Leading omni-channel retailer Shoppers Stop registered a steady 4% growth in total sales for the third quarter of FY24, despite demand headwinds impacting India’s retail sector. The growth was driven by non-apparel categories like beauty and watches/fragrances, which offset continued weakness in apparel sales.
Shoppers Stop’s beauty business achieved record quarterly sales of INR 262 crores, growing 10% over last year. “Our engagement with the customers were at all-time high with 266,000 makeovers and 138 master classes,” said Biju Kassim, CEO for beauty at Shoppers Stop.
However, sales from Shoppers Stop’s owned brands or private labels declined by 6% during the quarter. “The challenges in private brands continued for the second quarter too, particularly in women’s western wear and parts of menswear,” acknowledged Kavindra Mishra, CEO of Shoppers Stop.
The company is taking corrective actions like optimizing vendors, streamlining options and getting positioning right to revive private label growth, as per management.
Mishra highlighted that sectors like premium beauty, watches, fragrances showed potential for further growth. He also pointed to green shoots of recovery during the recently concluded festive season. Shoppers Stop saw 8% like-for-like sales growth during the Diwali sale period.
The company remains overall optimistic about its long-term growth plans, mainly relying on new store openings. It has a target to open 56 stores this fiscal, including 24 Intune value retail format stores. There are also plans to launch premium international apparel brands to tap changing consumer preferences.
OMNI-CHANNEL SLOWDOWN
Meanwhile, the company pointed out that the rapid shift of its sales from offline to online channels is plateauing. The shift had gone a major boost during the COVID era, as consumer got more comfortable with the idea of buying goods without first touching and feeling them.
However, this has been more so in categories where the products don’t have to match the customer’s exact specifications, compared to others such as clothing and footwear where the product has to fit the customer exactly. As such, items such as beauty products have done better in online retail compared to clothes.
For now, the trend anyway seems to be slowing down, the company said, indicating that the rampant offline-to-online switch in consumer purchases seen during the last few years in the retail industry may be moderating now.
“Our sales share was largely flat in Omni, though the overall trend seems to be that Omni’s channel is slowing down,” said Kavindra Mishra, Executive Director and CEO of Shoppers Stop, during the company’s Q3 FY24 earnings conference call.
Shoppers Stop has invested significantly into building its omnichannel retail capabilities in the last few years, allowing customers to browse and purchase products seamlessly via online channels like website and mobile apps in addition to its physical stores.
However, the pace of increase in the share of the overall business contributed by online sales channels appears to have slowed down lately for the company.
“Our investments in Omni will continue. We are reasonably confident similarly to beauty; Omni will be the leading channel in the next few years and we are fully prepared for that,” Mishra added, underlining that Shoppers Stop remains committed to its omnichannel strategy despite the temporary blip.
HOPING FOR THE BEST
Meanwhile, Shoppers Stop is hopeful that consumer demand will start picking up again from the next financial year after a prolonged slowdown over the last few quarters.
“We are definitely seeing a shift in the consumer spend, people spending more for the travel or experiences rather than only buying for the product. That’s a reality that we see at the industry level,” acknowledged Kavindra Mishra, Executive Director and CEO, during Shoppers Stop’s latest quarterly earnings call.
However, Mishra indicated that FY25 could see the start of a turnaround after nearly five quarters of demand sluggishness in the retail sector.
Shoppers Stop is betting on the continued outperformance of premium discretionary products to drive growth when overall retail demand revives.
“The premium portfolio in Q3 grew by 6% like-for-like. And we will keep on doubling down and making an account of differentiation as a departmental store, which I think is something which is very, very unique to Shoppers and our customers,” highlighted Mishra.
The company’s strategy to tap the premium segment also involves plans to launch leading international apparel brands in its stores on an exclusive basis.
For the recently concluded Q3 FY24, Shoppers Stop reported a modest 4% overall growth in sales compared to last year, aided by non-apparel categories. But the like-for-like growth for the quarter was marginally negative at -1% dampened by apparel weakness.
The festive Diwali sale period in November had seen some green shoots, with Shoppers Stop registering 8% like-for-like growth briefly. The management remains hopeful the nascent recovery will catch momentum starting next fiscal year.
BUDGET CHAIN RAMP UP
Meanwhile, the company said it was happy with performance of Intune, the chain launched to cater to more price conscious shoppers.
The venture, launched in 2022, continues to achieve the goals set as per the management. The format registered another successful quarter of operations in Q3 FY24, it said.
“We had positive EBITDA at the store level. Though we are away in the initial stages, there will be a learning as we go ahead,” updated Kavindra Mishra, CEO, Shoppers Stop, indicating Intune stores have turned profitable within 8 months of launch.
The company also continues to be on track to meet its rapid store rollout targets for Intune. It opened 4 new stores during the Oct-Dec 2023 quarter, taking the total count to 11.
Shoppers Stop plans to end FY24 with 24 Intune stores by launching another 14 stores in Q4. The management’s confidence in the format is evident from its goal to open 100+ stores over next fiscal.
Intune is positioned distinctly as a family and kids-focused value retail brand, with average ticket prices targeted at INR 450. The quick acceptance of this positioning among shoppers is visible from the 65% full price sell through achieved in the very first selling season, as per the management.
“We analysed the customer behaviour based on the shopping basket, which are the best performing categories, merchandise points, frequency of purchase,” highlighted Mishra. The data-backed approach has helped quickly fine-tune the product assortment and store experience of Intune to drive better outcomes.
While competition in value retail is heating up, Shoppers Stop is betting on Intune’s unique brand identity and customer focus to differentiate itself. Leveraging the learning from Intune’s initial success, the company aims to rapidly scale up the new format over the next 2-3 years.