Despite slow response, listed retailers fared well in Q3

The festive season followed by holidays could not attract consumers to stores as it happened in the past. Even the discount season could not attract shoppers. But despite all the negativity, listed retailers like Trent, Shoppers Stop, Reliance Retail and Pantaloon were able to register

growth during the quarter.

Retailers book profits

Tata-owned Trent for example, posted a 16 percent growth over past year and 39 percent over the earlier quarter, in its standalone net profit for Q3. It posted a PBDIT (profit before depreciation, interest and taxes) margin of 14.7 percent in the third quarter compared to 10.87 percent in the second quarter and 14.2 percent in the year-before period. These came on the back of a 12 percent yearly growth in net sales during Q3.

On

the other hand, Raheja-owned Shoppers Stop’s revenue went up 16.5 percent over a year to Rs 752 crores and saw gross margins going up 100 basis points (bps). However, its EBITDA margins were flat over a year, due to rise in staffing cost (up 46 bps) and operating expenses (up 50 bps). Profit after tax increased 1.4 per cent over a year, to Rs 17.3 crore. On a consolidated level, which includes its hypermarket chain, Hypercity, Shoppers Stop’s profit after tax (PAT) went up 17 percent to Rs 5 crore during Q3 as compared to Rs 4.3 crore in Q3 of 2012-13.

Mukesh Ambani’s Reliance Retail posted a PBDIT of Rs 106 crores in the third quarter as against a loss in the year-before period. It registered growth of 38 percent over a year in turnover at Rs 3,927 crores in the third quarter. Like-to-like sales growth across various formats was 21 percent. Future Fashion & Lifestyle has reported a net profit of Rs 93.39 crore for the third quarter ended December 31, 2013-14.

Looking forward to a positive Q4

Leading listed retailers witnessed healthy sales and growth in Q3 due to festive shopping. Industry experts point out that the performance was better than expected. In a report, Bharat Chhoda and Dhvani Modi of ICICIDirect.com (a subsidiary of ICICI Securities) have said, “We were surprised by Shoppers Stop’s operating performance, which led to profits (as against our expectation of a loss). While sales at Rs 1,089 crores (up 15.5 percent year-on-year) were in line with our estimate, the operating margin at 3.8 percent (down 35 bps) was higher than our expectation of 2.9 percent. Consequently, the company reported a profit of Rs 5 crore as against our expectation of a loss of Rs 5.8 crore.”

However, the disappointing factor, according to them was a weak like-to-like sales growth of 5.5 percent, due to dampened consumer sentiment and lower jewellery sales. “Over several quarters, the company has been making efforts to pare losses of the HyperCity segment and this is bearing fruit. With some more downsizing of the HyperCity stores on the cards, the company has guided (forecast) a break-even at the EBITDA level by FY15 and PAT level by FY16.”

Overall top retailers fared well and are looking forward to book topline growth in Q4 as well on the back of discount season but they are uncertain about the profit margins since it would depend on the number of days, they would have to extend the sale period.