Shoppers Stop Limited (SHOPERSTOP) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the Q1 FY '21 Results Conference Call of Shoppers Stop Limited. I hope you and your near ones are doing well. I would like to thank the management for giving IDFC Securities the opportunity to host this call. The management team is represented by Mr. B.S. Nagesh, Customer Care Associate and Nonexecutive Chairman; Mr. Karunakaran Mohanasundaram, Customer Care Associate and CFO; and other senior management personnel. We'll start the call with the commentary from the management and then move into the Q&A. Thank you, everyone, and over to you, Nagesh, sir.

Thank you, Rohit. Good evening and [Foreign Language] to everybody. Welcome. Hope you and your near and dear ones are safe. These are testing times and thank you for joining the Shoppers Stop earnings call for quarter 1. As you are aware, the quarterly results, the press release and investor presentations are available on our website. I hope you have had a chance to browse through the highlights of the performance. Rajiv, who conducted the last quarter's call will be exiting during the next 2 weeks' time, and therefore, I'm actually standing by for the Managing Director, CEO of the company. It's a pleasure and privilege to come back and speak to you after almost 8, 9, 10 years. As we said in the June meeting, we had to close all our 293 stores from mid-March. I think once the lockdown was gradually released from June 8, we have opened the store step by step, and have been opening the store based on the government and local and regulatory authorities, with controlled movements, maintaining social distance, taking up prepared hygiene measures and following the directions of the regulatory authorities. Let me start presenting the situation, which is not the same as year before. I think there's a huge amount of changes that have happened. And whether it's the new normal or the next normal, that's the reality. But some of the COVID realities are that the COVID regulations continue to hamper opening of the stores. Inconsistent, erratic, irregular calls taken by local authorities sometimes make us open the store, close the store, change the timing. And therefore, there has been inconsistency. Above all, malls and large stores in a few states are closed during the weekend due to government regulations and restrictions. Not only the government restrictions and regulations, but even the consumer behavior has changed. And in the last 2 months, we have been operating stores, we experienced the following change in behavior. There is a significant decline in the footfall, about 80% in June, gradually improving to 70% decline as of now for the stores that have been opened for the last 2 months or 2 fortnights or 2 weeks since the time we have started opening. This has -- this impact has been witnessed by almost all the retailers, fashion retailers, department stores. And for Shoppers Stop, our stores in nonmetros have shown higher level of resilience and stand-alone stores have outperformed the mall stores. And there have been surprising facts. Some of our stores in some cities actually have hit above the last year's numbers. So which means that the behavior is very different in different cities based on either the COVID situation or the resilience of the customer. If I look at the categories, home, kids and beauty are performing comparatively better than apparels. Similar to this, the casual, sports, athleisure are performing better than formals. And it is also because of probably work from home or the way the consumer is behaving and conducting his office work. Masks, sanitizers, personal grooming categories, demand has been increasing from the customers. Customers are actually coming to stores with a very specific purpose. I mean that is also reflected in the average transaction size, the bill values, the conversions, which have all gone up. If you look at it, the ticket size has gone up by 34%. Another very interesting factor is we are seeing catchment concentration. Whereas in the earlier years, we saw actually the malls becoming destinations and people are willing to travel 5 to 10 kilometers to go to some other malls, which was outside the catchment. But this time, we are seeing that people are coming from 2-kilometer catchments. Also, customers are visiting those stores, which they consider to be safer in their mind. So some of the businesses or Shoppers Stop as a brand, which has sustained its loyalty towards its customers and has always been treated as a trusted brand is actually seeing better movement, and therefore, we believe that the trust and the First Citizen contribution will keep adding value to our business as we take it forward. We have also responded to the COVID situation. Like in the last meeting, Rajiv spoke about reducing costs and maintaining liquidity, I think we are tracking favorably against all the internal targets that we had set. And these internal targets have been set and reset because we are seeing opportunities as we go forward. We are learning from the situation, and we are learning to react fast from the situation. We continue to focus on cost reduction initiative reducing monthly cash burn rate. On rentals, we've had some substantial savings, but the rental savings will continue to be negotiated because as we see stores opening, footfalls happening up and down, I think we'll continue to negotiate. Manpower optimization started from June. We did have changes in the manpower. And therefore, we've also incurred onetime Q1 cost of about INR 10 crores. The gains from the manpower rationalization will actually be seen in the further quarters, much more than what you saw in the first quarter. Travel is nil. Other administrative overheads we have cut by almost 75%. Discretionary expenses have been substantially reduced. The savings are expected to be about INR 450 crores for the full year, representing approximately 35% savings year-on-year. Of this, about INR 185 crores we have already seen in the quarter 1. This enhanced focus by the team on cash conservation across the company to maintain short-term liquidity and ensure balance sheet strength