Mumbai: Indian retail chain Shoppers Stop Ltd saw its profits rise in the fourth quarter that ended on 31 March even as it was held back by sharp increase in rents and hiring costs that have been plaguing most retailers.
The firm’s profit before tax in the March quarter increased 41.39% to Rs3.7 crore, while revenues shot up 40.29% to Rs294.2 crore. For fiscal 2008, the company’s revenues increased to Rs1206.9 crore from Rs899.5 crore.
Still, the company’s operating margins were worse than analysts’ expectations. Net margins are down 0.6% for the financial year from 3.3% the previous year.
“The topline growth is decent but margins are lower than expected,” said Hitesh Kuvelkar, associate director of research at First Global Securities Ltd, a Mumbai-based brokerage.
Much of the squeeze in margins for the departmental store chain came from lease rent and employee costs that surged 60.15% to Rs101.8 crore last year.
Selling and distribution costs rose 53.3% to Rs44.1 crore while employee costs increased to Rs78.2 crore from Rs58.4 crore.
Meanwhile, Shoppers Stop added 25%, or 0.34 million sq. ft of retail space in the latest quarter, which may be adding to costs and not have started yielding revenue, Kuvelkar said.
A report by Mumbai-based brokerage Edelweiss Capital Ltd had said in February that some of the cost pressure on the firm would ease by March 2010 when “the existing strong same-store sales and phased expansion will drive growth.”
Shoppers Stop, which started catalogue shopping and make-up store chain Clinique in the fiscal year, has around 1.5 million sq. ft of retail space and will look to double it every year in the next three years.
It also launched a rebranding camapaign for its Shoppers Stop department store on Wednesday.
Meanwhile, Vishal Retail Ltd, which runs discount store chain Vishal Megamart, postponed its results announcement to 29 April saying its board members were unavailable, according to the company’s chief operating officer Ritesh Rathi.
India’s largest listed retailer, Pantaloon Retail India Ltd, will announce its quarterly results on Saturday.