Rajiv Suri, managing director and chief executive officer, Shoppers Stop, said the company is planning to invest Rs 120 crore on expansion and renovation in FY19.

In an exclusive interview to CNBC-TV18, Suri said the company is planning to open 12 more stores and will be focusing more on news brands.

Watch the full video here:

Shoppers Stop to become debt-free by end of this year, says CEO Rajiv Suri

Suri said Shoppers Stop will put extra focus on private brands and in three years company want to double its market size.

Edited excerpts:

You have joined in at a time when it’s been tough for the industry as well as for Shoppers Stop. Revenue has been challenging. It’s been a muted year as revenue growth, in fact, revenues last quarter declined by about 7 percent. So when are we seeing growth coming back?

Last year on overall basis, we were about 3% like-to-like. The year had been more difficult due to Goods and Services Tax (GST) implementation, after effects of demonetisation. So, there has been a lot of turbulence in consumer minds, which has impacted the sales but we believe that in the coming year, we would be much better poised to get to higher growth, we are looking at 7.5 to a percent of same store sales.

I also think that the first quarter is going to be a difficult one. Last year, the first quarter of the year was really strong. To give an example, in June due to GST impact, lot of sales got preponed and we had end of season sale. It was like 39 percent up last year. The last ten days was actually 67 percent of like-to-like. So, our Q1 is going to be a bit muted and that is going to be an industry trend because it’s on a very high base but from Q2 onwards, we should come back strongly.

When can we expect you hitting a double-digit kind of revenue growth? Is there a target that you have in mind maybe by FY20? Do you think that is when growth will recover?

We are aiming for a double-digit total growth, not like-for-like growth. So we continue to expand, open new stores as well as our focus on beauty, we are opening more stores in beauty. So, with a combination of new stores and store sales, we will be in a double-digit mode.

About three percent odd was the same store sales growth in the last financial year. This year, you are aiming for 7.5-8 percent. What is going to drive this kind of like-to-like growth?

We have a strategy of around four or five pillars. The first is business pillar, where we will refocus on our private brands. Our private brands business has not done well in the last 12-18 months and what we have decided to do is put an extra focus on private brands. We have a strategy that we want to grow this business in the next three years to maybe double its size. But in order to get there, we need to invest first in the resources. Private brands, even though, we drive the momentum in terms of more share and more margins, we still believe that if we do not do it properly, it can be a double edged sword.

One key factor that the street has been watching out for is margin growth. If you could give us a sense as to how much will margins really improve for Shoppers Stop going forward, specifically in FY19 and FY20?

We are looking for 100 bps in this financial year, because we are putting all the ingredients in place in this financial year. I think, the main area which will drive up the margin is going to be the contribution of private brands.

In terms of revenues about Rs 3,800-3,900 crore was the kind of consolidated revenues at the end of FY18. When can you reach the Rs 500 crore mark? Is there a timeline that you are working with?

We are working on a strategy on how to get to a number like that. But I think that, we are going to articulate that probably around September or October, because we want to work through that as I have just taken over last week. We want to continue our drive and we have been growing and want to focus on three or four other things. For example, to get to the topline, you can raise to the topline but we also want to be sure we are profitable. So for us, I want to have a combination of growth in the vertical ratio. We are currently around 6 percent odd. We would like to improve that, while we increase the topline. So, we do not want to go after topline without improved profitability.

Talking specifically about profitability, last quarter we saw you break into profit. The previous quarter, we had seen some sort of loss coming about. How is this trajectory going to shape up going forward in this financial year?

We are aiming for a higher earnings before interest, taxes, depreciation, and amortisation (EBITDA) percentage than last year. Last year, we ended at under six percent and this year, we are aiming at 6.3 percent. So in that sense, we are going to get better in our profitability and each year, while we are trying to grow the topline, we also have to grow the vertical ratios and then we would start to see double impact coming, because if we grew only one of them, we would not make a double impact.

