Shoppers Stop More Than Doubles FY24 Intune Store Count Target

Shoppers Stop Ltd. plans to grow the number of low-cost Intune fashion stores across the country to 25 in financial year 2024 from its previous target of 10.

The fashion retailer launched Intune in June this year by opening two stores in Hyderabad and a store in Mumbai on a trial basis. In its post-earnings call in July, it had guided for adding 10 more stores by the end of September, targeting tier I and tier II markets.

Strong traction in early days has prompted the management to revise its store add target to 25 stores for FY24, according to an analyst's call that was scheduled to update on the leadership changes even as the company tried to calm investors' nerves after stock rout.

Outgoing Chief Executive Officer Venugopal Nair’s sudden resignation on Aug. 24 after a three-year stint was followed by the biggest intra-day drop in Shoppers Stop's stock market value on Friday.

Nair is credited for Shoppers Stop's most recent foray into the value-fashion segment with the launch of Intune, breaking away from its traditional stand as being a premium retailer. It will be competing directly with Reliance Retail's Yousta and Trends as well as Tata-owned Trent Ltd.'s Zudio.

The latest foray is also timed to deal with the current slowdown in discretionary spending, including apparel sales. "Under Intune, our objective is to provide irresistible fashion at unmatched price," Nair had said.

The average selling price for Intune is Rs 450–500. The new brand will help Shoppers Stop tap into India's vast market for value fashion, which is currently dominated by the unorganised sector.

In terms of value retail, the largest segment of the market is in the tier II, tier III cities and beyond, Nair had said. The organised retail is less than 30% in apparel, while the balance is in the unorganised space.

"And the unorganised space is estimated to be Rs 1.3 lakh crore. What we have been seeing over the last 10 years is the move from unorganised to organised. And, hence, that segment is very, very large," Nair had said.

He expects the Intune format to achieve breakeven in the first year itself.

The management of Shoppers Stop told analysts that there would be no change in the strategy and the new CEO’s role would be to execute the expansion plans that Nair has put in place for the company.

Nair has also been instrumental in bringing improvement in assortment and format clarity, which are somewhat visible in decent same-store sales growth, higher private-label share and aggressive expansion, according to Abneesh Roy, executive director at Nuvama Institutional Equities.

The new initiatives of Intune and private-label beauty distribution will continue at a strong pace of expansion, according to Shoppers Stop.

The management also highlighted that apart from the continued focus on improving the share of private labels and beauty, it will continue to prioritise opening smaller store-sized stores for enhanced efficiency.

The company has received healthy responses to its recent initiatives, which include opening smaller-sized stores of 30,000 sq ft versus existing average of 50,000 sq. ft, growing the private label mix; and prioritizing high-growth and margin-accretive beauty segment, according to Motilal Oswal Financial Services Ltd.

These initiatives have collectively contributed to an improved top-line growth and increased productivity. This, along with a store addition guidance of 12 and 15 in the departmental and beauty segments respectively, should aid revenue growth, the brokerage said.

A larger concern, however, is Nair's exit at a time when the company was just beginning to see an improved revenue trajectory after years of subdued growth.

"Given the crowding of apparel players that has been happening in apparel retail space, along with challenges seen by Shoppers Stop in the recent years towards footfall growth and brand dilution, is likely to impede growth," Roy said. "We reckon wait and watch given the format's history."

Shoppers Stop's revenue had been lagging prior to fiscal 2020, with a 3% compound annual growth rate in revenue over FY15–19, according to Motilal Oswal.

The brokerage said persistent demand pressures, particularly in tier II markets where the company has strategically focused its expansion efforts, coupled with increased competition from the newly launched Centro, underscored the importance of closely monitoring the execution of Shoppers Stop's Intune initiative.

Nuvama pointed out that a large number of retailers were facing delays in rollouts due to delays by developers, saying this was a significant risk and could lead to cost overruns. "Additionally, delays can also lead to capital crunch with a large number of stores bunching up," Roy said.