because these are unprecedented times, no doubt. We have maintained sufficient liquidity, both with existing and new lines. And we are committed to maintain liquidity to ensure that the business crosses these tough times. Cash and bank deposits that are at about INR 59.5 crores as of June 30, 2020. We further availed a INR 75 crore loan in July to deal with commitments made during the quarter. This is in addition to the loan that we had availed in May of INR 75 crores. In June, we opened 52 stores, and as we progress, we are opening further stores. As on date, 74 stores are open, and these are as per the government guidelines. We did open stores in Maharashtra from this month. However, I think we opened some stores in Thane, Navi Mumbai, just for a day and we had to close because of the regulation. And in Tamil Nadu, many stores are yet to open. Just like I mentioned earlier, very inconsistent. We are hoping things will stabilize over the next 3 to 4 weeks' time. Wherever we've opened the store, we have ensured utmost safety for customers and employees, and we have followed the WHO guidelines. We have been receiving very positive reviews from the customers. And if you look at our presentation, there are a few testimonials also which are there from the customers. And this is very important for us. For us, the safety and health of our customers and our employees is extremely important. And they say [Foreign Language], and I think we will continue to keep doing this again and again. We also spoke about in the last meeting about implementation of SAP S/4HANA and GRAVTY. This actually enables us to have a single view of the customer. This has also helped personal shopper to use endless styles with positive results. So after a long time, we now have the ability to look at customers through a single window. So when we look at a customer, whether it's online, offline, click-and-collect, whatever be the channel, we have a full view of the customer, one customer, single customer, full view, from all angles. Let us now talk about the most important initiative pivoting from the traditional offline to omnichannel organization. In the process, we have been working on this for the last 2, 3 years. I think this business requires much more talent than what we thought. And the talent required is from multifaceted skill set. And therefore, we thought the best is to get an organization which has done it globally and which actually can help us pivot from the tradition to online to omnichannel and become a multichannel organization. In the process, we have appointed a leading international consultant to improve the overall customer experience as well as improve the back-end as well as tighten up all the loose points that we had in the system, which has to be corrected. We need to build capabilities to improve supply chain, user experience, user interface, advanced analytics. I think some of the investments that have been done have now started fructifying. Some of them will fructify in the next 3 to 4 quarters. And in the process, we are also doing an in-depth assessment of our technology to facilitate the above and also look at the future because the future is looking much larger on online, multichannel than just a brick-and-mortar. I'd now like to discuss the quarter 1 performance of the company. As I said earlier, our Q1 performance was impacted by lockdown and partial reopenings. Already said that April and May were totally shut and some stores opened partly in June. So we started looking at the business slightly differently apart from sales per square feet and various things. We said, how many store days were we open. So it looks like the last year in Q1, we had 7,500 store days. And this year, we had just about 1,300 store days. Actually, if you start looking at it from store hours, this will be further dropped because we've not operated the full 10 hours in almost all the stores, even the 1,300 store days that we have had. So the store days have declined by 82%. And of course, if I look at the store hours, it must have declined further. Against last year's sale of INR 1,100 crores, we could achieve just INR 60 crores, though our ticket size increased by 34% and conversions increased by 20%. Our margins were lower as we have to provide for inventory as per our policy, which wasn't sold in the first quarter by INR 5.5 crores on a INR 60 crore revenue. If you had looked at even last year's sales, this would have been less than 0.5%. Very, very insignificant compared to the turnover INR 1,100 crores, which would have definitely been higher this year if everything was normal. The provision was necessitated due to the negligible sales. And like I mentioned, we have always been conservative, and this is also one of the task that we did due to our conservativeness. Under these circumstances, it is prudent that we conserve our costs and maintain liquidity. Our costs were lower by INR 185 crores versus last year. That's near 40% of last year. This is after accounting onetime exit cost of employee circa INR 11 crores. I would like to complement our team for this kind of an effort in this tough times because this is what we had planned, and I'm happy that the team has achieved. Despite the cost corrections due to negligible sales, our EBITDA was negative at INR 132.8 crores. But that's the reality, but we are looking at things improving as we go forward. And hopefully -- and we are sure quite confident we'll start showing better results quarter-on-quarter as we move from here. Coming to some of the strategic pillars. On First Citizen, we have now launched SAP S/4HANA and new loyalty engine, GRAVTY. This enables us to have a single view of the customer. We also upgraded our First Citizen program for better engagement and personalization. Our First Citizen mix remains at a healthy level of 76%. Our repeat purchase have increased by 1%. Our average ticket size has also increased by 6%. Even during this lockdown, we could -- we were able to serve and add 5,000 test members during this quarter. The addition of members continues. Our personal shopper continues to excel. We started this program 2 years ago, and it has been