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Business News/ Markets / Mark To Market/  Shoppers Stop shows steady pace of recovery in the June quarter
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Shoppers Stop shows steady pace of recovery in the June quarter

For perspective: Q1FY22 revenues are still nearly 76% lower than Q1FY20’s revenues

The sharp growth comes on a favourable base considering the first lockdown had adversely impacted Shoppers Stop’s performance in the June quarter last year. MintPremium
The sharp growth comes on a favourable base considering the first lockdown had adversely impacted Shoppers Stop’s performance in the June quarter last year. Mint

The retail sector has been one of the most impacted in the ongoing covid-19 health crisis. Various restrictions imposed to contain the spread of the virus have meant that sales of retail firms took a sharp beating since the pandemic began.

Shoppers Stop Ltd has suffered, too, and is now gradually healing. Recently announced June quarter (Q1FY22) results show recovery is in progress. Standalone revenues have increased by as much as 273% year-on-year to Rs201 crore. Of course, the sharp growth comes on a favourable base considering the first lockdown had adversely impacted Shoppers Stop’s performance in the June quarter last year. For perspective: Q1FY22 revenues are still nearly 76% lower than Q1FY20’s revenues.

Even so, the impact of the pandemic curbs has been relatively better than last year. Online growth has been impressive with digital sales accounting for 18% of last quarter’s revenues. In Q1FY22, the company’s stores were operational for 28% of the quarter. With the second wave lockdown easing, Shoppers Stop’s overall recovery in the month of June stood at 49% versus financial year 2020. This recovery improved to 71% in July, said the company.

Analysts from Edelweiss Securities Ltd said, “Gross margin came in at 39%, lower than Q4FY21 (41%) but better than 32% seen in Q1FY21 (estimate: 35%)." The broker points out, “With business normalcy on course and Shoppers Stop’s key geographies opening up, business visibility has improved."

Having said that, the stock continues to languish and is almost 38% lower than its pre-covid highs seen in January 2020. “We have marginally inched up our revenue/ Ebitda estimate for FY22E/FY23E, factoring in almost 98% of revenue recovery to pre-covid levels by FY23E," said analysts from Motilal Oswal Financial Services Ltd in a report on 30 July. Ebitda is earnings before interest, tax, depreciation and amortization; a key measure of profitability for a company.

The broker further added, “We value Shoppers Stop on a sum-of-the-parts basis, assigning an EV/Ebitda of 10 times to the standalone (Shoppers Stop) and EV/sales of 1 times to Crossword on a FY22E basis to arrive at our target price of Rs245." EV is short for enterprise value and a metric used to measure the total value of a company. Shoppers Stop’s shares closed at Rs266 per share on the National Stock Exchange on Monday.

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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: 02 Aug 2021, 07:59 PM IST
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