Shoppers Stop - Steady Progress Continues On Strategic Growth Pillars: Systematix

Systematix Research Report

We hosted the management team of Shoppers Stop Ltd. for an investor interaction to better understand the future business prospects. We see decent progress in the private brand strategy of the company where multiple brands like Stop, Life and Kashish are now gaining strong traction, especially in new stores.

The addition of SS Beauty app and aggressive offline expansion in addition to commencement of distribution with premium beauty brands should drive strong growth in the beauty business as well. Both private brands and beauty should be margin accretive in our view.

With the company having closed down loss-making stores, continuing to expand in non-metros and renovating old stores, sales throughput and store economics is picking up quite well across the board, further boosted by capex rationalisation.

While some business shifting to outright basis from consignment basis could be viewed as risk, we would not be concerned given better margins offsetting the impact of higher inventory cost in addition to solving availability issues especially in beauty segment.

Shoppers Stop is expected to remain ahead of the curve on investments in technology to drive a seamless and premium shopping experience. The company looks set to deliver a high-teens revenue compound annual growth rate and significantly higher earnings CAGR led by a better mix and operating leverage.

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