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Shoppers Stop Ltd (SSL) shares today opened at Rs. 591.95, reached a new 52-week high of Rs. 612.00, and are currently trading at Rs. 582.10 per share. The stock had touched a 52-week-low of 225.50 on 23-August-21 and after touching its new high of 612.00 in trade today, the stock is now trading 158% above the 52-week-low. In trade today, the stock has made an intraday high of 612.00 and an intraday low of 581.10. For the quarter that ended on June 30, 2022, the company saw a 383 per cent YoY uptick in sales to Rs. 1190 crore, PBT of Rs. 32 crores, compared to a loss of Rs. 157 crores in the first quarter of the fiscal year 2022. Following strong Q1FY23 earnings, brokerage firm ICICI Securities is bullish on the stock. ICICI Securities has set a target price of 705 for the shares of Shoppers Stop, which would be a new high for the stock in a target frame of 12 months.

In comparison to its net loss of 118 crore during the same quarter of the previous year, Shoppers Stop Ltd. reported a standalone net profit of 22.79 crore for the quarter ending in June. The company's revenue from operations increased 368 per cent year over year to 942 crore in Q1FY23, while its operating margin increased 350 basis points to 42.2%. In comparison to the same quarter of the previous year, it reported a consolidated net profit of 22.8 crore, compared to a net loss of 105 crore, and consolidated sales of 948 crore compared to 205 crore last year in the same quarter.

In Q1FY23, the company's revenue increased by 383 per cent year over year to Rs. 1190 crores. Private Brands revenue increased by 387 per cent, the Beauty Segment revenue increased by 321 per cent, and E-commerce sales increased by 29 per cent YoY. In Q1FY23, the Average Selling Price (ASP) increased by 15% YoY while the Average Transaction Value (ATV) increased by 7% YoY. EBITDA for the quarter amounted to Rs. 67 crores, compared to a loss of Rs. 116 crores in the first quarter of FY22, and profit before tax (PBT) was Rs. 32 crores in the first quarter of FY23, compared to a loss of Rs. 157 crores in the first quarter of FY21. For the quarter that ended on June 30, 2022, Shoppers Stop opened six new stores while continuing to be debt-free.

Mr. Venu Nair, MD & CEO at Shoppers Stop, said, "The strong growth momentum, seen March 22, persisted through first quarter of FY23 and continuing in July. We recorded a strong quarterly performance, and believe that the growth will continue in the coming quarters due to easing of Covidrelated restrictions. This, coupled with the upcoming festive season, is likely to release a significant pent-up demand and further aid the Company's revenue growth."

Nair also added that “All our product categories and channels have witnessed a surge during the quarter. Consumer sentiments have improved with the economy reopening which has led to an increase in footfalls. Our digital sales base remained intact in spite of our robust offline performance. We expect good demand in tier-2 cities and beyond, with the rise in smartphone penetration, and the growing adoption of digital payment systems. We plan to launch new stores primarily in tier-2 and tier-3 cities while sustaining our investments in store renovations, during the year."

“We expect FY23 to be one of the strongest year for the retail industry. Returning mobility and higher ticket purchases led by the pent-up demand will likely drive retail spending over the coming months. The hybrid work culture and the festive season will provide excellent growth opportunities for categories like beauty, formal wear, and Indian wear. We believe that digital channels will continue to witness higher growth, and Shoppers Stop will lead the change with its customer-friendly digital platforms that provide a smooth shopping experience. The retail industry is poised on a growth trajectory this fiscal year, and we remain optimistic about delivering a sustainable long-term growth, creating value for all stakeholders," said the company in its investor presentation report.

Post the robust Q1FY23 earnings, ICICI Securities has said in a note that “Stock price has underperformed the broader indices over the last five years on account of weak SSSG, muted store addition pace and lower share of private label brands. With the new management team in place, we expect SSL to revive its revenue trajectory and margin profile. Stock price has appreciated ~78% on a YTD basis. Despite recent run-up, reasonable valuations prompt us to remain positive on the stock and maintain BUY. We value SSL at 705 i.e. 11.5x FY24E EV/EBITDA."

Key triggers for future price performance of Shoppers Stop as per ICICI Securities

1. We believe the new MD (former Westside CEO) would bring in his expertise in the private label brands domain and focus on enhancing the share of high margin private label brands (~14% of revenues).

2. It has embarked on a healthy store addition plans with opening of 12 departmental stores and 15 beauty stores in FY23E. Majority of the store addition in Tier II/III cities. The capex for the same is expected to be 150 crore which will be funded mainly through internal accruals.

3. Management expects steady SSSG growth of 9-11% in the near term.

4. Key thrust on accelerating investments in omni-channel with long term target of channel contributing 20% of sales from current ~5%.

5. Higher focus on beauty segment (currently ~16% of revenues) through scale up of its own private brand Arcelia.

In the last 1 year, the stock has given a multibagger return of 118.10% and on a YTD basis, the stock has surged 77.82% so far in 2022. On the NSE, the traded volume for Shoppers Stop was 13,77,216 shares amounting to a trade value of 8,227.49 lacs.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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