the question, Pejesh. Two things. I think I also mentioned some time back that mall stores have done significantly better for us. The number that we've quoted is the average across mall and high street stores for stores which are more than a year old. Within this, mall stores are better than the high street stores, so that answers part of your question.
Secondly, I think if you see the selection of malls, selection of sites within the malls, I think you will appreciate that we've been very consciously frugal about making sure that there is an affordability correlation in place, which is also one of the reasons why we are now, after 70-75 stores, we are slowing down to make sure we continue getting the right properties. I think mall stores not only are more profitable, not only are they generating more sales, they are also generating more profits for us, and that's the direction that we see for an overall improvement in Intune productivity. I hope that answers your question.
Yes, it does. Thanks and all the best for coming forward.
Thank you.
Thank you. The next question is from the line of Swati Madnani from Madhwani Wealth Solutions
Thank you for the opportunity, sir.
My question is on the beauty side. Is there any, I mean, criteria for selecting the brands? Let's say you cover majority of these brands, so what is going to be the strategy going ahead?
Thanks, Swati. My understanding is that this is more for the distribution business which you are asking us about. Is that the—
Yes, yes.
Yeah. I think in distribution, we work across all levels. We have the L'Oréal or the LID brands with us, we have the exclusive partnership with Armani. We have something very amazing going with Prada and Valentino. We also have, for example, we spoke about, we have just launched Note. We have just launched MESSI. As a genuine distributor, we work across price points and categories to ensure that we are able to deliver the best through the distribution channels, right?
In the sense that the distribution for Armani would be very different from that of Note and MESSI, but that way we are agnostic. I think wherever we feel through our channels that there is a demand for the customer, as a distributor, we try to cover those things. I think there's a specialist team that sits here and works on this. Whether it's a masstige or prestige, we operate across both the segments. Okay. For the categories, we do makeup, we do skin, and we do fragrances. Across categories. Yeah?
Actually, my question is on the criteria for selecting these brands.
The criteria is the brand equity, brand awareness, the kind of revenue they can generate for us, margins, which any distributor would do for any business, right?
The availability of the brand to be distributed widely is one of the key things for its reference, for its target customers.
Okay. After covering the majority of these brands, what is going to be your strategy?
Sorry?
Let's say, on these SS Beauty stores. When you cover the majority of these brands, what is going to be your strategy going ahead? Is it going to be store expansions or what?
I'm not clear on your question, Swati. I thought your initial question was on the distribution. The distribution-
Yes, it was.
-is the startup. We have three large brands, and we are increasing the brands to a definite distribution business is conducted. Second one, if you're saying, what is your question on SS Beauty stores? Are you saying that these products will be available on SS Beauty stores? Are you asking that question?
No, no, no.
I'm just asking that let's say when you cover the majority of these brands, premium brands and such, then what is going to be your strategy after covering these?
Oh, okay. No, there are so many. I think there are lots of brands that will take some time for us to, A, onboard the new brands, B, ensuring that we are able to distribute them to the right potential, which is there. I think the market size is something which is huge, and for the existing brands, you build the depth in distribution, and then you keep on getting newer brands. I think this journey just started, Swati. I can't imagine that so early we are going to be in this—we were going to the saturation point at one.
Also, this business for us as a company generates a very healthy ROC, so we'll continue to expand this business.
Okay. Thank you. That's [a good question]. Thank you.
Thank you. Thanks.
Thank you. The next question is from the line of Yash Bajaj from Lucky Investment Managers. Please go ahead.
Yes. Good morning, and thanks for the opportunity. Am I audible?
Yes, yes, you are audible.
Yes. I had a question regarding Intune. I just wanted to understand the pricing range of Intune, and I also wanted to understand in terms of—I mean, not currently because it's a one and a half-year-old concept, but just trying to understand for the future, any thoughts regarding the pricing strategy? How would you—if you would like to have any price hike, how would you go about it? That's my first question.
Thank you, Yash.
Let me first address the first part of the question. Like a lot of other players in the value fashion space, our products average around INR 400-INR 450. We start from as low as INR 149, and we end everything at INR 999. That is the pricing structure that we have followed from day one, and we have stuck to it. To answer the second part of your question, as of now, there is no strategic clarity or intention of increasing prices. I think we have just started this journey, and we will build more on this before we deviate from it, if at all we do.
Okay. Okay. Got it. Just a follow-up on that. I mean, like the previous participant was just talking about it being a 30-35% gross margin kind of a concept.
Again, is this how we are seeing it today, or Intune as a concept has the wings to kind of go to a higher gross margin than the current one? I mean, suppose three, four years down the line.
I think as the business matures, the route has to be a margin improvement, of course. I think the margin improvement will be on both counts. One, as our volumes increase, we will start getting some supply leverage, which will give us a better cost. You've seen this happen in the bigger, older value fashion brands in the industry. Second is, as we get closer and closer to what our customer wants in terms of prediction, we will start getting better full-price sell-throughs . So we've got improvement on full-price sell-throughs .
We've got cost benefits on account of going from five, 10 stores to 70 stores, and I think that journey will continue. We should see improvement in the delivered margin to a few hundred basis points over the next two, three years for sure. That's the intention.
Understood. Understood. One last question is, like you alluded that the mall stores are doing better than the high street stores, and the mix today is 60, 40. Do you see this mix changing more towards the mall stores going forward, or this mix is more or less going to be the same?
I think in the immediate future, I don't see this mix changing dramatically. It should be more or less in that same space in the immediate future.
Okay. Okay. Got it. Yes. That's all from my side. Thank you so much.
Thank you.
Thank you.
Participants, you may please press star and want to ask questions at this time. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Sir, just one clarification that I required. The end of the season sales that we drive in Q2 and Q4, are the provisionings also taken of stocks during quarters? Or provisioning is a regular function and taken every quarter?
You are spot on, Gaurav. Thanks for that question. On our own brands, we take provision once a quarter, and for, I mean, other brands, we take once in six months. That's the policy.
Okay. Sure. Thank you.
Thank you. The next question is from the line of Rajiv Bharati from Nuvama. Please go ahead.
Yeah. Thanks for the opportunity. On Intune, I missed if you have called out the LFL number for the quarter. Sorry.
Intune has just started the business. I mean, last year we had 22 stores, and this year we have close to 75 stores. At this expansion, it will be a bit difficult to calculate the LFL. I mean, consciously, we did not say any LFL for Intune right now. Let's have a, what do you call it, one full cycle of close to 70-80 stores, and then we can measure that.
Sure. The other point is the three closures which you had. What was the [CSS, KSF] number they were clocking at which you—
Sorry? What was it? What?
SPSF. The three closures. Yeah.
Rajiv, getting into individual stores, SPSF may not be feasible, but I think I just mentioned a few minutes back that all these three stores, we were significantly behind in terms of the organic flow of customer entry that we were expecting, and therefore, obviously, the sales were far lower than what we were expecting, which led us to close. We did not see the gap being bridged through our marketing efforts. Significant underachievement is where I could put it without giving a specific number to it.
Sure. [That's okay] . Thank you.
Thanks, Rajiv.
Thank you.
Thank you. We will conclude the Q&A session now. Thank you, members of the management. On behalf of Shoppers Stop Ltd, thank you for joining us, and you may now disconnect your lines. Thank you.