Brokerage house ICICI Securities in its recent report highlighted that Shoppers Stop’s (SHOP) Q4FY22 revenue and EBITDA were below the consensus estimates as the same were impacted by the third covid wave in Jan’22 coupled with a few one-offs.
However, it noted that under the new management team, the company is likely to post a better growth trajectory driven by accelerated small size store expansion, growth in the private-label mix and increased focus on high-growth beauty business, aided by improved consumer sentiment, in our view.
Shares of retail chain Shoppers Stop Limited were under pressure after the company reported a net loss of Rs 16 crore for the quarter ended March 2022, as compared to the loss of Rs 23.71 crore in the same quarter in the previous fiscal.
The scrip closed 2 per cent lower at Rs 493.85 against the previous close of Rs 502.60. With a market capitalisation of more than Rs 5,400 crore, the shares stand higher than 20 day, 50 day, 100 day and 200 day moving averages but lower than 5 day moving averages.
In the past one year, the share price of Shoppers Stop jumped from Rs 197 to Rs 515.35, logging around 150 per cent return in this period.
The brokerage firm noted that the management suggested Mar-Apr’22 recovery has been strong and ahead of pre-covid levels. SHOP added 5 department stores and 8 beauty/others stores (net) in Q4FY22, taking the total store count to 88 and 171, respectively. It plans to add 12 department stores and 15 beauty stores (net), and is targeting ~9 per cent area addition in FY23.
“We raise our pre-Ind-AS 116 FY23-24E EBITDA by 2-6 per cent, PAT by 7-19 per cent and DCF-based target price to Rs 530 per share. We maintain Add. Key risks include lower discretionary spends, execution challenges and lockdown restrictions,” it added.
“While January had concerns around the Omicron variant, we believe that consumers will continue to spend as normalcy returns along with ensuing wedding season that would help stabilise the demand further,” the company said.
“We believe that the robustness in the consumer demand has offset rising costs, driving the margins higher. We expect to grow in line with the retail industry at a double-digit pace, this fiscal,” it added.
Mr. Venu Nair, MD & CEO at Shoppers Stop, said, “The company ended the quarter on a satisfactory note despite Q4FY22 getting disrupted due to the partial lockdowns caused by the Omicron wave in January. The underlying demand continued to be strong across all businesses with most segments posting a YoY growth over a very strong Q4 FY21 base.”
“The network expansion and campaigns have continued to progress well in anticipation of an upbeat FY23 – expected to be a normal year after a gap of two years of lockdowns,” Nair added.