I.

COMPANY INTRODUCTION

1. ABOUT SHOPPERS STOP

Shoppers Stop Ltd is one of the leading players in the retail segment. Shopper`s Stop is the
largest chain of department stores at present in India. The business units of the company
includes:

1. ABOUT THE INDUSTRY

 The Industry organized retail sector, which consists of only 5% of total retail market,
is estimated to touch 15% by 2025. The sector is characterised by footfalls &
conversions.

 Footfalls means the number of people who visit the mall & conversion means the
number of footfalls who open their wallet.

 An Increase in tax break by the government will increase disposable income of public
thereby boosting the consumption.

 According to a study carried out by the Indian Council for Research on International
Economic Relations (ICRIER), the traditional retail sector accounted for 84 percent
share of the total retail market till 2013 while the organized retail now accounts for
only 16 percent of the total Indian retail market.

 India has few organized players like Pantaloon Retail, Shoppers Stop, Vishal Retail,
Koutons, Trent, Subhiksha, Reliance Retail, More, Spencer’s etc.

 Pantaloon is fairly diversified player in terms of location and retail segments.

Koutons is primarily into apparels only.

 Shoppers Stop’s and Trent works on offering lifestyle products. Subhiksha and More
are counted as South-India based players and Vishal Retail is predominantly North-
India based retailer.

FUTURE PROSPECTS
  Shoppers Stop proposes to upgrade its standalone beauty stores, whose number is
above 100, increase assortment at these outlets as well as improve service levels. The
focus on the beauty business comes at a time when the company is looking to revive
overall growth and improve profitability.
 For the nine months ended December 2019, Shoppers Stop reported a marginal drop
in top line (1.9 per cent over the year-ago period) to touch Rs 2,690 crore though
profitability improved.

 From a Rs 9 crore loss in the nine months ended December 2018, the company posted
Rs 67 crore in profit after tax, its financial numbers for the period show.

 Profit before interest depreciation and tax (PBIDT), which is operating profit, for the
period under review grew 66 per cent year-on-year to touch nearly Rs 207 crore.

 While the apparels and accessories segments contribute 65 per cent and 19 per cent,
respectively, to overall sales at Shoppers Stop, this revenue mix could change in the
future with the beauty business growing steadily.

 The company had decided to add around 15 stores in 2019 and 2020 in the beauty
segment to improve reach. It is also looking at more international tie-ups in the beauty
space as competition from e-tailers grows. Besides MAC, Clinique, Estee Lauder and
Bobby Brown, Shoppers Stop also retails brands such as Burberry, Versace, Givenchy
and Marc Jacobs in the beauty space.

 The company is also pushing omni-channel retail, using its website to provide a
window to its beauty products apart from giving customers the option to buy online.

 Beauty requires engagement where products have to be tried to understand efficacy.

Their strategy as far as online retail goes is to give customers a single window where
they can see all their products.

 They are into online retailing too. However, if consumers wish to buy offline, they
can do so with the help of store locator option on their website.

AT MACRO LEVEL:

INCOME:

Indian retail industry is one of the fastest growing in the world. Retail industry was expected
to reach Rs 76.87 lakh crore by 2020. India ranked 63 in the World Bank’s Doing Business
2020 publication. India ranked 73 in the United Nations Conference on Trade and
Development's Business-to-Consumer (B2C) E-commerce Index 2019. India’s direct selling
industry recorded sales of US$ 2.47 billion in 2019, improving its rank to 15 from 19 a year
before.
India is the fifth largest and preferred retail destination globally.

GROWTH:
  The country is among the highest in the world in terms of per capita retail store
availability. India’s retail sector is experiencing exponential growth with retail
development taking place not just in major cities and metros, but also in tier II and III
cities.

 Healthy economic growth, changing demographic profile, increasing disposable

income, urbanisation, changing consumer tastes and preferences are some of the
factors driving growth in the organised retail market in India.

 Indian online grocery market was estimated to exceed sales of about Rs 22,500 crore
in 2020, witnessing a significant jump of 76 per cent over the previous year.

 India’s population is taking to online retail big way. India’s E-commerce business will
reach US$ 99 billion by 2024, growing at a CAGR of 27 per cent over 2019. Online
penetration of retail is expected to reach 10.7 per cent by 2024 versus 4.7 per cent in
2019.

 India is expected to become the world's third-largest consumer economy, reaching Rs

27.95 lakh crore) in consumption by 2025. Increasing participation from foreign and
private players has given a boost to Indian retail industry.

 India’s price competitiveness attracts large retail players to use it as a sourcing base.
Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their
sourcing from India and are moving from third-party buying offices to establishing
their own wholly owned/wholly managed sourcing and buying offices in India.

