Shoppers Stop to use recent divestments to reduce debt
Bengaluru: Departmental store chain Shoppers Stop Ltd plans to use around Rs300 crore of the amount it will get from recent divestments to reduce debt.
Once it does that, Shoppers Stop’s standalone debt will come down from around Rs492 crore to around Rs200 crore, said managing director Govind Shrikhande.
The company’s standalone debt-to-equity ratio will fall to about 0.25 from 0.7, he added.
“We wanted to ensure that we clean up the balance sheet, the P&L (profit and loss) and the return numbers. Currently, we are at 81 stores and at about 5.5-5.6% Ebitda. The whole idea is to take that 81 to 100, take the Ebitda to more than 8% and to take our online sales share from 1% to 10% over the next three years,” Shrikhande said in a telephone interview.
Ebitda, an indicator of profitability, stands for earnings before interest, taxes, depreciation and amortization.
From a total revenue standpoint, the K. Raheja Group firm is targeting an approximately 10% like-for-like growth rate in the next financial year after the addition of new stores.
On Monday, Future Retail Ltd said it has executed a share purchase agreement with Shoppers Stop for its Rs655 crore acquisition of HyperCity in a stock-and-cash deal.
Last week, Shoppers Stop said it was exiting the duty free airport retail business and disposed of its 40% shareholding in Nuance Group, which used to operate those stores, for around Rs6 crore.
In September, Shoppers Stop announced that it has sold a 5% equity stake in the company to Amazon Inc.’s investment arm—Amazon NV Holdings Llc—for Rs179.25 crore.
The firm expects a separate deal it inked with Amazon India to be a game-changer in its quest to be fully omni-channel by December.
Shoppers Stop currently only retails its private labels on Amazon India but with the new deal it will be able to sell its entire catalogue on the online retailer in the next 90 days.
“We looked at it as a standalone versus mall—our site is a standalone and a marketplace is like a mall. Amazon gets almost 500 million customers every month. We get on average about 4 million customers through our doors and as many on our app every month. And customers won’t have to hunt for Shoppers Stop in multiple categories. It will be upfront on the fashion page on Amazon, like the anchor in a mall,” Shrikhande said.
That, along with its HyperCity and Nuance exit, should help improve focus on the core business at Shoppers Stop.
About 23-24% of Shoppers Stop’s revenue typically came from HyperCity.
But, the hypermarket format was a loss-making entity. While the target was to hit profitability at an Ebitda level by the year-end, overall profit after tax was a goal that was still 24 months away, Shrikhande said.
The search for investments in HyperCity had been going on for two years and it was, finally, decided that Future Retail’s Big Bazaar was the best bet to align it with, he added.
HyperCity, the duty free side with Nuance, a gaming joint venture called Timezone and a chain of bookstores under the Crossword brand are the four other businesses that Shoppers Stop has been involved in.
While the first have been divested of, the other two are still part of the firm’s consolidated business. Although Crossword has been struggling, Shoppers Stop has been able to stabilize it over the last two years, Shrikhande said.