Shoppers Stop Ltd

NSE:SHOPERSTOP

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Shoppers Stop Limited Q4 FY '23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Ms. Mamta Samat from Perfect Relations Private Limited. Thank you, and over to you.

[Mamta Samat]

Thank you, Rohan. Good morning, and thank you for joining us on the Shopper Stop Q4 FY '23 Earnings Conference Call. Today, we have with us the senior management represented by Mr. Venu Nair, Customer Associate, Managing Director and Chief Executive Officer; Mr. Karunakaran Mohanasundaram, Customer Care Associates, Chief Financial Officer; and Mr. Jaiprakash Maheshwari, Customer Care Associate Vice President, Finance and Accounts. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I must remind you that the discussion in today's earnings call may include certain forward-looking statements and must be viewed therefore in conjunction with the risks that the company faces. Please restrict your questions through the quarter and yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. I would now request Mr. Venu Nair as for the opening remarks. Thank you, and over to you, sir.

[Venugopal Nair, executive]

Thank you, Mamta and Rohan. Good morning, friends. Thanks for joining us today to discuss our financial results for the fourth quarter of FY '23. Along with me, I have Karunakaran, our CFO; and Jaiprakash, our FP&A lead. It may sound as a key shape, but we have achieved our highest quarterly sales for 8 consecutive periods now. Our other KPIs such as gross margin, EBITDA and PBT have significantly improved versus last year. Our Q4 and full year results, investor deck and press release have been shared on our website and the stock exchanges. I'm sure you would have read this. Let me now talk about the Q4 performance and the way ahead. I will also brief on the full year numbers as we go along. In these slightly muted times, we have been growing and achieved our higher sales for the quarter. As I had said in my last quarterly speech, we witnessed moderation post-Diwali. December and January were better. The Indian economy is showing signs of resilience while the global uncertainty remains. Geographically, all the leading indicators are pointing towards sustained momentum in economic activity in the country. However, higher inflation in advanced economies and tightening financial conditions in India has had some impact on demand, particularly in Tier 2 and Tier 3 cities. Last year, during these times, we were witnessing pent-up demand in March and April, and that has been considerably moderated this year. This has impacted our sales in February and March. However, we have seen green shoots in April, and I will speak about that in the way forward. that background, we had robust sales growth of 32%. Our gross margin improved by 120 basis points, and we posted EBITDA of INR 55 crores against a loss of INR 13 crores for the similar period last year. Our EBITDA also included other income, which has been marginally higher against last year. This is due to the increase in the income from our loyalty program and the income we received from banks and vendors standing sharing of our physical state. Income from our loyalty members and the highest in the history of the company in this quarter. Elaborating on the other case, our average transaction value, or ATV grew by 6% versus last year due to the mix of customers purchasing bridge-to-luxury products. I must lag that this is now the 12th quarter of consecutive growth in our ATV year-on-year. Our ASP grew by 7%, and the ASP growth is driven by product mix and not just price. We are conscious of premiumization, which is in line with our strategy. Our items per bill versus FY '22 remain flat. Just to remind you, past 22 did have pent-up since most proven. And our overall count of bills increased by 27% versus last year. These significant improvements in KPIs indicate the strong undercurrent of the business and our ability to deliver reserves for 9 consecutive quarters now. Let me share some details on the operational costs. On a like-for-like basis, our costs have increased by 13%. The biggest increase from is from investments in marketing, which grew by 41%, both online and off-line. On an organic basis, in addition to marketing, other costs such as rent, electricity has increased during the opening of newer stores in Q3 and Q4. These are the investments that we make to deliver a sustained growth. Having said this, we have been extremely prudent on the discretionary spend, and we did not spend unless there is a marked reserve. With the strong sales and tight control on cost during the quarter, we reported an EBITDA of INR 5 crores as mentioned before. On GAAP financials, our EBITDA grew by 86%. During the quarter, we opened 2 new departmental stores and 1 beauty store. As always, due to regulatory approvals, opening of stores has got delayed, and we have now opened 1 in the month of April, and we will have a second one in the first week of May. For the full year, we reported revenue of INR 5,066 crores, an increase of 63% over last year. Our private brand reported sales of INR 723 crores, an increase of 70% and beauty, an increase of 54%. For the full year, we reported EBITDA of INR 324 crores at PBT of INR 178 crores and a profit after tax of INR 121 crores. I'm happy to say that these are the highest numbers on all the parameters in the history of shoppers. From operations, I will now go on to the performance of each of our strategic pillars. The first strategic pillar of first citizen. It would be fair to say that the success of Shopper Stop has always been scripted by our first citizen loyal customers. It's no different this time, too. The demand for personalized retail experiences is growing. Our customers now expect fashion and beauty retail businesses to accommodate their preferences with brands turning to technology to reshape their customer experience. At Shoppers Stop, we have been dialing up the personal experiences and personalization. We have always been as a pioneer in offering innovative experiences and personalization. Due to the sustained and multiple engagements with our customers, our IT contribution has been sustained at 75% and above. For the fourth quarter, our loyal members contributed to 78% of our total business or specifically on our first citizen Black Card, our average bill value has doubled from the normal customers and that the total shopping is 3x that of a normal member. Our base increase on Black Card has been consistently in double digits, and that's the same this quarter as well. Shoppers Stop has believed in creating value for its customers, a calendar of customer engagement activities or our first citizen Black Card members, which included adventure and sports like Golfing Sundays, tailing Sundays, octal mixing, farm-to-fork experience, Grapes Top, Mine Carnival and shopping extraneous that exclusive shopping hours for [Indiscernible] have all been special occasions created for our Black Card customers. We have -- apart from the Black Card and the growth in our Black Card customers, the other segment that we specifically targeted in the last quarter was inactive customers or active loyal members who haven't visited us for a while. I'm delighted to say that we had a 30% redemption on the inactive member base of over 300,000 customers that we had targeted, and this increased the revenue by 3% for the quarter. Moving on to the second strategic pillar of private brands. Our private brands grew by 35% during the quarter. We achieved INR 158 crores in revenue for the quarter and INR 723 crores for the full year. This is the highest annual sales that we have achieved in the history of Shopper