Shoppers Stop to realign strategy to meet goals

Shoppers Stop's expansion plans for the next financial year (2014/15) are very much on track. The lifestyle retailer is planning eight new stores in the forthcoming fiscal (2014/15), but in the following fiscal (2015/16), the plan is to open only around three-to-four stores.

The company, however, will tighten its belt with regard to its focus on several of its not so well-performing categories. Managing Director Govind Shrikhande says there are plans to seriously relook at some of Shoppers Stop's businesses, such as fine jewellery and electronics.

The jewellery business' lacklustre sales due to restrictions on gold import and the increases in gold import duty has, in fact, had an adverse impact on the third quarter (October to December 2013) results of Shoppers Stop.

It reported a net profit of Rs 17.34 crore, slightly higher than Rs 17.10 crore in the year ago (October to December 2012) period. Gross revenue rose 16 per cent to Rs 787.5 crore for the quarter ended December 31, 2013. The company, however, expects the current quarter to fare better than the third quarter.

"We have already curtailed the size (of the jewellery business) because we are seeing very clearly that this category may not come back very strongly for at least another year or two," said Shrikhande, adding: "We will, instead (of jewellery), focus on the beauty and personal accessories divisions."

He also said that HyperCITY, Shoppers Stop's hypermarket format, is likely to turn profitable over the next 24 to 27 months. HyperCITY, which currently has 15 stores, will benefit from an increase in Shoppers Stop's focus on the fashion division and store consolidations, along with its move away from "non productive or non profitable categories" such as electronic goods.

The company has taken the share of its fashion business to 13 per cent, and plans to take it to 15 per cent in the coming year, as that would directly impact the profitability of the business.

With this move, Shrikhande expects a 50 basis point margin improvement in the HyperCITY business. "For two quarters, you will still see losses continuing in a similar vein, but the second half of next year onwards will see us moving towards profitability," said Shrikhande, adding: "We have started getting out of electronics and by the end of the fourth quarter, we should be out of electronics completely."

There will also be a move towards smaller format stores, along with rightsizing some of the larger format HyperCITY stores. "We're clearly seeing that small format stores can turn around or start making money within 12 to 18 months versus 36 to 48 months required for a big format store," said Shrikhande.

The company, which has already reduced its store sizes in cities such as Amritsar and Ahmedabad, will now resize its store in Hyderabad and the ones at Vashi and Malad in Mumbai.