Shoppers Stop Unstoppable

Thursday, 31 March 2011

One of the most respected brand names in India’s retailing sector, Shoppers Stop plans to take its overall store count from 36 at present to 39 by the end of March 2011. This translates to occupying an aggregate area of about 2.1 million sq. ft. Hypercity, a 51 per cent subsidiary of Shoppers Stop, which is primarily into food retailing, has entered Ludhiana with a 70,000 sq. ft. store. It currently has nine stores in its portfolio, which are spread across another 0.9 million sq. ft.

After the Budget slapped an excise levy on branded garments, analysts were expecting retailers to slow down expansion plans as demand could come under pressure. However, growth plans of Shoppers Stop seem to be on track. Undoubtedly, both sales and margins will come under pressure, but sales from new stores should drive growth.

Despite the pinch of rising prices, Indian consumers have not stopped spending on discretionary items like clothes and accessories. Shoppers Stop will hike the prices of its merchandise by 6 to 7 per cent by next month, passing the excise duty hike on branded garments directly to customers. Govind Shrikhande, Customer Care Associate and MD avers apparel prices have already gone up by 10 to 15 per cent owing to skyrocketing cotton prices. And if the duty persists, there will be 6 to 7 per cent increase in prices.

The company has lined up plans for store expansion, which will take the total number of stores from the current 36 to 53 by 2013. The aggregate space occupied will go up from 2.1 million sq. ft. to about 3 million sq. ft. Given the uncertainty surrounding the implementation of the goods and services tax, rising employee costs and the pressure on gross margins, a domestic brokerage believes, the operating profit margin could contract from about 7.6 per cent in 2011 to 7.4 per cent in 2012. This would inch to 7.9 per cent in 2013. With a low interest burden, retail analysts expect the company’s earnings to witness higher growth at 21.3 per cent over the same period to reach Rs 110 crores.

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