Shoppers Stop plunges 6% on sharp decline in Q2 net profit

The sharp decline in profit for Shoppers Stop was on account of its aggressive capex plans and an additional expense to rebuild inventory destroyed in a fire in Delhi

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Shares of Shoppers Stop plunged around 6 percent in the morning trade on October 19 after the department store chain reported a sharp decline in its net profit for the September quarter of the current financial year.

The retailer’s net profit nosedived 83.3 percent to Rs 2.70 crore from Rs 16.2 crore in the year-ago period. The decline can be attributed to Rs 5 crore paid by the company for stock damaged in a fire in Delhi, though the firm is confident of receiving nearly full compensation from insurance companies.

The company’s aggressive capital expenditure to expand its footprint also pulled the bottomline lower.

At 10.36 am, the stock was trading 2 percent lower at Rs 676.95 on the National Stock Exchange.

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The company’s revenue remained largely unchanged on year at Rs 1,039.10 crore, up just 2.6 percent on year. The flat topline growth was largely on account of a delayed onset of the Durga Puja season this year.

On the other hand, the retailer went on an aggressive capex campaign during the quarter, spending Rs 46 crore as it continued to invest in growth opportunities by opening 11 new stores and renovating one.

Weighed by the incremental capex, the retailer’s operating margin remained under pressure and contracted to 16.6 percent in from 17.4 percent in the base quarter.

The company seems to be set on furthering its capex strategy as it plans on launching 18 Intune and eight beauty stores in the second half of the current fiscal.

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