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Business News/ Market / Mark-to-market/  Future Retail’s Q2 result shows improvement in same-store sales
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Future Retail’s Q2 result shows improvement in same-store sales

Given aspiration for greater store expansion (especially in Easyday), Future Retail will increasingly have to fund its own capex, which will impact return ratios

After dropping to at least a nine-quarter low, Future Retail’s same-store sales growth recovered in the September quarter. Graphic: MintPremium
After dropping to at least a nine-quarter low, Future Retail’s same-store sales growth recovered in the September quarter. Graphic: Mint

For the June quarter, Future Retail Ltd’s same-store sales growth (SSSG) was a dismal 3.6% year-on-year. That marked at least a nine-quarter low. On that front, the September quarter numbers give reason to cheer, SSSG recovered and came in at 5.9%.

SSSG is the comparable sales growth of stores that have been operational for over a year.

The company’s Easyday format (small convenience stores) performed well, helping overall same-store numbers for the September quarter.

Easyday format saw SSSG of 3% year-on-year during Q2FY19 against 11% year-on-year dip in Q1FY19, reckon analysts from Jefferies India Pvt. Ltd in a report on 14 November.

SSSG at Big Bazaar stores was slightly lower than the June quarter. But at 9.4%, the figure doesn’t look too bad.

Accordingly, revenue increased 9% over the same period last year to 4,929 crore, comparing favourably with the 3.5% decline in revenue for the June quarter.

Ebitda (earnings before interest, tax, depreciation and amortization) margins improved a bit. Net profit for the September quarter was 175 crore, representing 14% growth and here again, looking better than the June quarter net profit growth of 3.6%. Still, overall results aren’t too impressive.

In fact, Future Retail’s muted SSSG for the March and June quarters shows in the stock’s performance. The stock has underperformed the BSE 200 index so far this fiscal year.

To be sure, there are no visible triggers even as the current festive quarter is expected to be a notable one.

“We like company’s execution on the large stores (Big Bazaar)... however sustainable improved results are yet to be seen in the small box format (Easyday), which in our view will only be gradual," pointed out Jefferies.

Given aspiration for greater store expansion (especially in Easyday), Future Retail will increasingly have to fund its own capex, which will impact return ratios, added the brokerage firm.

Supermarket chain HyperCity’s financial health is another key measure to track. The good thing is the performance shows improvement. For the September quarter, HyperCity’s negative Ebitda margin fell to 6.7% from 11.3% in the June quarter and 20.2% in the March quarter. Future Retail has said that it is on track to achieving 5% Ebitda in the forthcoming quarters. Needless to say, encouraging signs from this unit will fetch some brownie points for the stock.

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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
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Published: 16 Nov 2018, 08:35 AM IST
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