Store. For year-to-date, we grew by 70% on private brands. And we've had a growth of circa 30% in all the 4 quarters during the year. Our private plan share has been 13.5% for the quarter, an increase of 30 basis points versus FY '22. And for the full year, it is 14.3%, an increase of 60 basis points. On share of the barrels for the quarter, it is at 20%. And for the year -- full year, it is slightly higher at 20.3%. During the quarter, we launched a new private brand called U R You, a brand focused on the plus size and this has been received extremely well, and we have now after the initial pilot, expanding it to over 50 stores. Our STOP brand is the single largest brand in the business and across 200 crores and second largest life cross INR 100 crores during the year. Our newly launched private brand Vanda recorded robust sales and was one of the best-performing brands in the menswear category. Moving to the third pillar of beauty. And beauty had one of good quarters. During the quarter, our beauty sales registered 197, a growth of 29%. Again, this is the highest sales probably in the quarter. Our overall mix of duty sustained at 17%. Hyperpersonalization is critical for beauty. We had endeavored to make a difference of the omnichannel experience that we are able to offer because of the large physical presence that we have in our stores. We did 112,000 makeovers during the quarter, which helped us to increase the sales by INR 40 crores. As you would appreciate, Makeover is a very personal engagement with our customers, and this is something which we are dialing up consistently. For the year, we did more than 400,000 makeovers. And this is helping us to increase the loyalty of our beauty customers. We launched 40 new SKUs in our private brand Arcelia, and the growth of Arcelia is very encouraging. On our distribution business, we added 3 international businesses into our exclusive range of brands that we offer into the country. We now have 15 premium exclusive brands through our distribution business. And we have now tied up with over 10 key retailers, and we expect to have an end during this coming quarter, growing our distribution business robustly. Finally, we opened 1 beauty store during the quarter, and we have also now launched our exclusive website ssbeauty.in as well as the app called SS Beauty, which has been passed for our first tenet. Moving to our next pillar of omnichannel. We are one of the first companies to invest in omnichannel, and we have continuously improved on the customer experience. As I just mentioned, the newest addition into that channel is SS Beauty. And it is a channel specific for our beauty customers in complementing the SS Beauty stand-alone stores that we have. Our growth together digital sales through the digital channels continue to be robust and registered double-digit increase. As I have mentioned in the past, we have moved away from measuring digital sales separately as we are an omnichannel retailer and what we looked at is the complete experience that we offer to our customers. Moving on to expansion and working capital. Expansion is a key focus for us and a big growth engine. For the third consecutive year, we have now opened more than 10 department stores. To be precise, we opened 11 department stores and 11 beauty stores. Of the above 11, 3 are in metro cities and 8 in Tier 1, Tier 2 cities.Apart from the new stores, we also renovated 11 department stores and the CapEx for all of this has been funded by internal accruals. We have been expanding and growing in the cities where we do not have any store presence, and the growth of new customers has been very healthy in these places. On working capital, our inventory increased from INR 363 crores to INR 530 crores, an increase of INR 167 crores. Let me elaborate on the reasons for this. First, we are in a high-growth period and comparing against a proved impacted period, hence, the periods are not strictly comparable. We added 11 stores in FY '23 and another 11 in FY '22. Increase in stores would automatically lease the inventory, as you would know. Further, we are growing our private brand business, and that requires a higher inventory. We have now onboarded beauty brands. And for some of the beauty brands, we have moved to an outright model, which helps us with higher margins. And last, some of the brands which have been converted to outright in fashion as well. And that's, again, margin accretive. And we are factoring in the carrying cost as we do that. All of this is visible in the improvement in margins that we have seen. To conclude, we will follow the 3 Cs for the Way Forward framework, consistency, customer centricity and capital allocation. On consistency, consisted -- we have been consistently delivering year-on-year growth across all KPIs for the last 8 quarters on revenue, PBT and margins. Our strategic business pillars have given consistent growth, and we will continue to focus on that. On the second C of customer centricity. Our customer is at the center of everything, make brief filing. Needless to say, due to this, we have consistently had over 75% loyal customers, letting us with their customers [Indiscernible]. We have taken various [Indiscernible] attract new customers, makeovers, which are about the experiences and engagement in store, combined with even in-store and active social media handles, connecting with customers consistently sharper targeting and enabling us to communicate the experiences and engagement that we offer and the personalization that comes with it. We understand the changing consumer needs and sharpening the offer accordingly as India gets younger. Globally, India has the highest number patient. And as the consumer trends change, we are staying ahead of it. Gender fluid fashion is one of the new changing trends and the fact that we are a multi-category departments to focused on fashion, focused on new trends we are benefiting from it. Combining with that and stressing on the engagement, we now have 142 stores and makeovers that I talked about, combined with personalization in these beauty stores, combining further with the SLBeauty app makes us a very strong player on beauty, focused on our beauty customers. The last C is capital allocation. We have been nimble, and we have one of the leanest balance sheets. Our net debt is negligible. We have repaid the term loans, and we have been investing completely from internal active or increasing our footprint across the country, existing and new geographies included renovating our new existing stores, investing into digital tools and omnichannel experience for our customers, hence partnering with international brands to bring in exclusive relationships for our distribution business. And we do all of this thing prudent with our capital. Shoppers Stop is future-ready. Our strategic growth pillars is in acceleration mode or sustainable revenue growth. Customer footfalls have crossed 3 pandemic rebels, and we are continuing to focus on increasing our conversion from the customers who come into our stores as well as online. As I conclude, as I strongly believe that the slowness is [Indiscernible] that we have seen in the last 2 months of February and March. We are offering our customers for a new taste for fashion, lifestyle and beauty needs giving an exclusive shopping experience to the customers. Experience and engagement is the key, and Shopper Stop is placed in a very unique position to be able to offer a distinctly superior experience on that. With that optimism, I conclude my speech, and we'll now be happy to take questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instruction] Our first question is from the line of Varun Singh from ICICI Securities.

