Mumbai: Not long ago, weekends meant families, friends, and couples flocking to bustling malls, indulging in the joy of strolling through their favourite stores. But with the rise of online shopping, those scenes of leisurely retail therapy are fading into nostalgia, leaving traditional brands like Shoppers Stop to confront a new reality. The retailer’s latest quarterly results reveal a troubling stretch, as escalating costs and market pressures overshadow modest gains. Following its board meeting on 22 October 2024, Shoppers Stop reported a net loss for Q2 FY25, signalling deeper struggles in a rapidly evolving retail landscape.
The company reported revenue from operations at Rs 1,114.87 crores for the quarter, marking a 4.2 per cent increase from Rs 1,069.31 crores in Q1 FY25 and a 4.5 per cent increase from Rs 1,068.10 crores in the corresponding period last year. However, the rise in sales was overshadowed by surging expenses, with total costs climbing to Rs 1,151.31 crores, driven largely by higher finance and depreciation expenses.
Commenting on the results, Shoppers Stop’s managing director Kavindra Mishra remarked, “While the growth in revenue is a positive sign, we are navigating a challenging macroeconomic environment that is putting pressure on our bottom line. Our focus remains on optimising costs while continuing to enhance the customer experience.”
Shoppers Stop faced a significant decline in profitability, with a reported net loss of Rs 28.74 crores for Q2 FY25, up from a loss of Rs 22.70 crores in the previous quarter and a sharp contrast to the modest profit of Rs 1.78 crores in Q2 FY24. The key factor contributing to this downturn was an exceptional item of Rs 2.05 crores related to stock damage due to smoke from a nearby fire incident. Additionally, the company’s efforts to expand and modernise stores have led to increased lease liabilities and depreciation costs, which impacted margins.
The loss reflects a broader struggle within the retail sector, as companies face subdued consumer sentiment and costly operations. Shoppers Stop’s finance costs alone surged to Rs 64.51 crores this quarter, up from Rs 61.01 crores in the previous quarter, while depreciation and amortisation rose to Rs 121.76 crores.
Amidst the current challenges, Shoppers Stop is making strategic moves to navigate the difficult terrain. The retailer appointed Nishit Sheth as the interim company secretary and chief compliance officer to strengthen compliance and governance practices. This move, alongside ongoing investments in e-commerce and store refurbishments, is part of a broader strategy to rejuvenate the brand’s appeal.
The board’s approval of new stock options under the ESOP Scheme 2022 reflects a commitment to rewarding talent and fostering employee engagement during tough times. While these initiatives aim to position the company for future growth, the immediate outlook remains constrained by high operating costs and ongoing market uncertainties.
The company’s balance sheet reveals a notable increase in liabilities. Total non-current liabilities climbed to Rs 2,466.48 crores from Rs 2,316.75 crores at the end of FY24, primarily due to additional borrowing and higher lease obligations. Additionally, total equity saw a reduction from Rs 301.42 crores to Rs 262.68 crores, further indicating financial pressures. Shoppers Stop’s cash flow statement also showed a decrease in cash reserves to Rs 13.89 crores from Rs 11.38 crores at the end of the previous quarter, underscoring liquidity constraints.
As Shoppers Stop faces an uphill battle, industry analysts suggest that the retail sector’s recovery will be gradual. The company’s focus on improving operational efficiency and enhancing its digital footprint may drive incremental gains. However, substantial growth may be elusive in the near term unless broader economic conditions improve and consumer demand strengthens.
Summing up the challenges, CFO Karunakaran Mohanasundaram said, “The current macroeconomic scenario is indeed tough, but we are confident that our strategic interventions will gradually improve our financial position.” Despite these reassurances, the road ahead appears bumpy for Shoppers Stop as it navigates this period of financial strain.
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