After two quarters of decline in like-to-like (LTL) sales volume, Shoppers Stop Ltd showed an improvement in the measure in the December quarter. LTL sales indicate the sales performance of stores that have been in business for at least a year. For the December quarter, Shoppers Stop’s LTL sales volume increased by 3.5% against a 4% decline in the first two quarters of the fiscal year.
But then, LTL volume had declined by 9% in the December 2011 quarter. So does that mean that the lower base has helped in a big way this time around? Govind Shrikhande, customer care associate and managing director of Shoppers Stop, says that “FY12 felt the impact of a 15-17% price hike in apparel while this year has seen a 5% increase. Still, apparel has done well and clocked 14% LTL volume growth, which looks good.”
The company attributes the December quarter’s better performance to the fact that the festival and marriage seasons came together last quarter. Sure, demand may well have been better during the quarter, but what happens after the traditionally strong quarter would be of more consequence.
What’s more, LTL sales growth was in double digit this time at 12.5%, which is positive, though most of it was led by pricing. Sales numbers, too, were better. Stand-alone revenue growth has been the strongest in the last three quarters at 20% on a year-on-year basis. In the September and June quarters, revenue rose 17% and 15%, respectively.
However, higher finance and depreciation costs meant that net profit declined by 11% over the same period last year to Rs.17.1 crore. On a consolidated basis though, Shoppers Stop’s net profit dropped to Rs.4.32 crore from Rs.9.33 crore in the same period last year. The company’s consolidated results continue to be adversely affected on account of the weak performance of its subsidiary, HyperCity Retail (India) Ltd. HyperCity posted a loss of Rs.23.6 crore for the quarter. It will take at least two more years for the unit to break even, says Shrikhande.
Investors should, of course, closely follow the improvement in HyperCity’s performance in future. Other than that, after a good quarter, whether the sales momentum continues is the key question. This quarter would reflect the impact of the discount sales offered to consumers.