Home >Markets >Mark To Market >Shoppers Stop’s Q4 satisfies, but second covid wave to hinder recovery ahead

MUMBAI: During covid-19, Shoppers Stop Ltd’s recovery has been relatively slower than other retailers. One reason for this is the company’s higher presence in shopping malls, where footfalls fell due to the pandemic-induced restrictions. Of the 84 department stores, 73 are in malls while the rest are standalone.

Understandably, Shoppers Stop’s shares reflect business conditions. The stock has almost halved from its pre-covid highs seen in early 2020.

March quarter results announced on late on Friday show a sustained recovery in revenue performance. Shoppers Stop’s reported revenues last quarter declined 5.4% year-on-year to Rs671 crore. This is the best revenue performance in the financial year 2021. On a non-GAAP basis, March quarter revenues have declined around 10% to Rs825 crore. The drop in footfalls was curtailed to 17% in the March quarter vis-à-vis a decline of 50% and 81% in the December quarter and September quarter, respectively.

Commenting on the results, Shoppers Stop said, “For the quarter, we had 90% of FY20 sales, the strongest recovery in the last 4 quarters. However, with the pandemic in India, taking a severe turn in the second half of March, the year has ended on a sombre note."

Having said that, the ongoing pandemic restrictions are likely to hit footfalls in the near term. Needless to say, this would hurt revenues. “Factoring-in the impact of recent lockdown owing to covid resurgence, we reduce our Ebitda estimate for FY22E though we maintain it for FY23E. We downgrade the stock to ADD from Buy with DCF-based target price unchanged at Rs235 per share, given the likely gradual recovery in discretionary spends and reasonable valuation," said analysts from ICICI Securities Ltd in a report on 24 May.

Ebitda is short for earnings before interest, tax, depreciation and amortization; a key measure of profitability. For the March quarter and financial year 2021, the company’s cost savings stood at Rs43 crore and Rs432 crore, respectively. Note that it has reported positive Ebitda for the second consecutive quarter.

From a medium-term perspective, Shoppers Stop will continue to prioritise maintaining volume-driven growth momentum, expanding inorganically and sustaining costs to grow overall profitability. Shares of Shoppers Stop were up around 5% during trading hours on Monday on the National Stock Exchange.

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