[Varun Singh, analyst]

My first question is on gross margin, which is very much increasing by 43%. I mean, I was looking at last 7-year quarterly average, which is -- that comes around 39%. So I understand that there has been improvement in the revenue mix, et cetera. But when you say, like, do you think that 41% to 43% is a sustainable kind of gross margin given the improvement in mix that you are expecting even further from here going forward?

[Venugopal Nair, executive]

Yes, Varun, we have been consistently increasing the gross margins on a number of reasons. One, our private brand share is increasing. Second, we have negotiated with the vendors for higher margins. And third, if you remember, last year, we had a higher fix, what we call the absolute. So that has also played some role in lower margin last year. So all these things factor. We should see an increase in margins, and we should be able to sustain itself.

[Varun Singh, analyst]

Sir, my second question is if I look at the revenue CAGR from last 4 year perspective, I mean, correcting the base for COVID impact, so we see that revenue CAGR is around 4%, and the retail expansion CAGR is also around 4, a 4% CAGR. So over the last 3 years, we have added more than 30 stores. I mean that to have more than 10 store addition is quite impressive. But can you also throw some light with regards to how many stores we would have closed over the last 3 years? And also maybe you can give some reasoning regarding what -- why we have closed that store? And hence, I mean, around that for rationalizing or optimizing the store sizes, et cetera, that should wind down to a margin expansion thing? If you can give some color on this tire.

[Venugopal Nair, executive]

That's a very good question, Varun. In terms of absolute number of store closures, it is 14%. And these -- the majority of them happened during the COVID period. And subsequent to that, in the last quarter -- in the last year, we closed 2 stores. So that number of store closures will continue, but it will be much muted because the major loss-making ones were the ones that we tackled and we closed during the COVID. Obviously, these were all loss-making and hence helps in the overall margin expansion.

[Varun Singh, analyst]

Understood, sir. And sir, just one last question, if I may, that in the beauty brand, given that we have launched online website and ads, I mean, as for the time line that you alluded during last quarter conference call. So sir, just wanted to understand that how are we positioning ourselves compared to NIC in the beauty space.

[Venugopal Nair, executive]

Our access beauty stores and the SS Beauty app is positioned sharply in the premium space of beauty. And what we focus on is catering to the upper middle-class customers and offering them a complete experience of the brands that they love as well as they would love to discover. And with some of the new brands that we are bringing in, focus on the premium and visual luxury segment, we are offering a much more curated experience for our beauty customers.

[Operator]

Our next question comes from the line of Pankaj from Kotak Mutual Fund.

[Pankaj Tibrewal, analyst]

Congratulations to the entire shoppers management team on a very consistent performance and delivering on what you guys had promised a couple of years back. As it's the year-end, it's a time for reflection and also looking forward. So going forward in the next couple of years, we and team, if you can guys quantify, what are the key deliverable you are targeting from here on, it will be very helpful from an overall strategy perspective? And you talked about the 3 pillars, 3 Cs, but if you can quantify it more it will be helpful.

[Venugopal Nair, executive]

Okay, thanks for the compliment, and I appreciate. Over the next few quarters, our focus will be implementing the strategy that we have put in place. We have a very clear strategy and the performance over the last 2 quarters is a reiteration of the success of that strategy, and we will continue to dwell down on that. Specifically within each of them, private brand is our first focus, and we would expect to continue growing our private brands. And the private brands currently contribute to 14% of our sales. As we grow, we would expect that to grow ahead of the total business, taking it to probably around 20% of our total sales and close to between 25% to 30% of our apparel sales. The second strategic pillar on beauty and in beauty, it is a combination of the department stores as well as the SS Beauty stores that we have opened. And we now have 11 SS Beauty stores. We will continue to grow on that. And along with the SS Beauty stores, we would also be doing boutique stand-alone stores for some of our key partners like [Indiscernible] and going forward, not with whom we have signed up exclusive relationship. The SS Beauty app further enhances that customer experience. And again, we would expect duty to grow ahead of the company average. The third area of growth would come from expansion and new stores. And as I said, we have committed to doing between 10 to 12 department stores every year. And the pipeline for this year and next year is robust for us to be able to achieve that.

[Pankaj Tibrewal, analyst]

Great. Just one more question, sir. In a decade, this is for the first time that you have maintained the role, which is much higher after last year in double digits. You spoke about one of the things, which is capital allocation. So no, what I was saying was that after a long time, return of capital seems to be now looking healthy, which was not the case for almost a decade. And you spoke about one of the fees, which is capital, which is very closely linked to those in a way. Can you help us understand from that perspective, how you are looking at things going forward because the challenge earlier for all the shareholders have been capital allocation. So just can you give us some comfort on how the rules could be defended, what you have achieved now over the last couple of years now.

[Karunakaran Mohanasundaram, executive]

Thanks, Pankaj. Thanks, once again. I think that's a very good question, and you almost transferred when you started it -- our endeavor is to consistently improve the return on capital employed and return on net worth. In fact, if you have seen it, our balance sheet has been pretty lean, like the loans are just net of INR 30 crores. So even our -- on the store additions, we have been quite aggressive plus even the cost per square feet has also been pretty low consistently in the last 2 to 3 years. So to answer the question specifically, we are expecting the return of capital employed between 20 to 25 percentage in the next 1 to 2 years. Further to that percentage as you would have seen one of our biggest areas of capital deployment is on expansion and new stores. And this is an area where we have had a significant reduction in the spend per store. And this has been achieved by a lot of reengineering without compromising on the quality and actually enhancing the overall customer experiences. And I do hope you've had a chance to look at some of our new stores, specifically in Bombay, both Arity and Bandra have just been renovated and worth looking at. To be specific, our CapEx spend has reduced by as much as 35% per square foot. And further to that, the bulk procurement that we are now enhancing on good will produce that further. In addition to that, we have also partnered as we go into some of the newer cities where we are negotiating and getting significant CapEx spend from the landlord. And that, again, helps to reduce our overall investment, enabling us to improve our return on capital.

[Pankaj Tibrewal, analyst]

Fantastic. My only worry was that in the past, you have alluded about venturing into value format. Couldn't that just defocuses from the capital allocation part. And I hope you will take care of that.