GOVERNMEN REGULATION:

GOVERNMENT POLICY SUPPORT:

 MAKE IN INDIA:
Six industrial corridors are being developed across various regions of the country.
India is the 58th most competitive economy, according to World Economic Forum’s
Global Competitiveness Index for 2018. India’s rank in the World Bank’s Doing
Business index improved to 77 in 2018.

 DIGITAL INDIA:
The Nandan Nilekani report on Deepening of Digital Payments estimates that there
were 22.42 digital transactions per capita at the end of FY 2019, indicative of a
significant growth over 2.4 such transactions in FY 2014. Unified Payments Interface
(UPI), a payment system that was introduced to mobile-enabled bank transfers, is
driving India towards becoming a cashless economy.

 GOODS AND SERVICES TAX (GST):

 Implemented in July 2017, to harmonise the tax structure across states, GST enabled
greater transparency, eliminated the cascading effect of tax, improved flow of credit
and reduced barriers to trade.

 FDI:
100% investment in single brand retail permitted under the automatic route, since
January 2018. FDI policy for e-commerce was amended, to provide clarity and level
the playing field among retail traders.

 OTHER INITIATIVES:
Skill India, Startup India, India Innovation and so on..

MICRO LEVEL

REVIEW OF OPERATIONS

 The company reported growth in revenue from operations of 6% over the previous
year.

 The EBITDA stood at Rs. 27,120 lacs, with a growth of 19.1% over FY18. The Net
Profit after tax for the 2019 was Rs.7,875 lacs (Previous year 1,160 lacs).

 2018 has been a pivotal year as the company embarked on positive growth and
delivered results. It reviewed every aspect of its business and worked aggressively
towards strengthening their strategic pillars of First Citizen Members, Personal
Shoppers, Exclusive Brands and Beauty.

 It made key investments in a new leadership team and aimed for sustainable and
industry leading growth in the years ahead.

The keystones of fashion, beauty, personalisation and delightful shopping experience remains
as their core
LEVEL OF DEBT:

 Shoppers Stop Ltd planned to become debt-free in 2018-19, this allowed the
departmental store chain to focus more aggressively on strategies such as ramping up
contribution from its private labels to 15% of overall revenue and expanding its
footprint in the fast-growing beauty and cosmetics segment.

 Shoppers Stop began fiscal 2017-18 with a debt-to-equity ratio of 0.76 and a total
debt of Rs575 crore. At the end of December 2017, its debt stood at Rs237 crore. The
company expected that to fall further to around Rs40-50 crore by end-March.

 The company anticipated that its debt-to-equity ratio in FY 2018-19 will either
become zero or turn positive.

 Revenue contribution from its private brands was around 9% in the second fiscal
quarter, the lowest share ever recorded.

 They had a range of failures in 2019.

 Their problem was about having too many options, not being able to sell all of them
and ended up with unsold stocks was another issue.

 Shoppers Stop has learnt from those mistakes and is correcting prices and ranges for
its private label brands.

 About 25% of overall investment over the coming years will go into expanding
Shoppers Stop’s retail footprint in the beauty segment—the fastest growing category
for the company via brands like MAC, Bobbi Brown and Smashbox.

 Over the coming year, the company plans to open at least a dozen more of these
specialty stores, with MAC leading the way and driving overall growth within the
category.

 Shoppers Stop is one of the best run retail companies and will reap benefits of its
expansion strategy. The company has maintained momentum in its retail space
expansion even amidst slowdown, which will aid future growth.
GOALS OF SHOPPERS STOP:

VISION STATEMENT – “To be a global retailer in India and maintain no 1 position in the
department store category.”

 Shoppers’ Stop aims to position itself as a global retailer. The company intends to
bring the world’s best retail technology, retail practices and sales to India. They are
adding 4 to 5 new stores every year.

 The company has set aside an investment of Rs 150 crore on the upgrade and opening
of new format stores. Out of the 50 stores, 40 will be in the beauty segment and 10
will be department stores.

 The new stores will have high-end brands along with the company’s private-label
brands as it looks to cater to a wider audience to boost sales and improve margins.

 They have been opening new concept stores according to the affluence index of the
cities.

 Over the last couple of years, private brands have helped the company in good growth
and revenues. 12 percent of the company’s overall sales come through private brand
space.

 To improve the brand mix, the company conducted a brand reshuffle and exited 37
brands.

 They have a strategy of around four or five pillars. The first is business pillar,
where they will refocus on our private brands. Their private brands business did
not perform well the last year and they decided to put an extra focus on private
brands.

