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  • 21 Jan 2022
  • ICICIdirect Research

SHOPPERS STOP SALES, PROFITABILITY INCH BACK TO PRE-COVID LEVELS

SHOPERSTOP - 601 Change: -8.30 (-1.36 %)

News:Healthy demand owing to strong festive and wedding season resulted in Shoppers Stop reaching close to pre-Covid levels in Q3FY22 (~96% vs. 75% in Q2FY22). On a favourable base, revenue grew 34% YoY to Rs.951.2 crore. The company on a net basis added three stores during the quarter taking total store count to 83 (4.0 million sq. ft.). On account of higher gross margins (up 210 bps YoY to 40.6%) and positive operating leverage, EBITDA margins (post Ind-AS 116) improved materially by 580 bps YoY to 19.2%, with absolute EBITDA almost doubling to Rs.182.9 crore. EBITDA was at ~99% of pre-Covid levels (Q3FY20). Overall share of private label brands remained flattish YoY at 14%, while share of private label brands in apparel improved 185 bps YoY to 18%. Reported PBT of Rs.66 crore vs. loss of Rs.28 crore in Q3FY21 (Q3FY20 PBT: Rs.63 crore).

Views: The company continues to achieve operational cost savings and curtailed operating overheads by ~ Rs.42 crore in Q3FY22 and Rs.253 crore in YTDFY22 (compared to pre-Covid levels). SSL has embarked on a healthy store addition plan with opening of five stores in Q4FY22 and 12 in FY23E. The capex for the same is expected to be Rs.100 crore which will be funded mainly through internal accruals. Owing to enhanced profitability and better working capital management, company generated positive FCF worth Rs.15 crore in 9MFY22 (vs. negative FCF of Rs. 305 crore in 9MFY21). The company’s liquidity position remains fairly stable with cash & investments worth Rs. 207 crore and debt worth Rs.194 (net surplus Rs.13 crore, D/E: 0.3x). With healthy store addition pipeline and sustained investments in omni-channel, we expect revenue trajectory to improve once restrictions are eased out. Also, judicious cost saving initiatives are expected to drive EBITDA. Shoppers Stop continues to trade at reasonable valuations of ~1.5x EV/Sales FY23E.

Impact: Positive