[Venugopal Nair, executive]

Absolutely, Pankaj. The value segment is a large market, and we don't play in that segment. We are conscious of that. We are looking at a small trial, but we'll be extremely prudent on ensuring that whatever growth we endeavor in that segment move them profitably.

[Operator]

Our next question comes from the line of Resham Jain from DSP Asset Manager.

[Resham Jain, analyst]

Yes. And congratulations on a good set of numbers. Sir, my question is on the overall investments other than the store CapEx. We have been doing this digital spend owed as well the omnichannel and then we implemented SAP HANA. And I think our overall digital spend has increased. Earlier, you used to mention that close to 100 basis point kind of margin impact because of that, how much impact is there because of the same? And are we seeing that coming down going forward.

[Venugopal Nair, executive]

The overall spend on digital has reduced in the last 2 quarters because a lot of the heavy lifting was done at the end of last year and the beginning of this year. SAP HANA and S/4HANA implementation is complete. And not only did we do the first phase, which was the base model, we also implemented the retail and finance modules of S/4HANA, which is helping our business and improving our efficiencies within the business. The SS Beauty investment is also now done. And the last area where we are now endeavoring is moving out the platform for shoppersstop.com, where we will get the benefit of what we have already done on SS Beauty. And hence, the total spend would be quite efficient. So to answer your question, the overall spend has now tapered down, and we will see that in our total investment split.

[Resham Jain, analyst]

Okay. And sir, on the overall economics of new stores, if you can just give a sense of, let's say, a store which has completed 1 year, how are you seeing a ramp-up of the stores and from the payback period perspective from a CapEx perspective, how do you see the overall economics working out?

[Karunakaran Mohanasundaram, executive]

Thanks for the question. The payback period is between 2 to 2.5 years. And we are seeing a good growth from year 2, anywhere between 80% to 18 to 20 percentage. And also giving a decent return on capital employed, again, anywhere between 20 to 25 percentage from year 2 onwards ratio. And the productivity is also close to 10% higher than the existing sales...

[Operator]

Our next question comes from the line of Ankit Kedia from Phillip Capital.

[Ankit Kedia, analyst]

Sir, 3 questions from my side. You mentioned you're going into the outright models. We always follow the SOR model or returnable model being a departmental stores, while it has some positive impact on the margins but inventory is a bigger risk for us while we already have private label shares increasing, just wanted to understand how -- which type of beauty and upsell brands are you taking on outright model? And how is the risk weighted returns or you're calculating that?

[Venugopal Nair, executive]

The major chunk on the inventory is for our own private brand -- and obviously, these are at significantly higher margins, and we have better control on the overall supply -- the -- in the existing business where we have switched to outright, it is fairly limited and depending with specific brands where we've had supply as an issue consistently. And hence, it is to welcome that where we move to outside. All of these brands are major, most of them come with the agreement of exchange stock at the end of the period, which minimizes any risk that we would have on redundancy.

[Ankit Kedia, analyst]

Sir, my second question is on your footfalls. If I look on Y-o-Y basis of footfalls customer visits have grown by less than 2% on a low Omnicon base where we have added 10, 11 departmental stores, we've added -- but -- and still, the customer visits is 2%, 3% growth. Are there challenges in customer footfalls you are facing or the base was very high and hence, we are looking at a low customer footfalls in the quarter?

[Venugopal Nair, executive]

The customer, it's not footfall, so Ankit, it is a combination of eyeballs plus footfalls that we have seen. As you rightly said in the base, there was a period where the stores were partially shut or had an impact because of COVID. And that was the period where there was a massive surge in terms of eyeball online. That is the segment which was muted. Footfall itself grew in -- or by almost 40%. But again, as an omnichannel business, we look -- we measure the customers that we engage with across online and offline, and that is the 2% that you are seeing.

[Ankit Kedia, analyst]

So from an age profile of a consumer, are you getting Jenga customers on the life form now compared to the past? If you can just share that because shopper stock is no one more from a family store perspective, histories. And now with more Yunga brands coming in the overall company, are you seeing that movement happen on a slower pace or at a much faster pace.

[Venugopal Nair, executive]

We do see a reduction in shopping of family and families and groups and a lot more of individual purchases that are happening. We recognize the shift in trends. And as I had mentioned in my speech, we are very cognizant and we continue to bring in brands, which cater to that segment. To be specific, we have an exclusive tie-up with good brands who are an incubator of D2C brands and we've got 4 brands, which are now in our stores on an exclusive basis, and all of them cater to D2C. And with these new brands coming into our stores, we attract a younger customer who has got used to a lot of the D2C brands. And this is an area we will continue to invest in. And with the exclusive partnerships, we would bring in new brands that would be right for that segment. If I were to elaborate further in the coming months, we are actually launching a street way a brand called Greg bans. And again, it is from the house of growth. And Greg brand is a young streetwear brand, extremely popular on the D2C channels, which will, for the first time, be available anywhere in the physical stores. So we continue to bring in brands that are right for the younger audiences even as we see the shift in shopping happening. Further, the opportunity that it brings in, is also for us to be able to grow our conversions as we attract some of our customers.

[Ankit Kedia, analyst]

Sure. And sir, my last question is on the beauty side of the business. Now for last quarter the growth is lever to the company growth, which we are seeing. While we are talking a lot positive about duty business, but that is not reflecting in revenue growth for the Beauty despite at being launched. Despite as duty in 1.5 years being 11-store network. So just wanted to know, while we had supply change issues last 2 quarters. What are the other challenges you are facing in but for the growth to be above the company average?

[Venugopal Nair, executive]

The main challenge has been on the supply side only. To reiterate, Beauty had made its highest sales ever, and it continues to grow. Can it grow faster? Yes, it could. And definitely, we are confident that each way. The focus and the -- initially at the beginning of the year, the makeup categories were still one of the last ones that rebounded from Cove and a number of brands we are not offering makeovers and et cetera. And that continued pretty much until June, July, post which we had a few international brands with whom on fragrances where we had challenges. And then again, in the beginning of this year, we had some challenges on a few of the makeup brand, which all of which has now been resolved. One of the reasons and methods we have chosen to mitigate this is to move to outside. And that's something which is that.

