Shoppers Stop surges 11%, hits 52-week high on healthy Q1 results

Returning mobility and higher ticket purchases led by the pent-up demand will likely drive retail spending over the coming months, the company said

Shares of Shoppers Stop hit a 52-week high of Rs 603.70, as the stock surged 11 per cent on the BSE in Wednesday's intra-day trade. The spurt comes after the company reported profit after tax (PAT) of Rs 23 crore in June quarter (Q1FY23), driven by a healthy operational performance, as against a loss of Rs 118 crore in the year-ago quarter (Q1FY22).

The stock surpassed its previous high of Rs 598.65, touched on April 28, 2022. The stock had hit a record high of Rs 792 on January 4, 2011. At 09:29 AM, Shoppers Stop traded 10 per cent higher at Rs 595, as compared to 0.1 per cent decline on the S&P BSE Sensex.

In Q1FY23, the company's sales jumped nearly five-fold to Rs 942 crore as against Rs 201 crore in Q1FY22. Shoppers Stop said the company recorded a strong quarterly performance, despite End of Season Sale being delayed by 10 days, as the momentum continued from March 2022 with the industry witnessing the first disruption-free quarter in two years. 

Gross margins improved 210 bps QoQ (up 350 bps YoY) to 42.2 per cent. The reported earnings before interest, taxes, depreciation, and amortization (ebitda) margin at 17.2 per cent against -31.2 per cent in Q1FY22. Ebitda margin stood at 16.6 per cent in Q1FY20.

"We believe the growth will continue in the coming quarters due to easing of Covid related 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," the management said.

It also expects good demand in tier-2 cities and beyond, with the rise in smartphone penetration, and the growing adoption of digital payment systems. The company plans to launch new stores primarily in tier-2 and tier-3 cities while sustaining investments in store renovations during the year.

Going forward, Shoppers Stop expects FY23 to be one of the strongest years 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," the company said.

"Shoppers Stop's liquidity position remains fairly stable with cash & investments worth Rs 183 crore and debt worth Rs 175 (net surplus Rs 8 crore, D/E: 0.3x). With healthy store addition pipeline and sustained investments in omni-channel, we expect revenue trajectory to further improve going forward. Despite, recent run-up in the stock price, Shoppers Stop continues to trade at reasonable valuations (~1.7x EV/Sales FY24E)," ICICI Securities said in a note.

Technical View

Bias: Positive

Support: Rs 567

Resistance: Rs 613

With today's 11 per cent rally, Shoppers Stop has given a strong breakout on, both, the daily and the weekly chart. At Rs 598-odd level, the stock was seen trading above the higher-end of the Bollinger Band on the daily and weekly charts.

As per the daily chart, the bias is likely to remain bullish as long as the stock sustains above Rs 591 level, while the positive bias as per the weekly chart may continue till the time the stock remains above Rs 567.

On the upside, as per the quarterly Fibonacci chart, the stock has near resistance around Rs 613, above which it can rally to Rs 645 and Rs 690 levels.

The key momentum oscillators, particularly the DI (Directional Index), MACD and the Slow Stochastic, are also strongly in favour of the bulls. Thus, the stock is likely to trade with a positive bias in the near-term.

In case of a correction, the stock could seek support around Rs 552-odd level.

(With inputs from Rex Cano)