recognized as one of the best initiatives in the industry. During the COVID times, their contribution has been immense as they have been able to engage with our First Citizen customers. And in addition to this, they continue to serve our customers through white glove service, that is customers at home or office can view the products through a video call and place an order. Payments are made through a link received on their mobile. Through Endless Aisle, our personal shopper improved retail overall customer experience. We have started a special initiative to serve our senior citizen customers, which is called [Foreign Language]. And this has been received very well and appreciated by many. I personally feel that this is a huge opportunity in our country. Due to social reasons and due to pressures from the family, the senior citizens have not been allowed to go out to shop. Even the government keeps saying that above 60, above 65 don't go to work. But this is a set of people in our country who have a large amount of money, have no more responsibilities and are willing to spend. And we believe our program [Foreign Language] is a very good initiative, and we are hoping to see some decent contribution from this initiative. With restrictions in traveling, we are seeing of 2 kilometers, Personal Shoppers have been calling our customers within 2 kilometers and increasing the affinity. In fact, sometime during the last 3, 4 months, every employee who was at home, especially on the front end, made multiple calls. And I'm told we have done more than 0.5 million or 1 million calls connecting ourselves to our customers, which is important for us, and this is not to sell, but just to inquire about the health of our customers as to how they are doing, and it also builds tremendous affinity for our customers. Due to all these initiatives, our contribution from personal shoppers have increased from 15% to 18% during this quarter. Coming to the next pillar of private brands. The private brand share increased to 15% this quarter. We made huge efforts to reduce the inventory in the private brand. And as a part of Personal Shopper and private brand, the Personal Shoppers have been recommending private brands, and we have seen the increase to go to 15%. We also, in the last 2 quarters tied-up with very large exporters and companies, which can actually help us in our growth momentum, where we definitely want our private brands to increase and reach a threshold of 30%. We have launched brands from home collection and added categories in athleisure, loungewear, innerwear, etc. The third pillar Beauty. Our Beauty business continued to remain strong, and the Beauty mix has increased to 22% of our total revenue. We have added 11 new brands with a few prestigious names such as Prada, Chloe, Bombay Shaving Company, WOW, etc. And the live sessions continue in the social media during COVID with our customers. Way forward, our outlook on demand, we believe the COVID impact will continue largely for Q2. And this festival season in Q3, normalcy should return. And by Q4, we expect close to last year or we may even start seeing growth, especially because March was a very, very weak month. And we hope that by that time, our online business is fully clicking. A single view is operating, our new personal shopper initiatives all working together. On stores, 74 stores have been operational out of out 84 stores. We expect that all the stores will also open up in the next 3 to 4 weeks' time, and therefore, everything should be operational as of September. And with the demand to increase in east from September because of the Pujo, things should start looking much more normal. In my last call, I had updated that Mr. Rajiv Suri has stepped back and stepped out of being the Managing Director and CEO of the company. He's moving back to Dubai. His last date of working is 25th. We are in the process of appointing a successor. I'm personally involved in directly looking at the appointment. And I must say the progress has been very good. Hopefully, in the next 3 to 4 weeks, we should make an announcement. In the meantime, we have a CXO committee which is managing the day-to-day affairs. I am involved, along with Rajiv, to take over and help the CXO committee in their performance. I'm very, very confident of our CXOs and the leadership team that we have in the company, and we believe that things should be normal. And I would be involved on a regular basis to ensure that there is no loss during this transition from Rajiv to the next CEO. We'll continue to focus on cost initiatives. I said earlier, we are renegotiating every cost. We had implemented a zero-based budgeting last year, and it ensured efficient allocation of resources. This also helped the managers to find cost-effective ways and solution to improve our activities. We had really made some big savings last year. And over and above that, during the COVID, we brought in some more savings. So this will all start bringing their impact into the numbers as we move forward. We have commenced our digital journey, and we expect the e-comm to have a large share in the near future. We are expecting the traction to increase as we finish up this project where we are working with this consultant -- international consultant to bring everything under, not only one roof, but align everything together for a single view of the customers. Our safety measures for customers, employees and stakeholders will continue. We are not going to compromise on any of these because it is extremely important. Fortunately, for us, in the strength of 7,000 employees plus another 15,000 of our brand employees, we have not had any major COVID issues. And anything that happened was controlled and everybody is back fully relieved. Once again, I thank you for attending this call. I wish you and your family all safety, all the best wishes. And I'm very sure by the time we come back next quarter, okay, or the next normal would have come in, and the next normal is going to be much better than the current normal. We are seeing green shoots, and we are seeing things improving as we go forward. Thank you once again. Thank you very much.