[Operator]

Our next question comes from the line of Gaurav Jogani from Axis Capital.

[Gaurav Jogani, analyst]

I have a couple of questions, if I may. Sir, my first question is, if you can help us out what -- of the INR 200 crore CapEx that we have incurred during the year, if you can break it up between the new store openings and also in terms of the omnichannel CapEx that we have done or rather the online CapEx that we are on.

[Karunakaran Mohanasundaram, executive]

On the new stores. We spend around about INR 82 crores. And on the stores, which we refurbished, we spent around about INR 55 crores.

[Gaurav Jogani, analyst]

And sir, the remaining would be on the omni fee there.

[Karunakaran Mohanasundaram, executive]

Not necessarily and about the digital and omni be around about INR 20 crores. And there are like for the distribution in some of the stores that about INR 10 crores.

[Gaurav Jogani, analyst]

And sir, the next question is with regards to the growth per se, EPP. on a 4-year CAGR basis, if I see for FY '23, the CAGR comes to around 4%. As a earlier participant highlighted that even that matches largely the rate square foot addition. So going ahead, also Venu Nair mentioned in his opening remarks that you are seeing some green shoots in the month of April. So how one should go ahead and build growth given the fact that even the figures have been some single digits. And given the fact that we will be adding around 10, 12 stores every year, we are looking to do a 5% SSD. So what kind of growth can we build in going ahead...

[Venugopal Nair, executive]

Specifically for this year, I mean, it's too early to say. We expect the overall growth to be including the new stores should be in the mid-double digits. SCC growth should be in about mid-single digits.

[Gaurav Jogani, analyst]

Mid-single digits. So this -- the mid double-digit total growth you are saying would be including this mid-single-digit SSD growth, right?

[Venugopal Nair, executive]

That's right.

[Operator]

Our next question comes from the line of Nihal Mahesh Jham from Nuvama.

[Nihal Jham, analyst]

Congratulations on the strong performance. So the first question was on the gross margin again. You did highlight the aspects to why it has improved. Would it be right to say that the change in the business model or the arrangements with vendors has been a large part of the contributor or if I compare it on a Y-o-Y basis?

[Karunakaran Mohanasundaram, executive]

Nihal, that contributed a very small percentage for this fiscal. But next year onwards, it should contribute probably 30 to 40 basis points.

[Nihal Jham, analyst]

Understood. That's helpful. Just a related question to the small change that while there has been a spike in inventory, there has been an increase in creditors also. So net-net, how would this end up impacting the working capital for the business going forward?

[Karunakaran Mohanasundaram, executive]

Specifically for this year, if you have seen there is a reduction in working capital of around about INR 147 crores. But we have taken steps to reduce the inventory from Q1 onwards. So we do expect the funding from working capital for the full year. The negative working capital should increase at the end of this fiscal year.

[Nihal Jham, analyst]

If I may, just final question. You did mention the CapEx per square feet for the new stores is down around 35%, what is the number now that we are looking at for the new stores?

[Karunakaran Mohanasundaram, executive]

Were between 200 and 200 to 2,300 depending upon but then we have beauty or not. If we don't have duty, it will be around about INR 2,200. And if we have put, it will be slightly above 300.

[Operator]

Our next question comes from the line of Aliasgar Shakir from Motilal Oswal.

[Aliasgar Shakir, analyst]

I just wanted some sense on the growth. So -- and where is this SSG coming from? So in this particular quarter, if I see Y-o-Y footfall is up about 2% against a 5% area or approximately addition. And even ATB is up about 5%. So it implies that number of bills would have grown nearly about 25%. So that's a very significant increase probably in the conversion rate. So strategically, if you could just help us how -- I mean, what is really changing that is driving this kind of an SSG. And just one follow-up here. As you mentioned mid-single SSG is what we are targeting going forward with then the store addition in a way probably implying about mid- to high teens growth. So I mean, we have been having an earlier target to revenues in FY '25. So with that kind of an SSG, I mean probably we would need something about mid-teens kind of SSG growth to achieve that target. So how are we seeing that getting achieved?

[Venugopal Nair, executive]

So the total growth, as you rightly pointed out, a combination of like-for-like growth and also the total. Now as you would also appreciate with the increased number of new stores in the mix, it would contribute to a higher same-store growth, and we would continue to see the benefit of that over the next 2 to 3 years as we continue to invest into stores. Further, the increase in the tote bill value, and it is a combination of price and volume. The price increase itself has been fairly plugged in terms of the product mix, and that is what has driven rather than an absolute increase. And if I were to be even more specific, the biggest increase or bulk of that increase in the price has come from the non-apparel category. And where we have moved to more premiumization. And this footwear as an example, where we've upgraded the brands that we retail, and that has contributed to the increase in price rather than the prices for the same product. Further, what will add to the growth is, apart from the new stores and department stores, the beauty stores and the addition of Beauty stores, including the -- our own plus the boutique stores for our brand partners that we talked about would contribute to accelerating that growth.

[Aliasgar Shakir, analyst]

Okay. Just a follow-up here is, so it ATV what you mentioned, volume plus price increases. ATV has grown about 5%. So I mean when I see your revenue growth in this quarter, even if I adjust for that ATV, I mean, it's a very significant growth in your number of bids, which is nearly about 25%. So I was just trying to get some sense of what would have led to this kind of a big increase in the despite footfalls non-growing.

[Venugopal Nair, executive]

So the overall, as we said, into stores, we did have a significant increase, and we do get a much higher bill values in our stores compared to online. And it is that weightage, which constitutes that higher growth in ATV.

[Aliasgar Shakir, analyst]

Okay. Got it. And we still stick to our target of doubling revenues by FY '25, right, on an FY '20 base that we had earlier indicated?

[Venugopal Nair, executive]

It was FY '20 that we had indicated and we stick to that.

[Operator]

Our next question comes from the line of Sameer Gupta from India Infoline.

