BackShoppers Stop, Trent fall short of analysts’ expectations
The firms, however, improved their financial performance from a year earlier
Premium(Priyanka Parashar/Mint)
Mumbai: Shoppers Stop Ltd, India’s oldest department store chain, and Tata Group’s Trent Ltd, which operates Westside and hyper market chain Star Bazaar, missed analysts’ earnings expectations even as they improved their financial performance from a year earlier.
Shoppers Stop reported a consolidated loss of ₹ 1.1 crore for the quarter ended 30 June, burdened by its money-losing hyper market chain HyperCity. On a standalone basis, the retailer who runs the eponymous department store chain, more than doubled its standalone net profit to ₹ 1.6 crore.
Consolidated revenue for the K. Raheja Corp. group firm, which operates large-format department stores and speciality stores such as Crossword and Mothercare, grew 13% to ₹ 866 crore, helped by the strong wedding season in May.
Standalone revenue for Shoppers Stop, which accounts for nearly three quarters of the consolidated revenue, grew at 20% to ₹ 537.07 crore in the June quarter from ₹ 441.32 crore a year ago.
However, the standalone numbers missed analysts’ estimates. A Bloomberg poll of eight analysts had estimated standalone net profit at ₹ 5.98 crore and revenue at ₹ 578.6 crore.
Trent reported a net profit increase of 36% in the June quarter to ₹ 17.34 crore from ₹ 12.76 crore a year ago. Total sales increased by 15.4% to ₹ 252.40 crore from ₹ 218.70 crore in the same quarter a year ago, the company informed BSE.
A Bloomberg poll of three analysts had estimated net profit at ₹ 18.33 crore on sales of ₹ 253.1 crore for the June quarter for Trent.
On 4 March, Trent had agreed to a scheme of amalgamation and arrangement between Landmark Ltd, Fiora Link Road Properties Ltd and Trexa ADMC Pvt. Ltd. The appointed date of the merger will be 1 April with retrospective effect, subject to approval.
Meanwhile, Shoppers Stop said it got shareholders’ approval for the transfer of business done by Elca Cosmetics Pvt. Ltd by way of a slump sale to its wholly-owned subsidiary Gateway Multichannel Retail (India) Ltd for ₹ 63.46 crore. Elsa runs the cosmetics business of Estee Lauder, M.A.C and other beauty retail chains.
Shoppers Stop also got shareholders’ approval to increase its borrowing limit to ₹ 1,000 crore from ₹ 650 crore.
The company may need the additional funds to fund its expansion plans and invest in HyperCity. “This is just a provision," said Govind Shrikhande, managing director of Shoppers Stop, adding that the company may not necessarily increase its borrowings immediately.
Like-to-like same store growth, a measure of growth based on sales in stores that have been open for at least a year, for Shoppers Stop stood at 12%, driven by a 9% price increase and 3% volume growth. This is much higher than the 5-6% like-to-like growth that the company had reported in fiscal 2013. It is also higher than the estimates the company has given for fiscal 2014 at 8%.
“We maintain our outlook of like-to-like sales growth of 8% for the fiscal year," said Shrikhande.
“It is good to see the like-to-like sales growth coming in double digits," said Abhishek Ranganathan, vice president, retail, real estate, institutional equity research, PhillipCapital (India) Pvt. Ltd. However he added, “sustaining the momentum will be a challenge. Also, the new store openings could impact profitability going forward."
During the quarter HyperCity’s loss widened to ₹ 24.72 crore from ₹ 21.35 crore a year ago due to a write-off of ₹ 3.3 crore for the closure of a store in Ludhiana. Sales grew 12% to ₹ 228.33 crore from ₹ 204.75 crore in the same quarter a year ago.
Over the past year, Shoppers Stop has been tweaking the business model of HyperCity as it looks at making the chain profitable. During the June quarter, it closed one store and is also considering exiting from the consumer durables and Information Technology (IT) products business division in the next 12 months.
During the quarter, the retailer has also launched a new compact HyperCity format of 30,000 square feet in Bangalore. Further it is planning to resize three stores in Cyberabad, Vashi and Thane.
In the June quarter, Shoppers Stop opened five new Shoppers Stop stores, two Homestop stores, two M.A.C. stores, three Clinque stores, two Estee Lauder stores, one Bobbi Brown store and two HyperCity stores. Trent opened four new Westside stores, taking the total number of such stores to 74 and total number of stores under various formats to 78.
India’s largest publicly traded retailer, Future Retail Ltd (formerly Pantaloon Retail (India) Ltd), is still to announce a date for its June quarter earnings.
On Tuesday, shares of Shoppers Stop fell 3.72% to ₹ 353.35 on BSE, Trent shed 0.7% to ₹ 998 while the exchanges’ benchmark Sensex declined 1.25% to 19,348.34 points.
Shoppers Stop reported its earnings before the close of market hours while Trent posted results after the close.
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