The other key area that Shoppers Stop has been focusing on has been in reducing debt and there are a couple of initiatives that you had taken over the last year including exiting some of the non-core businesses and Amazon that came in and bought some stake in Shoppers Stop. So where does it stand at this point in terms of debt and will you be debt free by FY19?

Last year, we had a debt of about Rs 576 crore. At the end of the financial year, we were at Rs 67 crore. So, we wiped out more than Rs 500 crore of debt and we plan by the end of this year, we will be totally debt free and that is a good place to be. We will also have about R 270 crore of share of Future Group, which we got as part of Hypercity. So, we will be in a very good position. If we were to have a strategy to accelerate growth, whether it’s for opening new stores or investing in refurbishing existing stores or investing in management team, we would have that capital to do so.

Have all the funds flown in in terms of all the divestments that you have done?

All the funds have flown in. We have shares of the Future Group, which we got as part of the deal and has a lock-in period of 12 months and that will be over around by the end of this calendar year.

Amazon had picked up about 5 percent stake in Shoppers Stop at Rs 180 crore and that is a very interesting deal that the street has been watching but in terms of tie-up how is it shaping up at this point in time. Is the micro site having all your brands there?

I would say, majority of our brands are on the micro site and by quarter two end, we should be able to have 100 percent or 90 percent odd of our brands online. We are starting to see traction in sales and we believe that our association with Amazon is not just about sales and we want to try and see how we can widen that relationship. We are planing to open Amazon kiosk in our stores. We have opened three of them now and we are starting to see traction in sales there and we have to see how that relationship develops and how we can further maximise our relationship with them.

What kind of incremental revenue do you expect after this Amazon tie-up? It’s been some time since it was announced but I am sure you have some short to medium-term targets there?

How it works is that we started our relationship with them towards the end of the last calendar year and for us, it’s still very early days. We still have our monthly meetings with them to see how we can improve sales, how we can get better in terms of checkout with them. So, I would say it’s still work in progress. If you look at it really from a business point of view, it’s been four-five months and our first objective is to make sure that we have the full catalogue and how can we market that catalogue. So, it’s still early days. It’s hard to predict in the omnichannel world that how much would be sales, especially when you don't have any history in sales. We also have setup, within our distribution centers a separate zone for Amazon fulfilment centers.

Are you open to Amazon picking up more stake in shoppers Stop. Is that something that you would consider when the time is right?

There has been no discussion either from our side or from their side on this. So I cannot comment on something which is conjecture at this time.

But would you be open to it?

When the discussion happens, we will have to see where both parties stand.

So you are open to it essentially?

I think, we would be open to any discussion but at the moment, we cannot make any talk about it, because there isn’t anything on the table.

Talk to us about store expansion in terms of how many stores will you be looking at expanding to in FY19-FY20?

In the current financial year, we are looking to expand to about five new department stores, about 10-12 beauty stores, as our focus on beauty is strong. So that would put us somewhere in the region of 17 new stores this year.

In terms of your overall store count, what will be by the end of FY20 and when can we expect you to hit the 500 store mark?

We are quite far from 500 store mark yet and we are currently present in 38 cities and we have a potential to go to about 53 cities. So, there is some wide space, but getting the right location is important. For beauty brands, we can move much faster. So, if we are opening about 12 this year, we could open another 12 or maybe even 15 or 17 next year.

Over the last year, we have seen a decline in terms of growth rate for private labels. 22 percent was the kind of decline that we have seen over the last year and Shoppers Stop has called it out as a space, where a lot needs to be done. So from 11 percent, what could the share of private labels be brought up to at this point?

Currently, we are at 11 percent and company is taking initiatives to grow the private brands in this particular year, at least at a low double digit number and that is what we are aiming at today. Going forward, if you were to look at about in three year horizon, we would like to be at least double of that, but it will take us three years to get there.

Would you look at reducing prices across categories. What do you think is going to drive growth out there because if you compare yourself with other peers, private label growth is much higher for them and that is primarily because pricing is one key aspect that they focus on? So do you think average pricing will be brought down?