[Sameer Gupta, analyst]

This is regarding the CapEx that you mentioned. So INR 82 crores for new store additions is what I heard during the call. And this is a area addition of around 2.3 lakh square feet during the year on a net basis. So this is translating into CapEx per square feet of around INR 3,500 crore. But you also mentioned that the CapEx per square feet has been reduced and now it is at around INR 2,200 crores to INR 2,300 crores. So just trying to reconcile these 2 data points.

[Venugopal Nair, executive]

So it is -- the CapEx is not just the 11 department stores, it's also beauty dose. And the beauty dose have a -- I mean these are smaller stores and also more premium. And hence, the CapEx per square foot for those stores are much higher. To recap we had -- we have opened 11 beauty stores and 11 department stores and the spend is per combination of both put together.

[Sameer Gupta, analyst]

Okay. Okay. That makes sense. Just one follow-up or one more question, if I can squeeze in. I just missed the SSS growth number reported by you for fourth quarter and full year.

[Venugopal Nair, executive]

For the fourth quarter, specifically the same-store growth is a bit complicated purely because it's not a true comparator. The absolute growth was 32% on last year. Again, as I said, because there was a period last year in the quarter where stores were partially closed.

[Operator]

Our next question comes from the line of Resham Jain from DSP Asset Managers.

[Resham Jain, analyst]

So I have just one more question on the stores, which we are opening. So some of our peers have established a model whereby the full investment of the store is done by the landlord and a percentage of revenue is being shared with them. And in fact, some of the stores which -- where they have done a CapEx, they are transferring the complete kind of book value to the landlord just to free up the balance sheet. Are we experimenting with such models? Or are we experimenting with such models are seeing such kind of yields?

[Venugopal Nair, executive]

Resham, that's again a very good question. To answer your question, Yes, we are excluding whether we can get the partners either to part or fully fund our CapEx. We've just started doing it for some of the new stores. So probably in 3 months or 4 months down the line, we should be able to give a definite answer for that.

[Resham Jain, analyst]

Okay. Because I'm specifically harping on this is because one of our peers has basically significantly ramped up the store expansion through this model because it frees up the balance sheet. I don't know whether that's a correct model or not, but yeah.

[Venugopal Nair, executive]

Resham, to answer your question. The only the difference is the CapEx, what we are missing in our stores is anywhere between INR 7 to INR 10 crores depending upon the size of the store, depending upon the offerings, what we have. And whereas the score, what you are mentioning, I don't want to go to those numbers. I know the company which you are talking about. Those numbers are significantly different from the investments what we are making.

[Operator]

Our next question comes from the line of Priyanka Trivedi from Anti Stock Broking Limited.

[Priyanka Trivedi, analyst]

Sir, my first question is that we've been highlighting that the supply chain issues would be streamlined by the fourth quarter that has gone by? And still you indicated that the issues are persisting. So what is your commentary out there? And we shifted to the outright model, but do you see any streamlining on that side going ahead? And what would be the margin differential between the outside and mobile and [Indiscernible].

[Venugopal Nair, executive]

So Pranav, thanks for the question. I appreciate where you're coming from. And in a rapidly growing market, especially in a category which is quite heavily dependent on imports, some of the supply chain issues would be expected to be expected, and that's something which we need to deal with. And the outright was one of the ways we have dealt with it. The second is moving with the distribution channels that we have launched and the subsidiary that we have now established, we are able to, again, get a better handle on the -- our own supplies. The third area is also we are slowly growing on our private brand, which again helps and fourth, also with partnering with a number of wherein appropriate, which again helps the supply chain issue or mitigating against that. So those are the 4 different ways by which we are managing and ensuring that we continue to be on the high growth trajectory that we have embarked on for SS Beauty.

[Priyanka Trivedi, analyst]

Okay.. And my second question would be that you highlighted that we have been resisting rentals. So could you give us a sense like what categories are doing there? How is the panel performing on Beauty?

[Venugopal Nair, executive]

I wouldn't want to get into specifics. It's still early days in the quarter, and it has been quite mixed, specifically because we are -- the comparative period last year was the initial search that we had from recovered also where there has been a shift in the data base of weddings, et cetera. What I would say is that we are managing to write that and come up ahead and quite reasonably pleased with the way we are progressing on that.

[Operator]

Our next question comes from the line of Devanshu Bansal from Emkay Global Financial Services Limited.

[Devanshu Bansal, analyst]

.Sir, you indicated that February and March was relatively slower while Jan saw a pickup in growth. So if you could share growth trends across the 3 months for March quarter individually, it would be better to understand the macro weakening.

[Venugopal Nair, executive]

Devanshu, if I'm greatly honest, I wouldn't want to do that. And the reason is because the periods are not comparative Jan had end of season sale, Feb had different things going on, et cetera. So it would be a true indicator. And that's the reason I wouldn't want to do that. More so because as I said, there were 2 things which happened, Jan, the U.S, which is normal. And then in Jan 22, there was COVID. So the comparatives are not really...

[Devanshu Bansal, analyst]

Got it, sir. And sir, I wanted to understand this gross margin improvement. I know there have been multiple questions on this brand. So the drivers, the basis recover gross margins have improved by about 400 basis points. So you indicated one of them being private label as well as some negotiations with vendors for higher margin. In my view, this 200 bps increase in private labels would have added about 100 basis points to our gross margins, but they could sort of help us understand the rest of the margin improvement, the drivers for the rest of the margin improvements.

[Karunakaran Mohanasundaram, executive]

Devanshu, thanks a lot for the question. You almost answered that question. See, as a private plan, we have negotiated better with our vendor partners. The most important thing is we also had a onetime high obsolescence last year. That has been the rationalized right now. And last but not the least, even the discounts have been optimized over a piece of times that has also reduced it. Those are the 3 or 4 large reasons where the margins have improved.

[Devanshu Bansal, analyst]

Can you also -- from vendors, you mean your vendors for private label business or for third-party brands?

[Karunakaran Mohanasundaram, executive]

Both.

[Devanshu Bansal, analyst]

Okay. Lastly, sir, you said Tier 2, 3 is facing challenges relatively more versus metals, but our expansion has been primarily in subsidy. So do you foresee a change in strategy or slowed expansion because of weak trends in DCT?

