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Key Takeaways from Q2FY21 earnings call of Shoppers Stop - YES Securities

Posted On: 2020-10-19 22:13:52

- Cost savings and margin outlook - Target 450crs of cost savings in FY21 and strongly believe that while rental savings will go away, about 200crs savings would be permanent (on heads like employee and store operating expenses) - which implies a sharp EBITDA margin increase of about 4-5%.

- 3Q outlook - Remain hopeful of better performance with a significant reduction in EBITDA losses in 3Q - but breakeven dependent on festive sales which have started well in October (-25% yoy in last two weeks).

- New CEO appointment - New CEO Venugopal Nair will join from November, currently CEO of Westside and M&S - strong positive for private brands business.

- Ecommerce business - Current share has increased to 8% from 2% last year, hoping to reach 10%; business is not making losses now given increased scale and higher ticket size.

- Margin hit in 2Q- GMs sown 550bps in 2Q given 12cr inventory provisioning and aggressive discounting-led liquidation of private brand inventory; should normalize in 2 quarters.

- Impact of Reliance Retail/Jio- Believe big players like Reliance, Amazon and Flipkart (Myntra) will open up the fashion market which becomes a solid opportunity for players who can adapt well to the digital model.

- Fund raise - Company raising Rs 300crs via rights issues mainly to pare down debt; should become debt free by mid next year.

- Beauty business- Revenue contribution down to 15% mainly due to lower spends on discretionary items; recovering quite well.

- Private brands- Revenue contribution increased to 15% led by entry into new categories; continue to target a share of 20%.

- First Citizens- Loyal customer contribution increased to 83% vs 77% last year and ticket size increased by 12%; 130,000 new members enrolled.

Shares of SHOPPERS STOP LTD. was last trading in BSE at Rs.176.9 as compared to the previous close of Rs. 173.1. The total number of shares traded during the day was 4801 in over 259 trades.

The stock hit an intraday high of Rs. 177.85 and intraday low of 173.45. The net turnover during the day was Rs. 840886.

Source: Equity Bulls

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