 They want to grow this business in the next three years to double its size. But in
order to get there, they need to invest first in the resources.

 Private brands, even though drive the momentum in terms of more share and
more margins, they believe that if it is not done properly, it can be a double-
edged sword.

COMPETITORS

LIFESTYLE

• Lifestyle is an online fashion marketplace that offers clothing, footwear, toys,

homeware, furniture and beauty products for men, women and kids.
 • Lifestyle is perceived as one of Shoppers Stop's biggest rivals. Lifestyle was founded
in 1999, and is headquartered in Bangalore, Karnataka. Lifestyle operates in the
Apparel Retail industry.

• Lifestyle generates $625.9M more revenue vs. Shoppers Stop.

• Sales at Lifestyle International, the company that runs an eponymous department

chain in India, grew 12% in the year to March 2019 to Rs 8,467 crore, closing in on
the combined sales of its immediate rivals Shoppers Stop NSE 3.53 % (SSL) and
Future Lifestyle.

• Strategy adopted - ensure that we open stores at the right location instead of just
adding to outlet count.

• Future Lifestyle and Aditya Birla Fashion have ample potential for return on capital
employed improvement, basis their growth plans and outlook. Shoppers Stop is at the
bottom on multiple parameters

PANTALOONS

• Pantaloons, the newly acquired business by The Aditya Birla Group,

• one of India's leading multinational conglomerates, is a powerhouse

• of fresh fashion and innovation. While weaving its magic across

• lifestyle segments, Pantaloons caters to the discerning and trendy

• Indian consumer.

• The Aditya Birla Group ranks high in the League of Fortune 500

• Corporations of the world with a strong mix of talented and capable

• personnel comprising of 42 different nationalities, who are credited

• with anchoring the organization and scripting one brilliant success

• story after another

• With a chain of 71 fashion stores across 35 cities and towns,

• Pantaloons is constantly extending its foot-prints into the rest of

• modern India.

• One of the key ratios used by investors is Price To Earnings ratio. From the above
chart it can be seen that Lifestyle has a better P/E ratio than the other two.
 •
• Dividend Yield ratio determines the dividend income from the investors’ point of
view. It allows them to compare latest dividend they received with the current market
value of the share. It is one of the best indicators to be used by investors for
comparing ratios for different companies and industry. Lifestyle has the highest
dividend yield as compared to the other two, making it the investors choice.

• In terms of profitability Aditya Birla Fashion and Retail has reported the highest
profit as compared to the other two.

• CORPORATE GOVERNANCE

• TOTAL NO OF BOARD OF DIRECTORS – 10

• WOMEN IN BOARD OF DIRECTORS – 1

AGM – The company has been conducting their AGM every year since 2005 continuously
without any issues

Audit Committee:

Audit Committee was constituted in the year 2001 and further reconstituted in the year 2004
and 2014. The Committee comprises of:

The members of the Committee possess the sound knowledge of finance and accounts. The
Audit Committee invites such of the executives, as it considers appropriate to be present at
the meetings of the Committee. The Managing Director, Chief Financial Officer, Company
Secretary, representatives of internal Auditors and statutory Auditors are also present at the
Audit Committee meetings as invitees.

 
Nomination and Remuneration & Corporate Governance Committee :
 
The Nomination and Remuneration & Corporate Governance Committee was constituted in
2001 and further re-named and re-constituted in the year 2014. The Committee comprises of:

 Stakeholders Relationship Committee:

 
The Stakeholders Relationship Committee was constituted in the year 2004. The Committee
comprises of Mr. Ravi Raheja, Mr. Neel Raheja, Mr. B. S. Nagesh and Mr. Deepak Ghaisas.
Mr. Ravi Raheja is the Chairman of the Committee.

This Committee consider and resolve grievances of shareholders of the Company and matters
connected therewith.

REUMERATION OF MD AND CEO:

Mr. Rajiv Suri – MD & CEO
Renumeration- Rs. 539.69 lakhs

Mr. Govind Shrikhande – Rs. 506.21 lakhs

Disparity percentage – 6.2035%

CURRENT AND FUTURE COMPETITIVE STRENGTH OF THE COMPANY

STRENGTHS

 REFINED PORTFOLIO MIX:

