NEW DELHI: Shoppers StopNSE 0.53 %, the country’s oldest department store chain, plans to double its contribution from higher margin private labels, exclusively launch international and celebrity brands, renovate several stores, and strengthen management team, as the company looks to revive growth and boost its profitability.
“We are not in a turnaround stage as yet, but what we are talking about is the transitional stage,” Shoppers Stop (SSL) managing director Rajiv Suri told ET in his first media interaction after being elevated last month. The retailer has been struggling to keep up with online and offline rivals, reporting a fall in its sales growth and footfalls in 2017-18.
In a major rejig last month, Shoppers Stop promoter Chandru Raheja announced his retirement as chairman of the company, and non-executive vice chairman BS Nagesh took his role. Also, Govind Shrikhande, who served as its MD for eight years, resigned, to be replaced by Suri who joined the company in January as CEO.
To begin with, the new MD plans to focus on in-house brands, as part of its efforts to improve operating margins. Most of its rivals — from Tata Trent to Future Lifestyle Fashion — have been selling a higher percentage of own labels to earn more profits. Trent gets nearly 90% through private labels, while it is nearly 60% at Pantaloons and 30% for Central. In comparison, the share of private labels within Shoppers Stop has been consistently falling, from 14.1% in FY15 to 10% in FY18.
A decade ago, private labels — which earn nearly 10% higher margins than other merchandise — used to account for one-fourth of Shoppers Stop’s overall sales. “There were issues around design, fashionability, fit and fabrics,” Suri said. The company has recently hired a head of design for its in-house brands and invested in a testing lab and studio.
Shoppers Stop’s operating margins for last fiscal, at around 4%, was onethird of Tata Trent’s margins and nearly half of Future Lifestyle. Analysts feel Shoppers Stop can leverage its beauty segment to improve profitability. The retailer exclusively retails some top beauty brands including Estee Lauder, MAC, Clinique and Bobby Brown in India, and the segment accounts for nearly 10% of its sales from over 100 stores.
“Beauty has a strong pull in the online platform and in light of SSL’s greater focus on beauty, and with its tie-up with Amazon, it will be increasingly possible for the company to tap the online segment,” said Abneesh Roy, senior vice-president, institutional equities, at Edelweiss Securities. “From the financial metrics perspective, the beauty segment boasts double-digit EBITDA margins,” he said.
E-commerce giant Amazon acquired a 5% stake in Shoppers Stop in September last year, and the two signed a deal to use each other’s network. The US firm has already opened three Amazon Experience Centres, which showcase its exclusive products, within Shoppers Stop outlets. Shoppers Stop will receive commission on sale of Amazon products from its shops, plus rentals. Under the deal, Shoppers Stop also got to use Amazon network to reach online shoppers.