Shall we begin with the question-and-answer session?

Yes, please go ahead.

[Operator Instructions] The first question is from the line of Avi Mehta from IIFL.

Just wanted to kind of revisit the comment on the recovery. If you could kind of just clarify -- I'm sorry, I missed that, that you are expecting things to normalize by fourth quarter towards the pre-COVID normal, which means there is a growth that you're expecting, if you could clarify that? And second related point, if you could just answer the -- or can you give us a sense on how July or the recent end of season sale has been to help us understand how are we reaching, what the green shoots that you're talking about?

So let me answer the EOSS of the July month, we are seeing recovery week after week. I think if you look at the -- and also this is erratic because even on EOSS, some stores open up, some stores close. So we have seen from minus 70% to now about minus 60%. But it ranges by minus 55% to 65% depending on the store and the location, okay? But just to give you and take a name of Vijayawada or Vizag or Varanasi, okay, or Guwahati, okay, suddenly as frank surprises of doing 100% of last year or 80% of last year, okay? So which actually means that what you're seeing is not only based on consumer, but is also based on what's happening in the local catchment and the local community, which also gives us the hope that the fear in places where the COVID impact has not been high, is not as much and people are coming out. And that's a positive thing that we are seeing. So that's as per EOSS. That is what makes me make a statement of a green shoot. Now looking at this and trying to project it forward, okay, we are also saying if because there are lots of ifs and buts in which you know, which is also talking of a second wave in October, November, but also October, November is a festive season for our business. We are saying that by January end, which is the EOSS of December, January, okay, things to start looking normal. And January, March should be in the region of minus 10 to flat to our growth, okay? That will purely depend on what happens during the last quarter. But yes, we are hopeful that the Q4 of 2021 should be flat to positive or a very, very low and negligible negative.

This is on an underlying -- this is despite the fact that 4Q was weak. So -- okay. That is how I -- okay, sorry, this is it. Okay. The second bit, Nagesh, was essentially on the consumer behavior, especially in terms of the industry dynamics. Now as you correctly alluded, this is -- there are issues across the industry in terms of footfalls. But the end of season sale has given some ray of hope. Does this suggest that you might see discounting as a means to get the customer back or something that has to right, would you see that or how...

Actually, I see it contrary. See, because please understand that when the retail industry is closed, okay, it has also impacted the manufacturing, okay? Once the retail and retail was already sitting as of March with fresh inventory for Summer '20. So we had inventory, the manufacturers had supplied us, the payments have got stretched, okay, and the retail has not opened. So you must have heard from other players also that many of the spring/summer items are also getting extended and launched in autumn/winter, if the season permits. So therefore, I am not seeing that the retailers will go in discounts because there wouldn't be much of merchandise to sustain October, December and January, and March till the time the production begins from the back end. So personally, I expect that you won't see much of discounting. There will be some depending on players who probably have got too much of stocks were not able to sell. Second is you also saw this time the industry saw discounting happening at a lower rate and also saw the discounting almost starting at the same time. So people did not go erratic or starting early doing things like that. So I see very, very positive behavior from the industry, and this is a good sign. So I'm not expecting the discounting to be so high that we'll all will bleed in order to cross the border as it comes.

Perfect. And with your permission, just the last one before I go back into the queue. The provision of INR 5.5 crores that you've made, does that now kind of at least from here on obsolescence or any kind of risks on that front and now behind us. Is that how I should see it? If you could just give us a sense on what this INR 5.5 crores inventory, what is it?

You are aware that we have a conservative policy that depending on the number of seasons, the merchandise has crossed. We write it off in the books, okay? If we had INR 1,100 crores to INR 1,200 crores of business, we would have written off this INR 5.5 crores. Irrespective of that, okay, we have even at a INR 60 crore turnover, taken the same conservative policy and written off INR 5.5 crores, and we have provided for it. We just provided, Avi.