A variety of products, encompassing private labels, international names, exclusive tie-
ups and niche categories, together with an incomparable ‘Shoppers Stop’ brand recall,
attracts and retains customers. This enables us to become the first choice for mall
developers, brands and suppliers; helping us in our pursuit for greater consumer
mindshare.
 OMNI-CHANNEL PRESENCE:
A cross-channel approach, comprising 83 large stores in 39 cities (plus 12 HomeStop
and 115 specialty beauty stores), an e-commerce website, and a mobile application
(Endless Aisle), helps us grow a closer bond with our shoppers. We recorded 71
million visits to our website and 5.5 million mobile app downloads serving 25,000 pin
codes during the year leading to a 43.8% growth in sales.
 ROBUST SUPPLY BASE:
Our supply chain, from sourcing, design and production to a hub-and-spoke
distribution model, is key to sustaining our multi-channel approach and we
consistently invest in it to remain competitive. We leverage four brick-and-mortar
regional centres spanning 5,10,000+ sq. ft., manage 4,00,000+ SKUs and work round
the clock. We are about to launch a 6,500 sq. ft. design studio in May 2019, for
private brands with a sampling unit, ramp walk and photo studio at the Company
headquarters.
 FIRST CITIZEN PROGRAMME:
It accounts for 76% of our sales. Started in 1994 and with 6+ million enrolled
members, it is one of the longest-running and coveted loyalty programmes in India.
First Citizen members average ticket value is twice than that of a non-member. It also
helps us garner gainful data-driven insights, enabling decision making across the
organisation and analytics-backed targeted promotions.
 PERSONAL SHOPPER SERVICE:
The initiative innovates customer engagement and differentiates the shopping journey,
contributing to 13.6% of our revenue. It was introduced to help discerning customers
explore our product range and indulge in a premium end-to-end experience.
 VIBRANT LEADERSHIP:
An experienced team, with a growth-mindset and streamlined focus, helps us unlock
value for our stakeholders. Our commitment to good governance further enables to be
a beacon for the industry.
CHALLENGES:

 HIGH COST OF OPERATIONS: Rent is one of the largest components in a retail

business’ fixed costs. 100% FDI in single brand retail has led to increased demand for
key catchments in prominent malls, driving rentals higher.

 RISE IN COST TO SERVE THE CONSUMER: A wider geographical spread,

together with higher management and infrastructure costs and larger store supervision
spend, translates to higher cost to serve.
 DIGITAL INNOVATION: Internet access will be democratised in India by 2030 with
more than 1 billion citizens on the internet. More than 80% of internet users primarily
access the web through mobile phones. This implies a potentially different profile of
connected consumers for businesses to tap into.

 BRANDING: Clear brand communication bears a greater influence on the preferences

of the modern consumer. Brand messaging that is candid and in tune with the
dynamic retail environment remains relevant.
 DATA HANDLING: Besides a real-time update of stocks and inventory, data offers
great potential for more targeted advertising.

THREATS

 ECONOMIC CONDITIONS:
Retail consumption is contribute to the development of new platforms that are steadily
being adopted by the industry. This is also making older technologies gradually
obsolete.

 SCARCITY OF SKILLED WORKERS:

The Indian organised retail space incurs a significant expenditure as personnel cost; a
large part of which is on account of training and development. The industry also deals
with a high churn rate. Lack of specialised courses that impart pertinent skills impacts
the business’ ability to build a talent pipeline.

OPPORTUNITIES

 SCALE AND SPEED OF URBANISATION:

By 2030, 40% of Indians will be urban residents. While metros and emerging boom
towns continue to drive economic growth, rural per capita consumption will grow
faster than in urban areas emulating consumption patterns of urban counterparts.

 INCOME EXPANSION: 60% of India’s GDP is driven by domestic private

consumption. With a healthy savings propensity, favourable demographics and rising
income levels, this will transform the consumption profile of Indian households.
 PREMIUMISATION AND CONVENIENCE:
There is a discernible shift in preference towards premium and customised services.
Convenience also continues to play for young, aspirational consumers who seek more
flexibility and choice in their consumption basket. High-street retail is increasingly
gaining ground, online platforms notwithstanding.

 BEAUTY AND PERSONAL CARE CATEGORIES: A combination of higher

discretionary spending, rising awareness towards personal hygiene and grooming with
urbanisation as well as globalisation, impact consumption decisions vis-à-vis these
products. directly linked to the general economic climate. Below-expectation GDP
growth performance, subdued market confidence, unanticipated policy reforms and
rising oil prices are some of the many macroeconomic factors that affect retail
performance.

 COMPETITION: With India continuing to be an attractive retail market, we expect

many new entrants into the sector. Our nationwide footprint, seamless service offer,
diversified format presence and capable management team are few of the factors that
help us retain our competitive edge.

 INDUSTRY DISRUPTIONS: Intense competition within the sector, among leading

national retailers, leads to rivalry for locations, footfalls and price-based discounts.
Our robust pipeline of stores and an array of insightful promotions help us navigate a
tough operating context.