Pantaloon Retail (PRIL) standalone maintained its growth trajectory in Same Store Sales (SSS) in June 2009 on a y-o-y basis clocking 8.1% growth reiterating signs of economic revival and sustained consumer confidence.
PRIL’s Value and Lifestyle Retailing Segments Standalone registered 8.1% and 8.2% y-o-y growth in SSS, respectively.
On a consolidated basis, PRIL’s SSS growth stood at 3% in June 2009 compared to 4% SSS growth registered in May 2009.
The slippage in the growth rate was on account of the poor performance registered by PRIL’s Home Retailing arm, HSRIL, which witnessed a further sharp decline in Sales from 28.3% in May 2009 to 34.4% in June 2009.
HSRIL continued to register negative yoy SSS growth for the seventh consecutive month mainly due to the fall in purchase of new houses and selective spending on discretionary home products by consumers amidst the current sluggish economic conditions.
Going ahead, we expect HSRIL to continue to register negative SSS growth over the next few months.
Lifestyle Retailing Segment
For June 2009, PRIL’s Value and Lifestyle Retailing Segments registered 25.4% and 19.1% y-o-y growth, respectively. As a result, PRIL Standalone clocked overall Sales growth of 23.8% for the month.
PRIL’s June 2009 consolidated net sales growth (excluding intercompany sales) was however, sluggish at 16.9% primarily due to the 22.8% decline in sales posted by the Home Retailing Segment during the month on a y-o-y basis.
In fact, the Home Retailing Segment registered de-growth for the second consecutive month in a row in June 2009.
The Segment Sales started plunging from May 2009 after an abysmal 11% y-o-y growth registered in April 2009 and a healthy 72% y-o-y growth in March 2009 (on account of festival season promotions).
Outlook and Valuation
We believe that that future growth of the Organised Retailing Sector in India would be led by Value Retailing, cascading effects of which would be witnessed in the Lifestyle and Home Retailing Segments as well albeit with a lag effect.
PRIL continues to be our top pick in the Indian Retail Sector on account of being the largest Retail player in India and having presence across most product categories and price points.
We are positive on PRIL as it has been able to sustain decent growth on a Standalone YTD basis despite the apathetic economic scenario.
At Rs270, the stock is trading at 17.3x FY2011E Earnings and 3x FY2011E P/BV. We have valued PRIL Standalone at Rs240.
We have valued PRIL’s stake in FCH, HSRIL and Future Bazaar at Rs31, Rs12 and Rs18, respectively. We recommend a BUY on PRIL with a target price of Rs301.