Shoppers Stop is an Indian department store chain promoted by the K Raheja Corp Group, started in the year 1991 with its first store in Andheri, Mumbai Shoppers Stop Ltd has been awarded "the Hall of Fame" and won "the Emerging Market Retailer of the Year Award", by World Retail Congress at Barcelona, on April 10, 2008. Shoppers Stop is listed on the BSE. In 2011, Shoppers Stop has 53 stores in India.
Shoppers Stop is one of the leading retail stores in India. Shoppers Stop began by operating a chain of department stores under the name "Shoppers' Stop" in India. Shoppers Stop has 56 stores across the country (with the latest one being the outlet at Kumar Pacific Mall, Pune) including three airport stores.
Shoppers Stop retails a range of branded apparel and private label under the following categories of apparel, footwear, fashion jewellery, leather products, accessories and home products. These are complemented by cafe, food, entertainment, personal care and various beauty related services.
Shoppers Stop launched its e-store with delivery across major cities in India in 2008. The website retails all the products available at Shoppers Stop stores, including apparel, cosmetics and accessories. Shoppers Stop opened stores in Amritsar, Bhopal and Aurangabad.
Industry Background
The retail sector in India is growing at a phenomenal pace. According to the Global Retail Development Index 2012, India ranks fifth among the top 30 emerging markets for retail. The recent announcement by the Indian government with Foreign Direct Investment (FDI) in retail, especially allowing 100% FDI in single brands and multi-brand FDI has created positive sentiments in the retail sector.
There are many factors contributing to the boom in this sector. To name a few, increased consumerism with a capacity to spend on luxury items and increased spending power in the hands of Indians. India's internal consumption is also high and the consumption pattern owning to diversity in culture, religion and the family values that encourage spending on specific occasions keep the retail business well oiled. Marriages add a big dimension to the retail spends. Our culture expects a lot of give-and-take for marriages, festivals and other important events of life. Hence, it's imperative for people right from rural to the urban, irrespective of their caste and creed or economic status, to spend on gifts as a part and parcel of life. And that's the reason worldwide retailers eye the Indian market.
The size of India's retail sector is currently estimated at around $450 billion and organized retail accounts for around 5% of the total market share. Ratings agency Fitch has assigned a stable outlook to the retail sector for 2012 as factors like expected sales, growth-driven expansion and efficient working capital management are likely to benefit retail companies. It is estimated that the retail sector would continue to grow at 10-12 % per annum, which is extremely encouraging when the country's economy is only projected to grow at 6%.
Shareholding Pattern of Shoppers Stop
CATEGORY OF SHAREHOLDER
NO. OF SHARE-HOLDERS
TOTAL NO. OF SHARES
Shareholding of Promoter and Promoter Group
14
56,029,674
Public Shareholding
10,922
26,869,140
Total
10,936
82,898,814
Public and holding more than 1% of the Total No.of Shares
No.
Name of the Shareholder
Total Shares held
Shares as % of Total No. of Shares
1
Reliance Equity Opportunities Fund
3,765,575
4.54
2
Arising Partners (Asia) PTE Ltd. A/c. Arisaig India Fund Ltd
2,646,877
3.19
3
Eastspring Investments India Equity Open Ltd
1,750,988
2.11
4
Miraj Marketing Company Pvt Ltd
1,856,250
2.24
5
Zodiac Clothing Company Ltd
1,713,750
2.07
6
Emerging Markets Growth Fund Inc
950,410
1.15
7
Vidya Investment & Trading Co Pvt Ltd
1,023,009
1.23
8
Reliance Regular Savings Fund - Equity Option
993,274
1.2
9
Bajaj Allianz Life Insuarance Company Ltd
952,853
1.15
Total
15,652,986
18.88
Working Capital Ratios:
Shoppers Stop
Sl. No.