[Venugopal Nair, executive]

The softness that we are seeing in some of these Tier 2, Tier 3 cities, we believe is temporary and definitely not something which is structural. And hence, we don't see any reason for us to revisit our strategy of continuing to expand into markets where we are not present. Our new store strategy is always led by focusing on a, the availability of our target customer. And to remind, we are in the premium lifestyle space. So we are catering to the upper middle class and we look for customers like catchments where there is a significant presence and we are not present. And the runway for that, the pipeline for that is very, very strong. And again, to reiterate, we are being quite specific in terms of the store sizes that we go for to ensure that we have great productivity to compensate for the target customer base being smaller as we go into some of the never [Indiscernible].

[Operator]

Our next question comes from the line of Shrey from Swan Investments.

[Unknown Analyst]

So just wanted to understand, going back to last year, if I read your commentary, you're saying Jan and mid of Feb was impacted by the Omicron variant. And had that not been there, we would have grown by about 28-odd percent. So at that point in time, you had given a rough figure of about INR 1,050 crores of top line. So on that number, we've done 1,175 this quarter. So that comes to about 11-odd percent. So in that light, how do you see this 11% growth rate for your company? Is my first question.

[Venugopal Nair, executive]

If I heard you right, what you're referring to is the Q4 of financial year '22 and the guidance of what was the impact because of project, and that's how we have looked at it. Is that right, Shrey?

[Unknown Analyst]

Yes.

[Venugopal Nair, executive]

Which is a fair assessment. And the growth that we have seen subsequent to that. And even if we were to normalize for that, the growth continues to be robust and we are reasonably pleased with the growth that we have seen.

[Unknown Analyst]

Sir, your line is not clear. I'm not able to hear you properly.

[Venugopal Nair, executive]

So normalizing for that, our growth continues to be robust, and we are pleased with the growth that we have seen so far, particularly as there has been a slowdown in the market. And despite that, we've been able to grow robustly. All right.

[Unknown Analyst]

My last question is, sir, on your square foot addition. If I'm not wrong, last year, at this point in time, we had about 3.7% of total retail space. And this year, we are at about 3.9%. So the net addition is about 0.18 million. So that comes to about 18,000-odd square foot in terms of store addition. So is my figure right? Or my sense is, have we renovated existing stores and cut their sizes? Or how should I look at this number?

[Venugopal Nair, executive]

I don't think your numbers are right, Shrey, and I think it might be because last -- till last year, we were reporting the chargeable area or the super built-up area, which we shifted to being carpet area as the industry now and the 2 lakh 90,000 square feet that we currently have is -- for the department stores is on carpet area. The vision we the 90,000 square feet is what we have added in this financial year.

[Operator]

Our next question comes from the line of Jignesh Kamani from GMO.

[Unknown Analyst]

Just want to know, this time winter was delayed, so it is anyway positive impact on the revenue and the margin? And similarly, how is the full prices this quarter versus Y-o-Y?

[Venugopal Nair, executive]

Thanks for the compliments, Jignesh. Winter was decent without being great, if I put it that way. The onset of winter was delayed and hence, we could not fully maximize on what we could have achieved. I wouldn't want to get into the specifics of full price and reduced because that's not something which we would divest.

[Unknown Analyst]

And any idea on the how is the revenue and the profitability from the Beauty distribution segment in the fourth quarter and some color for the next year?

[Karunakaran Mohanasundaram, executive]

We just started, Jignesh, in the month of March. We are in the process of appointing retailers. So we have completed close to 10, and we may have to add another 4 or 5 in the next 1 quarter. So the sales have been negligible in the fourth quarter this year we expect anywhere between INR 180 crores to INR 200 crores for the full year.

[Operator]

Our next question comes from the line of Disha Shed from Annual Share and Stock Broking Private Limited.

[Unknown Analyst]

Sir, when we are targeting and building of, I don't know your on it will be a double digit or like a 15% CAGR growth. So and in the past so many as we have on mid-single-digit cater. So if you can grow some light? I know you have answered that question, but if you can still get deeper into it since we have not performed in the past, what will lead to the mid-double-digit growth around 15%.

[Venugopal Nair, executive]

Disha, thanks for that question. And in a way, you have answered your own question. But I would reiterate what would contribute to the growth is implementing of our strategy. Our strategy built on the foundation of a strong partnership that we have with our national brands. And we continue to grow on that using -- bringing in great customer experience and engagement. Within the strategic pillars, the 2 -- the 3 engines of growth that we would have are private trends, beauty and omnichannel expansion across online and off-line.

[Unknown Analyst]

Okay. Okay, sir. And also in terms of when you said this quarter, we grew 32% like-to-like growth. Am I getting a silver right?

[Venugopal Nair, executive]

That's correct.

[Unknown Analyst]

And for FY '23, how was the like-to-like to?

[Venugopal Nair, executive]

Again, not a true comparison. It was 63% was the total growth like collide was 57% growth.

[Unknown Analyst]

Okay. And sir, since we are expanding aggressively, is it going to some light on the debt requirement or will fund through internal.

[Karunakaran Mohanasundaram, executive]

Disha, I -- we don't foresee any debt for our expansion, we should be able to fund from internal accruals.

[Unknown Analyst]

Okay. And the only case I would say around? Between...

[Karunakaran Mohanasundaram, executive]

Same similar to this year, anywhere between INR 150 crores to INR 200 crores, yes, that's right.

[Operator]

Our next question comes from the line of Tejash Shah from Avendus Spark.

[Tejash Shah, analyst]

Sir, there's always a trade-off that been private stable strategy, which is positive on margins, but kind of stabilizing on wind days. So if I look at our numbers also on 4-year CAGR basis that from 19 to 23, but roughly 4.5%, 5% odd CAGR growth, our inventory has grown at something around 8% CAGR. So just wanted to understand, though, the benefits are visible on target front, but how would you like to manage it into an absolute basis on overall working capital, we are planting on inventory days basis, how are you planning to [Indiscernible]?

[Venugopal Nair, executive]

I did not get the numbers. Are you seeing that 5% CAGR [Indiscernible]?

[Tejash Shah, analyst]

No, sir, overall growth for 5% or inventory growth is somewhere around 8% CAGR from '19 to '23.

