An extended mid-year sale may have boosted the same-store sales of Shoppers Stop Ltd and Pantaloon Retail (India) Ltd for the quarter ended September. That’s good news, because growth in sales in stores, which have been in existence for more than a year, was weak in the quarter ended June because of the increase in apparel prices.
According to IDFC Securities Research, “Pantaloon is expected to see improvement in growth rates to 20% in the quarter ended September as against 15% in the June quarter, as same-store sales growth improves to double digits.”
Same-store sales in Pantaloon’s home retailing business, which saw a 4.5% decline in the June quarter, are something investors are likely to track closely.
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The IDFC report further points out that Shoppers Stop is expected to have clocked same-store sales growth in the mid-teens. Motilal Oswal Securities Ltd expects Shoppers Stop’s same-store sales to increase by 14% during the September quarter.
Broadly, the operating profit margin of Pantaloon’s core retail business is expected to remain flat. Analysts expect Shoppers Stop’s consolidated performance to be hurt by the poor performance of HyperCity Retail (India) Ltd.
While the September quarter results of both the companies may show an improvement in terms of growth in same-store sales, it is their performance in the December quarter that will show whether there is a demand slowdown and what is its impact. Most major festivals will fall in the coming three months and this is usually a good time in terms of sales for retailers.
While retailers are bullish about their prospects in the coming quarter, some analysts are sceptical. Gautam Duggad of Prabhudas Lilladher Pvt. Ltd wrote in the September quarter preview that “moderation in footfalls in the latter part of the quarter has raised the concern of a possible impact of economic slowdown, if any, on the same-store growth of retailers”. That’s why the December quarter performance becomes important to track.
In the past year, Shoppers Stop has outperformed the BSE-500 index while Pantaloon has underperformed it, though both the stocks have fallen since 30 June. However, Pantaloon’s sharper fall makes it attractive in the near term, in spite of concerns of high debt and higher inventory.
Graphic by Sandeep Bhatnagar/Mint
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