Shoppers Stop managed to keep head above water in March 2012 quarter with consolidated net profit of close to Rs 1 crore (drastically down from Rs 7.7 crore in same quarter last year) led by its 51% subsidiary, Hypercity, which reported a net loss of Rs 22.4 crore (up 20% year on year), higher fixed costs (interest, depreciation) and subdued operational performance.
Operating profit margin tanked by 140 basis points to 3.2% due to higher overheads on account of store expansions.
However consolidated revenues jumped 24% year on year in March 2012 to Rs 833 crore on account of same store sales growth (SSSG) recovering to 10% year on year after declining 1% in the previous quarter, high growth of 25% recorded by HyperCity (forming 20-25% of consolidated revenues) and price hikes in apparels (60% of total revenues) of earlier quarters.
The management expects the overall retail sector to continue to see signs of softness and is cautious in FY13 but will continue to add 8 stores each year in next three years taking it to total 75 by FY15.
Focus will be on ramping up stores opened last year and increasing the share of private labels.
Further efforts are on to work towards growing Hypercity profitably and expects the same to breakeven at PAT level only by FY15.
Overall, analysts are positive about the company but they believe stock’s valuation appear stiff at 35 times FY13 estimated earnings thanks to its lower debt to equity ratio of less than 0.4 times compared to highly indebted Pantaloon Retail.
However, Gautam Duggad, analyst, Prabhudas Lilladher, sees lower consumer confidence leading to weakening in SSS growth and lack of visible operating leverage as major risk.