Okay. This is not like advanced for expectations of an obsolescence...

No.

The next question is from the line of Abneesh Roy from Edelweiss.

I have a question on Private Label and Beauty business. So obviously, Q1 quarter has been extremely erratic and volatile. So any data interpretation will be tough. So I'm asking on the movement seen in Private Label, it was stuck at that 11%, 12% for many quarters, this quarter, 15%. So would you say this is due to the success of the strategy? Or it is not a good enough quarter to really conclude because you must have focused on inventory reduction also? So could you comment on that? Why has it moved? And can you touch 20% now sooner than your, say, expectation 2 months back?

So there are multiple reasons for it. I don't want to take away the efforts, which have been done by the team. Basically, because don't forget, when a customer comes into a store, he or she also has an option to buy the brand. And the same option that they had earlier, they must have seen much, much better product range and much better pricing. And I must tell all of you that please visit our stores in the next 2 weeks or 4 weeks and see what the team has done on the Private Brands in terms of pricing and the quality. And you'll be surprised. I mean we are seriously coming into play. So I would say one is because of the work that has been done. Second is the customer under these circumstances have become more value conscious than what they were earlier. So when we look at the data, okay, the number of items per bill has gone up by a few percentage points, and the transaction size has also gone up, basically because they don't want to do multiple visits. So that has also made a difference. So value consciousness towards Private Brand has also gone up. The third is, if you look at our Personal Shopper scheme, the Personal Shopper are actually working with customers, and they have had to chance to interact with more customers, because there were less customers and the Personal Shopper numbers were the same. So they've also been recommending Private Brand. So a combination of 3 has actually yielded this, and I don't see any reason for these 3 things to drop. So I'm definitely hopeful that the contribution will continue to raise. Whether we hit 20% much earlier, give me another quarter to judge and then maybe I'll come back to you.

Sir, other apparel companies have said e-commerce have seen 50% plus kind of a growth this quarter. In Private Label part of the business because that's something which is very important from a strategic perspective, how much is the e-commerce growth there?

Private Brand mix has gone up to 20% from last year's 14%. But I think you have to be conscious of the fact, and I did mention in my commentary that since we just finished implementation of SAP and the whole integration of SAP with GRAVTY and SAP Hybris has happened, okay, we did lose the last 3, 4, 5 weeks during this time to really capitalize on the full e-commerce growth. So our growth has been muted, okay, basically because of this, all this integration work that was going on. So I hope that once our growth -- once our -- all the integration work is done, in the next 3 months, we will actually see a much better results, both for the Private Brand mix within the e-commerce business as well as within our First Citizen as well as on the floor.

So integration may take some more time, right, impact of the integration, some more weeks?

I would say that in about 4 to 8 weeks, we should be all right. But take about a quarter before we start seeing better results.

My last question is on the Beauty business. So 22% of the business sales coming from there. If you see FMCG companies have had a very tough quarter in the Beauty business because of the work from home. So I wanted to understand why you have done well on a relative basis? And is it because of the 11 new brands we have added? Or is it some other proactive or some activation you have done?

No, I would say it is not because of 11 new brands. But like I mentioned also in my commentary that during this time, we find that the customers are buying much more in one transaction because they don't want to come again and again. And the second is for, especially Beauty, which is very personal, and it's something to touch the skin, they always go to a trusted brand and retailer. And we always had the largest beauty business on ground, okay? And the Beauty as an overall business has done online also very well. So it's a combination of all these 4. The new brand launches are very new for it to have impacted this much.

The next question is from the line of Shalini Gupta from Quantum Securities.

I just wanted to know like, will you be opening any new stores this year?

As per our plan, there were about 5 stores to be opened by March 31, okay, and depending on the delivery by the developer I think those we will continue to do. Overall, I think in the last year, we had mentioned about 12 stores, but it looks like those 6 to 7 stores, we will get delayed, because of natural reasons, not because we don't want to do, okay? So say about 5 stores by March 31st is looking like a possibility.

Okay. And sir, I wanted to ask you, like earlier, online was about like 1% or 2% of sales, so how much will it be now?

It still remains around the same.

Okay. But has it turned profitable now?

You're saying online to overall sales?

Yes, online to overall sales.

This quarter, if you look at the online contribution is 18%, which is substantial because of the movement that has happened.

