Shoppers Stop hits fresh 52-week high; ICICIdirect maintains ADD rating as company turns debt-free

Shoppers Stop rallied more than 17 per cent in intraday trade to hit a fresh 52-week high of Rs 425 on the BSE after the retail major reported a consolidated net profit of Rs 77.32 crore for the third quarter ended December 2021.

The company had posted a net loss of Rs 25.11 crore in the October-December quarter a year ago, said Shoppers Stop in a regulatory filing.

Its revenue from operations was up 33.82 per cent at Rs 958.11 crore during the period under review as against Rs 715.97 crore in the corresponding quarter of the previous fiscal, said a PTI statement.

According to the company, it has returned to "profitability" with a zero net debt.

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Reacting to the results, ICICIdirect maintained its ADD rating on Shoppers Stop with a target of Rs 405 that translates into an upside of over 12 per cent from Rs 361 recorded on 20 January.

“It turned net debt-free in Q3FY22 with net surplus of Rs13 cr as on Dec’21-end. Despite a likely small blip in growth, which may be caused by the third wave, management expects a better growth trajectory driven by improved consumer sentiment, accelerated small-size store expansion, growth in the private-label mix, and more focus on the high-growth beauty business,” said the note.

ICICIdirect maintains ADD with a revised DCF-based target price of Rs405 per share on better cash flow. However, the key risks remains to be lower discretionary spends and lockdown restrictions.

Building Digital Capabilities:

Shoppers Stop operates 83 department stores in 45 cities. It also operates 11 premium home concept stores, 129 Specialty Beauty stores, but the focus now shifts to online.

"The company has seen a sustained demand during the festive period and the marriage season in October and November. We have witnessed a high customer spend and a higher Average Transaction Value (ATV). While Omnichannel is here to stay, our present online contribution gives us immense headroom to grow," Shoppers Stop MD & CEO Venu Nair said in a statement.

Shoppers Stop invested Rs 40 crore YTDFY22 for building its digital capabilities and is likely to invest another Rs10 crore in Q4FY22, taking the total investment in building the omni-channel to Rs50 cr in FY22E.

“It incurred Rs550mn as capex and opex for building new stores and refurbishing the existing ones in YTDFY22 and is likely to invest Rs250mn for the same in Q4FY22,” said the ICICIdirect note.

“Shoppers Stop is likely to invest Rs 100 cr for building new stores and renovations, and Rs400mn for building its digital capabilities in FY23,” it said.

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