Particulars
31/3/
2007
31/3/
2008
31/3/
2009
31/3/
2010
31/3/
2011
31/3/
2012
Formulas
1
Inventory Turnover Ratio
8.05
6.70
9.06
10.09
9.70
9.39
Sales/Inventory
2
Receivable Turnover Ratio
39.38
42.46
42.90
126.45
70.64
84.10
Sales/Receivables
3
Payables Turnover Ratio
6.87
5.65
4.97
5.76
6.32
7.08
Sales/Current liabilities
4
Inventory Period(in days)
45.34
54.46
40.30
36.18
37.63
38.86
365/inventory turnover ratio
5
Receivables Period(in days)
9.27
8.60
8.51
2.89
5.17
4.34
365/receivables turnover ratio
6
Payables Period(in days)
53.15
64.65
73.43
63.34
57.73
51.55
365/payables turnover ratio
7
Cash Conversion Cycle
1.47
1.58
24.62
24.27
14.93
8.35
(Inv TR+ Rec. TR) - Payables TR
8
Working Capital(Rs Million)
995.2
8.60
767.3
1,060
928.10
663.2
CA-CL
9
Non Cash Working Capital(Rs Million)
26.10
127.7
985.8
1,152.2
1,110.5
813.4
WC-Cash and bank balance
(Values in red are in negative)
Industry
Sl. No.
Particulars
31/3/
2007
31/3/
2008
31/3/
2009
31/3/
2010
31/3/
2011
31/3/
2012
1
Inventory Turnover Ratio
5.02
4.33
3.58
4.19
5.71
4.41
2
Receivable Turnover Ratio
81.34
55.21
35.06
24.80
24.43
17.34
3
Payables Turnover Ratio
11.77
11.90
4.54
8.08
7.95
6.95
4
Inventory Period(in days)
72.73
84.37
102.04
87.20
63.97
82.72
5
Receivables Period(in days)
4.49
6.61
10.41
14.72
14.94
21.05
6
Payables Period(in days)
31.02
30.67
80.32
45.19
45.90
52.56
7
Cash Conversion Cycle
46.21
60.31
32.13
56.73
33.02
51.21
8
Working Capital
5,528.40
11,850.40
4,154.60
15,747.50
6,598.90
13,690.80
9
Non Cash Working Capital
3,243.10
8,039.50
1,987.60
12,758.90
4,539.00
8,416.60
Analysis
The inventory turnover ratio is important to understand the efficiency of the inventory management system of a company. The inventory turnover ratio of Shoppers Stop is much higher than the industry standard. This is a very good sign as it indicates that the company's efficiency in managing inventory is excellent. This indicates that the company is not overstocking and thus considering the type of industry it is in, it gives the company a competitive advantage as they will not face the risk of obsolescence of stock and also this result in decreased holding costs.
Accounts receivable turnover measures the efficiency of a business in collecting its credit sales. In comparison to industry benchmarks we can see that the Shoppers Stop started with a lower receivables turnover ratio but they surpassed industry standards by manifolds over the last 5 years. The company thus seems to be a very efficient in its collection policy. This is also reflected in their decreased collection period which is a good sign. The company will not have to worry about the risk of default in credit payments.
Accounts payable turnover is a measure of short-term liquidity. The company has a much lower ratio when compared to the industry standards. It indicates that the business does not repay its suppliers quickly. This need not be necessary bad as it can be that the company has a good credibility with its suppliers and thus can pay after longer periods. However, this can also put off potential suppliers as they may not be in favor of getting delayed payment. Shoppers Stop seems to be having come close to the industry standard in the previous year as this will ensure that the company is attractive to suppliers and yet has the liberty to pay a little late and can make good use of its capital.
The working capital is a measure of liquidity. Shoppers Stop's liquidity situation seems to be in a bad state. They have been showing negative working capital for nearly the last 4 years. This seems to be a very peculiar situation as the inventory, receivables and payables turnover ratio is in a good state. The reason for this is because the company is not able to generate its cash flows as fast as they are flowing out of the organization. Another possible reason for this seems to be because of liabilities other the payables that the company has been accumulating over the years.
The company has a negative cash conversion cycle. This is favorable for the company as this means that their cash is locked up for a lesser period. However, in the years of 2009 to 2011 they had a very short cash conversion cycle, which can indicate that they had excess cash during the period and this may not have been managed properly. They are doing much better that the industry standards. It can be inferred that the company is doing very well in the industry and maybe giving its competitors a tough run for their money.
Conclusion
Shoppers Stop is in a very good cash management system. They have to however focus on their working capital position to bring it to a positive state. If not they can be in a problem if their payables period falls or their receivables period increases due to changes in certain factors outside the control of the company. Working capital position can be improved by increasing growth rate of company. If company does not invest more money and increase profit, the same amount will increase in the cash position of company and with cash company can increase their working capital position.