Okay. And sir, like, so you're expecting -- I mean, this has been a profitable business now for you, online?

I would actually like to say it in a slightly different way, okay? The losses from online has substantially dropped, substantially, okay? And the contribution has turned positive.

The variable contribution has turned positive.

The variable contribution has turned positive, which is extremely a positive sign for the online business.

And you're expecting that will continue?

Well, again, as it grows, we have to see how we push the business because like everybody else, I think we also have to see that the contribution increases substantially. But more or less, I think it will remain either flat or a little profitable than what it was last year. Last year was, I think, substantial losses on the online business.

The next question is from Gaurav Jogani from Axis Capital.

Sir, my question is with regards to the INR 145-odd crores savings that we have done for the quarter. Can you just break up into various heads, as in how much was saved through the rent? And also, this quarter, we haven't seen this rent line item in the P&L. So a breakup of this would be really helpful.

Okay. Can I take that question?

Go ahead. Go ahead.

So out of INR 185 crores, INR 112 crores is on account of other costs. We saved rental of around about INR 74 crores, Gaurav.

And sir, this INR 74 crores is pre-Ind AS number that you are saying for quarter?

It is the non-GAAP number because Ind AS number doesn't talk about rent at all, it is talking about the ROA, asset interest and liability. So if you see our GAAP number, we have given INR 185 crores in the investor presentation. Of the INR 185 crores, the breakup is INR 111 crores non-lease rental and INR 74 crores is lease rental.

Sure, sir. And sir, in terms of the cost savings that we have achieved, how much do you think is sustainable over the -- like the INR 450 crores that we're talking about, so we saved this particular year, how much we can sustain in the going years ahead? Like some costs would come back with the sales coming back. But how much can we sustain?

It's a bit difficult to say right now, but we do expect anywhere between INR 200 crores to INR 250 crores to be sustainable in the future, Gaurav.

Sure. And sir, with regards to the store expansion that we have said, in this quarter, I noticed that we have closed 2 stores. So when we are saying about the 5 stores that we are opening, are those net stores or like -- these are the gross stores opening?

So these are the gross stores opening, Gaurav. I mean if you listen to the previous quarter speech, what Rajiv said, we are evaluating all these stores. And if the store is not making profit, EBITDA profit or in the foreseeable future is not making profit, we are planning to close it down. In fact, last year, we almost took a provision of INR 20 crores. And to answer the other question, the 2 stores, what we closed in the last quarter are very, very small stores. One is in Jaipur, the other one is in Mangalore. Anyway the term got expired. So they are very small stores, and we closed those 2 stores.

But we also opened one large store in Phoenix in Lucknow in the month of July.

Yes. On July month, yes.

The next question is from the line of Trilok Agarwal from Birla Sun Life.

Just on this -- taking this question on savings further, out of the INR 450 crores, what will be the broad breakup in rent and other expenses for the full year? We just want to get a sense on that.

I would say probably 60% is nonlease rental and 40% would be lease rental, but slightly more than 60% would be nonlease rental and 40% would be a -- less than 40% would be lease rental, Trilok. At this point of time, we don't want to give the exact numbers. I can [indiscernible] in the range of that.

Sure. But is it advised to assume that the large portion of the savings and lease rental will come back in '22 because this could be obviously this year only, correct?

Yes, that's right, it would come back. You are right. I mean -- yes.

Yes. I mean that kind of agreement, would -- you must have done with the landlords, correct?

Yes, you are right. You are right, yes. Yes.

Absolutely. And sir, also on if you can -- when you -- in the beginning remarks when you talked about improvement, particularly sequential improvement in demand and footfalls, just to -- just want to hear your thoughts. You've already mentioned about 30% plus average bill sizes are up. What is the consumer actually picking up? You have mentioned about Beauty and Cosmetic doing well. But obviously, given the magnitude of the fall is so large, this well -- doing well doesn't kind of give us the exact picture. Can you just throw some light category-wise, that will be helpful. We don't want an online picture. We want an in-store picture, sir?

So basically, the biggest contributors are Home, Beauty and Casual, Athleisure, Children Garment and Women's Ethnic Wear, which is wearing at home. Kids and women's ethnic wear, are the ones that they wear at home.

