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Research
Shoppers Stop - 2QFY13 Results Update - Motilal Oswal
Posted On : 2012-11-05 20:26:53( TIMEZONE : IST )
Shoppers Stop (SHOP) posted better than expected results for 2QFY13. Given that festive season-led recovery could improve profitability, 3QFY13 will be key for SHOP.
- Standalone LTL sales up 5%: Standalone net sales grew 16.8% to INR5.8b (est INR5.7b). Like-to-like (LTL) sales growth was 5%. LTL volumes declined 4%, after similar decline in 1QFY13.
- Operating margin down 280bp: The share of bought-out inventory contracted 180bp to 42%. Gross margin declined 50bp to 35.9%. Increase in lease rent (up 80bp), administrative expenses (up 120bp) and employee expenses (up 20bp) led to 280bp operating margin contraction to 5%.
- EBITDA down 25%: EBITDA declined 25% to INR291m (est INR198m), aggravated by expansion-related costs. Sharp spike in capital costs - interest cost up 36% and depreciation expenses up 62% - led to 67% decline in standalone PAT to INR64m (higher than est INR36m).
- Two Shoppers Stop stores added: In 2QFY13, SHOP added two Shoppers Stop stores at Bangalore and Coimbatore. It also opened two Crossword stores, two Mother Care stores, and one Home Stop store.
- INR56m loss at consol level: HyperCITY Retail (51% stake) reported sales of INR1.87b (INR1.89b in 1QFY13). LTL sales growth deteriorated to 2% (7% in 1QFY13); LTL volumes fell 7%. However, gross margin expanded 50bp to 18.9% and store-level EBITDA doubled QoQ to INR8m. While overall EBITDA loss was INR87m, LTL EBITDA improved 4x to INR30m. Net loss declined marginally QoQ from INR214m to INR209m. Due to sustained losses in HyperCITY, SHOP posted consol loss of INR56m v/s profit of INR102m in 2QFY12. Consol sales grew 14.8%.
- Fairly valued; maintain Neutral: SHOP has added ~20 stores in the last two years, which has impacted profit margins, given the context of sub-par same store sales (SSS) growth. Higher losses in HyperCITY and the resultant increase in debt to fund the business will remain a drag on near-term financials. The stock trades at 62x FY14E EPS of INR6.8. Maintain Neutral.
