Retailer Shoppers Stop Ltd’s September quarter (Q2) results reflect the impact of festive season shifting to the December quarter this year. Last year, Dussehra was on 30 September. Not surprisingly, like-to-like sales growth for the month of September declined 8% year-on-year, says the company. July and August like-to-like sales growth was decent at 7.5% and 10%, respectively. Accordingly, for the September quarter, like-to-like sales growth was at 3.6%, which is not too bad, reckon analysts.

Like-to-like sales growth is the comparable sales growth of stores that have been operational for over a year.

Reported revenues increased 3.2% to 865 crore. If we exclude the adjustments made in turnover due to Indian Accounting Standard 115 implemented from 1 April and the GST, revenue growth would have been at 7.4%, it adds. A comparatively slower pace of growth in operating costs meant that Ebitda margins increased marginally by 20 basis points to 6.25%.

One basis point is one-hundredth of a percentage point. Ebitda is earnings before interest, tax, depreciation and amortization.

Shoppers Stop has done well on efforts to cut debt and that is bearing fruit. Funds garnered by divesting a 5% stake to Amazon and divestment of its HyperCity Retail (India) Ltd stake are among the two key factors that helped the retailer reduce debt substantially by the end of the last financial year. For Q2, interest expenses declined by three-fourths on a year-on-year basis. Accordingly, despite flattish Ebitda, pre-tax profits increased 17% to 23 crore.

Its worth mentioning that there has been an increase in borrowings on a sequential basis. At the end of Q2, net borrowings were at 33 crore, an increase from 14 crore in the June quarter, said Karunakaran M., customer care associate and chief financial officer, Shoppers Stop. “This increase is seasonal in nature as working capital needs grow owing to the festival season. We expect this to further reduce by next quarter."

Investors will do well to watch how that changes. What’s also important about the current quarter is whether festival demand will brighten up the day. “On the physical retailers front, our channel checks suggest festive demand has seen a very strong start," said analysts from Jefferies India Pvt. Ltd in its 25 October report. So far this fiscal, the stock has declined by 10%. It goes without saying that a better December quarter holds the potential to reverse those losses.

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