Understood. And do you see this given the -- I mean, just out of curiosity, given the extension of lockdown and intermittent lockdowns in various parts, these sort of -- do we run a risk of delay or a change in habits in consumer in terms of purchases, particularly apparels, fashion versus essentials? Your thoughts on that would be helpful. Because one of your competitors was alluding to the fact that because of maybe -- I mean, we are obviously getting given this year it would be relatively volatile in terms of going out of patience and all. So maybe the impact on the apparels could be much higher than probably what we all think of?

See, for us, firstly, more than 60% of -- I mean 40% -- 35% to 40% is nonapparel, 60% is apparel. In that, currently 12% going to 15%, 20% will be Private Brand, which means we will be able to articulate the assortment as per what we want. So therefore, the risk for us of apparel going down is much lesser than an apparel company. That's number one. Number two, if you look at the way forward, we definitely see a huge change in the formal wear to casual wear. I mean formal wear was anyhow coming down, I won't say dying down, but that, I think, is one big change that we are seeing. We also are likely to see even in the casual wear we see that the lighter garments is likely to go up compared to denim, but denims have done well in the last few months. So that's one big change that we see. We definitely see the share of customer wardrobe within the 2-kilometer to 3-kilometer catchment going up because of the First Citizen program and also because of the trust in the brand. So these 2 behavioral changes, we definitely see. We continue to see the footfall increasing in numbers for some time because parents are not bringing children. Adults are not coming in groups and families, okay, maybe one adult is doing the shopping for the other. Therefore, also the increase in ticket size. So these are some of the changes that we are seeing, and we are monitoring this. And fortunately, as we go over the next few quarters, our data is becoming richer by the day because of the implementation of GRAVTY. We should be able to start sharing some very interesting facts as we go, okay? So if you look at it, I think we have put in terms of single men shopping 6%, single women about 12%, couples about 37%, families about 45%. So that's the kind of breakup we are seeing in terms of the shopping.

[Operator Instructions] The next question is from Avi Mehta from IIFL.

So I just wanted to....

Avi, we can't hear you.

Can you hear me better now? Sorry. So I just wanted to kind of put the cost savings program in the context of the reducing monthly burn rate that you kind of quantified. Would it be possible for you to share at what level of sales would you be kind of breaking even in a way? Or that will help us understand how to kind of better estimate. Because this year is I understand it's very volatile, and I'm not expecting any margin expectations, but any guidance on how you are looking at breakeven would be very useful.

So Avi, that depends on whether you're talking about this year or next year because these costs are dynamic.

Let's talk about this year and more -- actually, I was looking for both to be frank with you, but maybe this year would be more relevant if you could start with that, please.

Yes. This year, if I do probably anywhere between INR 700 crores to INR 800 crores in a quarter, we should be probably badly breakeven. And next year, will be slightly more than that. Say probably between INR 900 to INR 1,000 would be a good number to begin with to have a breakeven. Slightly lower than...

Perfect, Karuna.

[Operator Instructions] Next question is from Trilok Agarwal from Birla Sun Life.

Yes, sir, I also wanted to understand this GRAVTY sort of loyalty program that you have launched. If you can just tell us what's the objective? And what is the kind of investment you are doing? And what are the thoughts behind it? If you can just share your thoughts on this, please?

The investments were done in the last financial year. We were actually implementing it and we had to coordinate with the SAP implementation, which happened in this quarter. And therefore, SAP implementation and GRAVTY happened together. What GRAVTY does is it gives us a single view of the customer online, offline, and it helps us in personalization. So if you look at -- till now what was happening is if you were shopping in the offline business, we had a view of what you were doing. If you're shopping online, we had a view of it. We had a detailed assortment of what you've done offline and online separately. The offers were being done separately. Now we'll be able to actually look at you shopping online, offline, everything will look together. So if I take out a fact sheet of yours, I should be able to see what time you looked at offline? When you look at online? Were you looking at online even inside the stores? And inside the store standing, we do decide to look at offline select, but buy from an online into home delivery because you didn't want to carry the bag in your car and take it home. So that's the kind of opportunity we start getting. And it also helps us in doing a lot of dynamic campaigns. So now if suppose you're standing inside our store and going online, okay, we can do a dynamic campaign for you to see that you are able to buy it offline inside the store as you're standing. So I think these are the things that you will start seeing. And as we go, the tier will start working. We'll be able to offer separately to a gold customer, to a platinum customer, to a black card. And all this will start happening both from the app or the web or offline, including our personal shoppers, we'll be able to see what you're done, what's the record, what's your transaction with us. And eventually, we want our Personal Shopper to have a full view of you as much as you know about your wardrobe, we should be able to know. In fact, we want to reach a stage where we want to know more of your wardrobe than even you know because you would have a full detail of what you have shopped with us over the last 1 month, 2 months, even offline and online. So that's the capability we are building. And we want to see that these capabilities start fructifying in the coming quarter. And slowly, we are able to use all this to improve our service and experience and also our revenues and bottom line.