At Shoppers Stop, we prefer not to focus so much on pricing, but on customary experience. We want to layer on to that, more of a celebrity business and designer exclusive to us and we are going to start to work on that as a strategy.

You have been working on a lot of luxury brands in your stint as well.

Yes, and we want to bring international brands. But the international brands that we want to bring would be on the condition that they are exclusive to us, otherwise we will not bring them. So we are going to fix what we have. We are going to work on celebrity brands from India and we are going to create some of them with some celebrities and we are going to bring in international brands and a combination of these three is going to be what we call private brands.

Any names in terms of which international brands will be bring into India?

It’s still work in progress. I think it will take us another - let’s say by end of Q3, we should be able to get at least one or two brands. As we go forward, depending on our experience with them, we will have to see how we can get more brands. We met a few brands already, we were in New York last week, we were in Europe three weeks ago and we have a lot of old connections.

What does the next two-three years look like for the beauty business? Where do you see it in terms of revenues?

Beauty is an important part of our product mix and assortment. We are working on it. We are opening a lot of stores. Last year, we opened, if I am not mistaken, close to 20. We are opening another 12, maybe hopefully more in the future. So we are going to continue outside the department stores to focus more and more on beauty brand. We are trying to bring new brands in to our stores faster and quicker.

One of my favourite brand ‘Crossword’ and ‘HomeStop. What is the future looking out there? There has been some talk of you rationalising some stores and that also took place over the last couple of years. So are we at the end of that rationalisation exercise. Is there more to come?

Let’s address Crossword first. Crossword is the largest book store chain in India. We want to try and see how we can elevate the experience of shopping in a book store. So it’s there to stay. At the moment, we are studying the strategy. In the next three-six months, we should be able to articulate that better. For the time being, what we like to do is study the assortment, see how we are marking it and see how we can provide a better experience to our customers.

Some aggressive expansion plans, but what is the kind of investment that you require for it?

This year, we are investing Rs 120 crore on our expansion and renovation plan, so roughly about half of that would go to the new department stores and a quarter of that would go to our beauty stores and the balance would be investments in information technology, because without technology, we have to keep up. So technology and renovation would be other quarter.

What is the kind of requirement in terms of funds over the next three-five years, say by 2025?

If we sort of keep the same pace of about Rs 120-150 crore, so in five years that will be about Rs 800-900 crore.

Talk to us about the omnichannel strategy that Shoppers Stop has. You have been an early mover and in terms of revenues how large is the whole omnichannel experience for you?

We are one of the first retailers to embrace. Currently, the omnichannels space, we are roughly at about one percent of our sales, so it’s still early days for us but what is more important is not just the sales, I think omni is more about a mindset and most retailers today are thinking of e-commerce separately and store separately. But as a company, we are calling ourselves as omni retailer. So, I think there is going to be a fusion of the two. In terms of future growth, we are currently at one percent and it has a potential to double every year.

A predecessor of yours had said that you look at 10 percent over the next three years. So are you sticking by that target?

We are at one percent. So last year, we were aiming for two percent this year. So I would say in three years time, we should be close to that number.

You have seen a lot of changes at the board level of Shoppers Stop once you have taken over. What according to you will be the structure that Shoppers Stop will have and the new structure that you are putting in place?

Basically, we are not changing any structure. What we are doing is strengthening what we have, but what we want to do is for areas where our strategy is to focus, we are going to bring in higher calibre of people.

You will be bringing in vertical heads, how will the structure strengthen?

What we are doing is, for example, private brands as it’s a big part of our future strategy. We are bringing a president for private brands, search is currently on. We are hoping in the next two-three months, we find someone and he will join. We have got a head of design, we had a head of sourcing. In terms of beauty, which is another big growth area, we are focusing high caliber leadership, which we want to bring.

First Published:Jul 6, 2018 6:52 PM IST