Shoppers Stop works out recovery plan

Friday, 06 July 2012

After witnessing consecutive quarters of falling volumes and margins, India’s oldest organised retailer Shoppers Stop is planning ways to deal with the situation. Like other apparel retailers, it has decided to raise the share of its private labels to gain better margins. The three main brands — Stop, Haute Curry and Live — bring in 15-16 per cent of sales for the company and now it plans to increase it to 20-22 per cent by introducing new private labels.

In Q4 of FY12, the company’s like-to-like growth — a measure of the performance of stores operating for over a year — stood at a healthy 10 per cent. But this was driven by the 9 per cent rise in average selling price (ASP) as the retailer hiked prices by 15-18 per cent. Retail expansion, which raised top line in the last two quarters, also increased input costs.

Last month, Anil Ambani group firms, Reliance Capital Asset Management and Reliance Capital Trustee Company bought 17.40 lakh shares in the retail chain for over Rs 51 crores through open market transactions. Reliance Capital Asset Management purchased 10 lakh shares in Shoppers Stop, while Reliance Capital Trustee Company bought 7,40,500 shares of the retail entity, according to the data available with stock exchanges.

Besides its flagship Shoppers Stop, the group also operates Hypercity, Home Stop (home retailing) and specialty stores like Crossword, MAC and Mothercare. Hypercity has been the biggest drag. The large-format retailer, which started operations in 2006, has taken longer than average hypermarkets to turn cash-positive. While its huge stores have affected store-level functionality, its focus on food and grocery has squeezed operating margins.

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