Shoppers Stop has evolved its business model over a period of last decade that will enable it now to scale up faster in the coming years.
It has been derisking its merchandise model with a higher share of consignment as against the bought-out share, while its cost-cutting exercise has started paying off as visible in better margins in the two quarters.
Most of its subsidiaries have already turned profitable with a turnaround in the home solutions and international airport retail venture expected in near future. Its footfalls to sales conversion ratio came down in the March 2010 quarter, but a significant increase in average transaction size and average sales price have kept the like-to-like store growth up.
Going ahead, the company has aggressive growth plans to open 8 stores in FY11, and another 10-12 stores in the next financial year. This will cumulatively add about 1 million sq ft to the existing 20.4 million sq ft of space. These factors enable the company to justify its P/E above 27 and P/BV above 4.7, which are unlikely to weaken in market turmoil.
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