Shoppers Stop – a Good Share to Acquire for Medium Term

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Shoppers Stop – a Good Share to Acquire for Medium Term

Paris Hilton
Paris Hilton | Source
Shoppers Stop – a Good Share to Acquire for Medium Term
Shoppers Stop – a Good Share to Acquire for Medium Term | Source
Shoppers Stop - share price movement
Shoppers Stop - share price movement | Source

Shoppers Stop – a Good Share to Acquire for Medium Term


Good Q2 results

Shoppers Stop has produced good Q2 results for the quarter ended 30.09.11 as compared to the quarter ended 30.06.11. Revenue has increased from Rs.393.02 crore to Rs.497.34 crore. Revenue for the whole year 2010-11 was at Rs.1712 crore. Net profit increased from Rs.11.68 crore to Rs.19.54 crore. Net profit for the whole year 2010-11 was at Rs.75.18 crore. Operating profit margin increased from 7.65% to 8.82%. Net profit margin increased from 2.97% to 3.93%. EPS for the year 2010-11 was at Rs.9.52. Annualized EPS for Q2 works out to Rs.13.72. The company is running departmental stores. The shares of Shoppers Stop are traded in Indian stock markets at Rs.298.75 now (BSE 15.12.11). The shares are available in both BSE and NSE. The highest price recorded by the shares of the company in the last one year is at Rs.504 (25.07.11) and the lowest price is at Rs.261 (11.02.11). Can one invest in the shares of Shoppers Stop at the current market price? Let us analyze.

One of the best retail players

Very few companies have produced good Q2 results in this time of depressing macro economic scenario prevailing in India and all over the world. Therefore the company Shoppers Stop should be given credit for not only surviving but also for thriving and prospering even in this gloomy scenario to come out with an outstanding result. The stock markets have become very volatile with the indices falling at the slightest pretext. Euro Zone crisis is spreading like contagion to all parts of the world. Investors are exiting from mid cap companies with inefficient corporate governance and high debt. In this murky scenario, Shoppers Stop has proved itself as one of the best retail players. It has able corporate governance. It has a healthy balance sheet. Riding on the back of a retail wave, it will continue to perform well in the earnings front and give the investors good returns.

Open to foreign tie-ups

In the grocery and food segment, Shoppers Stop is open to foreign tie-ups. The company was not worried when the government opened the retail sector to FDI (Foreign Direct Investment). Shoppers Stop runs its hypermarkets under the brand ‘Hypercity’. Shoppers Stop has expressed that it is more interested in sourcing and logistics in a foreign partner. But at the same time the company has made it clear that it is not desperate for such tie-ups. In other words, when the government had to take a backseat in the midst of the opposition assault on its policy of opening up retail sector to FDI (Foreign Direct Investment), the company kept its cool. The company is of the view that foreign players in retail sector can bring with them best practices in supply chain and logistics that will be beneficial to Indian retail sector and consumer.

No revenue fall for the last six years

Shoppers Stop has not witnessed any revenue fall for even a single year for the last six years. This is a great achievement. Govind Shrikhande is the Managing Director of the company. What is the secret for the company’s success? It has certain formulae which it strictly follows. It always sticks its business to big towns. It adds number of stores steadily. These are the secret formulae for the company that has ensured it a steady success in the Indian retail sector. The company plans to add 24 new retail stores for the financial year 2011-12. The company has been putting a CAGR of 23.47%.

Paris Hilton enters India through Shoppers Stop

So popular is the brand name of the company Shoppers Stop that Paris Hilton planned to launch her handbags and fashion accessories from Shoppers Stop in India. Paris Hilton is American actor, fashionista, singer and great grand daughter of founder of Hilton Hotel Conrad Hilton. Shoppers Stop will be opening Paris Hilton shop-in-shops across metro cities in India. Paris Hilton has seventeen product lines including apparel, fragrances, music albums, footwear, pet products, sunglasses, bedding, stationery and handbags. Paris Hilton earns $10 million a year. Paris Hilton inaugurated a Moto Grand Prix team styled as SuperMarxte VIP last year. She plans to follow through with beach clubs and hotels.

Paris Hilton will target the rich

Shoppers Stop will be targeting Paris Hilton brands at the rich and super rich. Brand Concepts, based in Indore will distribute Hilton handbags in India. Shoppers Stop also retails handbags produced by the Indian designer Rocky S. Paris Hilton handbags and other accessories are distributed through 30 stores spread over 35 countries in the world. Even countries like Bahrain, Malaysia and Philippines have such shops.

62 departmental stores in 2014

Shoppers Stop will be investing Rs.400 crore for expanding its operations in the next 4 years. It will be investing Rs.200 crore for setting up 25 more departmental stores in existing as well as new places in India. The balance amount of Rs.200 crore will be spent on other forms of departmental stores. Shoppers Stop has 43 Shoppers Stops in India so far. Retail industry is growing by 30-35 per cent every year. Therefore Shoppers Stop is keen on expanding by as much as it can. It will be opening nine Shoppers Stops during the current fiscal year. The company has estimated that by 2014, it will have 62 operational stores with a retail space of 3.6 million square feet. The company is also planning to enter Tier-II cities apart from expanding in metros.

Focus on cosmetics

Shoppers Stop has five speciality retail formats. They are Mothercare (baby care), Home Stop (Home buying), Estee Lauder (cosmetics), Crosswords (music and books) and Mac (cosmetics). It is noteworthy that the company has two speciality retail formats Mac and Estee Lauder for cosmetics. This shows how fast cosmetics sale is growing in India. Shoppers Stop allows customers to convert points at the cash teller itself without obtaining vouchers for it. Thus paper work is eliminated both for the company and for the customers.

Trying to make Hypercity profitable

Shoppers Stop is trying its level best to make the loss making Hypercity profitable in the coming months. Average ticket size has increased by at least ten per cent in the last one year. Customer entry has gone up by as much as 26%. Shoppers Stop feels positive sentiments even in this murky economy to set up more shops.

Invest and accumulate

At the current market price, investors may purchase the shares of Shoppers Stop and also accumulate it at every decline for medium term investment to get decent returns. The reasons for this recommendation are:

  • Shoppers Stop has produced very good Q2 results
  • Shoppers Stop is not affected by the gloomy economy
  • Shoppers Stop is expanding its business
  • Even when the economy is slowing down, Shoppers Stop posts a good growth
  • Shoppers Stop has very efficient management
  • Shoppers Stop is not afraid of foreign competition in retail trade
  • Retail business is growing in double digits in India

Shoppers Stop is scouting for foreign collaboration in logistics and supply chain

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