Maintain ‘outperformer’ on Shoppers Stop with a target price of Rs 574. Though the current quarter has been impacted by lower LTL growth in departmental stores, all other formats have improved profitability; we expect departmental store margins to recover from Q4 itself. The threat of e-retail is genuine and though LTL growth may get impacted by 100-200 bps during short periods we expect rationalisation to prevail eventually. Also with Shoppers Stop introducing its own omni-channel foray in the next few quarters, the benefit of the online boom will accrue to the company as well. We believe a full blown recovery in consumer demand will result in double digit like to like growth for the company.
Further with Hypercity on a swift path to turnaround, consolidated ebitda will be up 2.5x from FY14-17e.
Standalone revenues increased 8%; ebitda increased 2%and PAT declined 21%. Like to like (LTL) growth was muted at 0.8%. Hypercity revenues increased 6.4% with same store sales increasing by 6.5%.
The disruptive pricing and advertising of online retailers has impacted same store sales growth. As a part of its online strategy, the company will first start to sell its private labels (16% of sales) on online marketplaces from March 2015.
IDFC Institutional Securities