Shoppers Stop plans to become debt-free in FY19
Bengaluru: Shoppers Stop Ltd plans to become debt-free in 2018-19, which would allow the departmental store chain to focus more aggressively on strategies such as ramping up contribution from its private labels to 15% of overall revenue and expanding its footprint in the fast-growing beauty and cosmetics segment, a top executive said.
Shoppers Stop began fiscal 2017-18 with a debt-to-equity ratio of 0.76 and a total debt of Rs575 crore. At the end of December 2017, its debt stood at Rs237 crore. The company expects that to fall further to around Rs40-50 crore by end-March.
In 2018-19, the company’s debt-to-equity ratio will either become zero or turn positive, managing director Govind Shrikhande said.
“We are not reinventing our strategy; we are figuring out how to execute well the reinvented strategy of last year – of bringing romance back to retail. The balance sheet clean up is happening faster than the strategy implementation as of now,” Shrikhande said in an interview. That implementation, which will gather pace in the coming year, involves looking closely at everything from assortment to leveraging its omni-channel and personal shopper strategies.
While its omni-channel policy will fall into place by May, boosted by its 5% equity stake sale to Amazon’s investment arm last September, it is the private label assortments and prices that Shoppers Stop is looking at tweaking immediately.
Revenue contribution from its private brands was around 9% in the second fiscal quarter, the lowest share ever recorded.
“We saw lot of range failures in this financial year right from Q1 onwards. Our realization was that we have a range which is decent but priced higher than what we want in some cases. In certain cases it is too fashionable to be carried as a private brand,” Shrikhande said. Having too many options, not being able to sell all of them, and ending up with unsold stocks was another issue.
Shoppers Stop has learnt from those mistakes and is correcting prices and ranges for its private label brands. When its new summer range hits the shelves by end of February, there will be an average price reduction of 3-5% across its brands. It plans to ramp up contribution from private brands—of which Stop, Life and Kashish are the largest names—to 15% over the next two years.
About 25% of overall investment over the coming years will go into expanding Shoppers Stop’s retail footprint in the beauty segment—the fastest growing category for the company via brands like MAC, Bobbi Brown and Smashbox.
Over the coming year, the company plans to open at least a dozen more of these specialty stores, with MAC leading the way and driving overall growth within the category.
“Shoppers Stop is one of the best run retail companies and envisaged to reap benefits of its expansion strategy. The company has maintained momentum in its retail space expansion even amidst slowdown, which will aid future growth. In our view, it is well strategised to galvanise future growth,” analysts at Edelweiss Securities wrote in a report on 2 February.
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