Revealed: Why Shoppers Stop is shutting more stores

By: |
Mumbai | April 5, 2018 3:19 AM

In a bid to improve its profitability, retail chain Shoppers Stop has shut at least five loss-making stores (across formats) in FY18, while it has re-sized a few.

Shoppers Stop, Shoppers Stop stores, Shoppers Stop stores shutting, Shoppers Stop lossIn a bid to improve its profitability, retail chain Shoppers Stop has shut at least five loss-making stores (across formats) in FY18, while it has re-sized a few.

In a bid to improve its profitability, retail chain Shoppers Stop has shut at least five loss-making stores (across formats) in FY18, while it has re-sized a few. The company has been selling off loss-making businesses and shutting loss-making stores over the past couple of years to lower losses and bring down its debt. On April 2, Shoppers Stop shut one HomeStop store at E-city Mall, Coimbatore, as it failed to deliver on business and profitability. The store clocked sales of Rs 4.88 crore (0.12% of the company’s turnover) in 2016-17. On March 1, the company had closed another loss-making HomeStop store at Koramangala, Bengaluru, which had posted sales of  Rs 2.05 crore in 2016-17 (0.05% of the company’s turnover). With the closure of this store, the company now has 13 operational HomeStop stores, down from 16 at the end of last fiscal. Govind Shrikhande, chief executive officer, Shoppers Stop, had earlier said, “In FY18 the company would focus on consolidation and shutting down loss-making stores to improve its profitability. The company has already shut a few loss-making stores and re-sized a couple of its stores.” Experts said that the company’s focus on right-sizing stores and shutting loss-making stores would help the company to improve its performance. Abneesh Roy, senior vice-president, institutional equities at Edelweiss Securities, said, “Shoppers Stop has restructured its store size and reduced wastage of space and unwanted assortments from a store, resulting in new store size of 45,000 sq ft from the earlier 55,000 sq ft. This will not only reduce the store launch time, but also prune rent per store, which is expected to significantly enhance probability.”

In November the company had closed Shoppers Stop stores at Inorbit Mall in Pune and Nirmal Lifestyle-Mulund in Mumbai, due to their below par performance. In FY17, the store at Inorbit Mall in Pune recorded sales of  Rs 24.91 crore (0.66% of the company’s sales), while the store at Nirmal Lifestyle-Mulund in Mumbai posted revenues of  Rs 16.67 crore (0.44%). Before selling off its 51% stake to Future Retail in October 2017 for  Rs 655 crore, the company had closed a Hypercity store at Inorbit Pune Mall (sales of  Rs 13.27 crore in FY17). At the time of concluding the deal, Hypercity had 19 operational stores. Post announcement of the company’s Q3 financial results, Shirkhande had said that the company is focusing on reducing its debt from  Rs 237 crore to  Rs 40-50 crore by the end of the fourth quarter. The sale of Hypercity was a big step in its move towards shoring up its finances. The company also exited Nuance Group India, the duty-free airport venture, and TimeZone Entertainment, the gaming business. Shrikhande said, “All these exits will reduce debt and stop losses and thereby completely change the balance sheet for the year FY18-19. Our tie-up with Amazon will start showing traction from Q4 of FY17-18. The investment by NV Investment Holdings LLC, which is a foreign investment of `179.26 crore, was received and equity shares were allotted on January 12. This investment along-with our marketplace tie-up strengthens the company’s Omni-channel strategy.” Shoppers Stop reported a 13.8% decline in its net profit to Rs 16.34 crore in Q3FY18. The sales of the company declined 4.7% to  Rs 963.22 crore. Same-store-sales growth of the company was 1.4% in Q3FY18. The company reported an EBITDA of `79 crore, up 16% year-on-year. Roy of Edelweiss Securities said, “Shoppers Stop’s omni channel strategy will receive a boost post tie-up with Amazon India and funds raised via the deal will be used to prune debt.” Shoppers Stop currently has 83 stores (including six airport stores) in 38 cities and operates more than 4.5 million square feet of space across formats. The company operates HomeStop and specialty stores such as Crossword, Mothercare, Estee Lauder, Clinique, Bobbi Brown and MAC.

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