[Karunakaran Mohanasundaram, executive]

I agree. That's what Venu spoke at the beginning of the meeting. Our inventory is higher , let's understand the constitution of the business. We have close to 20 so and 1/3 is -- We are focused on the or inventory where it's a paid inventory. 3 or 4 reasons. Our private brand has been growing between 50% to 70% last year. So that inventory will be higher. Second, we also spoke about some of the shift in model on apparel and beauty. And that's the reason the inventory is higher. In fact, the inventory CAGR used significantly lower than the private brand CAGR, what we have achieved a go.

[Tejash Shah, analyst]

Sure. Mike, how should we think about this in less next 2, 3 years? Will it remain at the same percentage or because the strategy shift is there, it will accelerate this direction further.

[Karunakaran Mohanasundaram, executive]

A bit difficult to answer that question pages because it has -- I mean the dynamics are completely different. As we continue to grow on the private brand, the inventory will be higher. And it largely depends on what our private brand share and the growth for the next 2 to 3 years.

[Tejash Shah, analyst]

Okay. So let me cut this. So our ROI on private sector business is very high because the inventory deployment is higher versus our third-party banks?

[Karunakaran Mohanasundaram, executive]

The net margin, what we are doing from the prevent is also higher and commensurate with the investments that we are making.

[Tejash Shah, analyst]

Yes, sir, but that's what I'd say that the higher margin competes for higher effective. So does it culminate it to better ROI rest of the business?

[Venugopal Nair, executive]

It more than -- I mean covers us for it and hence, the investment is definitely worth one and we are quite as well as delighted with the progress we are making on that. Further to that, I think the other point which is also worth calling out is that as we grow our private brands, it also brings in the customer, giving them a different reason to come into our stores. So combining with the national brands and international brands, our own exclusive brands gives a different reason for the customer to walk into our stores.

[Operator]

Our next question comes from the line of Yash Bajaj from Lucky Investment Managers.

[Yash Bajaj, analyst]

Sir, just trying to dive a little more deeper on the private brand business. So I just wanted to understand, versus a third-party brand, what is the positioning of a private brand in terms of the style and the pricing? That is my first question.

[Venugopal Nair, executive]

So yes, our positioning of our private brand even the good segment within our stores and online. And it complements the national and international brands that we have. We are very clear that we don't want our private brands to be competing, but should be complementary to what we already offer. And hence, widening the choice that we are giving to our customers to evaluate, also to delve further into it, each of our brands caters to a lifestyle need. The brand ethos is very clearly defined. And it is within the framework of that brand ethos that the brand grows to. If I were to again explain that even a little bit more. Life is one of our larger brands, not the largest, but one of our larger brands. It's very clearly defined as a men casual-wear brand. And that's what the brand would cater to. And this is one of the significant shifts which we have made over the last 2 to 3 years, where the definition of each brand has been sharpened. And by doing that, it is addressing a specific lifestyle need of every customer who walks in, and it is doing that by being better value within the box compared to the more well-known national and international brands that we would have in our stores.

[Yash Bajaj, analyst]

Okay. Got it. And my second question was, the stores which we are adding, we are aggressively adding more and more stores in Tier 2 and 3. So would it -- would the offering of the -- or the mix of private and third party be different for a Tier 2, Tier 3 versus metro Tier 1?

[Venugopal Nair, executive]

The mix of brands that we would have in a new store is very strictly guided by the catchment that we are going into and the propensity to spend of the customers in that catchment. Having said that, the mix of private brands would be slightly higher than what we would have in the more established markets.

[Yash Bajaj, analyst]

In the more established markets.

[Venugopal Nair, executive]

Yes, the established stores that we have, when I said market cement stores that we've already had. We do see that in our newer stores, the contribution of our private brands tends to be fairly high, much higher than what we would have in our current stores. And this is further accentuated by the fact that we are opening more compact stores and hence, the split or percentage mix of private brands within these compact stores would be even higher.

[Operator]

Our next question comes from the line of Aasim Druvaraj from Informs.

[Unknown Analyst]

So I wanted to ask if you are planning to explore more in e-commerce maybe by partnering with some of the brand segment or part?

[Venugopal Nair, executive]

As of now, we are brands that are available on Amazon. And we are focused on tropestock.com. As we have always emphasized, we have moved from a brick-and-mortar retailer to being an omnichannel retailer, and we offer a stimulus offer across shoppersstop.com and our own stores for our customers to shop from. In addition to that, we are currently present on Amazon. And we -- while we wouldn't rule out further partnerships, really, our focus will be on shoppersstop.com.

[Operator]

We take our last question from the line of Akshay Krishnan from ICICI Securities.

[Akshay Krishnan, analyst]

Just one trying to understand what will be the contribution of the quantum of donors that you received from the brands at the end of FY '23 because I think -- my understanding is we get a bonus from these branded players once we achieve a certain target of volumes at Q4 in the FY.

[Venugopal Nair, executive]

Akshay, thanks for that question, Akshay. They are all completely confidential, and we can't share because we do have a confidential agreement with vendors. All I can say is they are consistent. It's not something that has happened only this year. It was there this year. We have -- we achieved the targets last year. That is effect tactically, we call it.

[Karunakaran Mohanasundaram, executive]

And we also have targets for this year. And if we achieve the cases, we'll get this year.

[Akshay Krishnan, analyst]

One final question, sir. So you have -- with ASP around 4,000 plus odd and per ASP around 1,500, is there any stress levels that you're finding in any ticket is, like maybe between 2,000, 3,000 range or like sub-thousand ranges as a consumer of listing restore?

[Venugopal Nair, executive]

We've now had 12 quarters of consecutive growth in the ATVs, and we are not seeing any resistance at any particular price points. As I would want to emphasize the growth in the ATV is mainly because our customers are blessing us with more business. There has been some increase because of price, but that, again, is not just a rise or same product, but because of the product mix. So to answer specifically your question, none that we have noticed.

[Operator]

Thank you. Ladies and gentlemen, we have reached to the end of the question-and-answer session. And on behalf of Shoppers Stop Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.