The financial performance of retailers in the September quarter was expected to reflect the impact of extended discount sales.

Shoppers Stop Ltd, the first among retailers to report earnings, has delivered a satisfactory performance on an overall basis and disappointed on some counts.

Photo by Ramesh Pathania

True, Shoppers Stop did comparatively better than its June quarter performance when LTL growth was 7%. Further, LTL volume increased 1%, which is meagre but better than the 5% decline posted in the June quarter.

Shoppers Stop’s total stand-alone revenue increased by 15% over the same period last year to 497 crore, just a tad better than the June quarter revenue growth of 14.4%. While operating profit margins have fallen on a year-on-year basis by a percentage point to 7.8%, they are about one percentage point higher than the June quarter margin.

Operating profit growth increased by just 1.4% while net profit grew at a relatively faster pace of 12.5% to 19.54 crore, thanks mainly to a sharp increase in other income.

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On a consolidated basis, the operating profit margin trend is similar to the stand-alone performance (lower year-on-year (y-o-y), higher sequentially). As expected, the consolidated profitability was affected on account of the weak performance of Hypercity Retail (India) Ltd, which posted a net loss of 18.2 crore.

Shoppers Stop reported a consolidated net profit this time against a loss in the June quarter, which looks good. But operating profit is down by 2.8% to 32 crore, and profit before tax by 14.5% to 10.77 crore.

Even as the results may not look that encouraging, it would be slightly early to talk about any slowdown in consumer demand. The real test for retailers to evaluate whether consumer demand is actually slowing would be in the current quarter, which includes the festival season. The Shoppers Stop stock has outperformed the BSE-500 index since the beginning of this fiscal. As mentioned earlier, the current quarter would be important, and investors would do well to track LTL growth and the turnaround of HyperCity.

Graphic by Sandeep Bhatnagar/Mint

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