[Operator Instructions] Next question is from Abneesh Roy from Edelweiss.

Sir, my question is on technology front. So if you see the technology companies are saying work from home will continue for many years, and they see this as a long-term trend. And other sectors are also trying this for the first time, and they are reasonably happy with this. So my question is opening physical stores, can that become a big, big question mark for you longer term? So do you see an opportunity here because of the issues with the physical store. And are you -- do you believe that after, say, vaccine comes, customers will go back to the mall? Or the way technology has changed this sector in U.S. and other markets already, that can happen even in India, and it can get accelerated because of the COVID?

So I think this question, I should be asking you back because you probably interact with more tech companies and more retailers. But if you look at...

But sir, my tech analyst feels it will happen. That's why I'm asking you. He is quite bullish on this. These 10 years are most bullish.

I personally feel that in the next 5 to 10 years, if you look at India as a whole, okay, this is not what is likely to happen. The India contribution online is still 3%, to go into 5%. If it doubles every year also, it will be at about 20%, 25% over the next 3 to 5 years. However, if you look at the penetration of malls and shopping centers, creating experience for the customers, and likely the first time experience is yet to happen in many of the cities. So I think as you go forward, okay, we believe that the customer will continue to come to physical shops and malls because there is entertainment, which will still happen, theaters will come back. Maybe they'll take a little more time to come back. And don't forget, if you're working from home, at some point, you also stop looking at your laptop at 6:30 or 7:00. So the travel time will get saved and we believe the customers are going to come back. Yes, people just going to malls to be there and enjoy the air-conditioning and just to food court may come down. So we expect that traffic may come down, but the transaction size will go up. And we are saying, as customer experience, we want to create something like moments that matter to you, matter to us, and therefore, we'll actually start personalizing quite a lot. So I am not expecting that to happen. Even if you look at the U.K. market and if you look at the average of the U.K. market, you have maybe 18%, 20%, but you have an outlier in a John Lewis, who is doing a 40% average and suddenly hits 60%. So they will be outliers. So people like us have to work on online capabilities and therefore build online capabilities. But do we expect to see 40%, 50% coming from online in the next 2, 3 years? I don't think so.

So as of now your medium-term, long-term plans of opening physical stores that remains unchanged, pre-COVID and now?

No. It remains unchanged from maybe the number of cities that we want to go, but it definitely changes from the size of the format and the cities. We would be more focused on Tier 2, Tier 3. We'll be more focused on properties where the CapEx can be reduced dramatically by the landlord sharing the CapEx. And our store that we opened in Seawood Mall in Mumbai -- Navi Mumbai, okay, that format, we saw returns within the first 2 months, okay? And we believe -- and it's a very small format 15,000, 18,000 square feet. So that's the format that probably will take it to Tier 2, Tier 3 cities, where the returns will be faster, breakeven will be faster, the payback will be faster.

Right. That's useful. My second question and maybe Karuna can -- maybe answer this. On the rentals Karuna, if last year's base was say 100, what is the realistic base you're internally targeting for the full year? And how many percentage of contracts we have already signed? And Nagesh sir said that because of the erratic nature of the lockdowns currently also, you're again revisiting some of the signed contracts, the renegotiated contracts?

See, Abneesh, you're absolutely right, Abneesh. Let me answer one by one. See, for the first quarter, we saw anywhere between 60% to 65% reduction because our rentals in non-GAAP includes rental as well as common maintenance charges. Maintenance charges, we didn't see a much reduction, but we saw a significant reduction in the rentals. Overall, we saw anywhere between 60% to 65%. In second quarter, we will not get such a high reduction, probably anywhere between close to 50% or slightly less than 50% reduction will happen because malls are open and the stores are open. In fact, last time also, Rajiv said, wherever we are not opening the stores, we are not paying the rent. So that's -- those things are there. See, the landlords have not given any long-term commitments. They are giving commitments up to per quarter, sometimes -- so most of the landlords are committed up to September. And yes, we are renegotiating very hard even for Q3 and Q4 for a number of reasons because the number of customers haven't come up. The stores are also not opening double shift. We have a single shift. And even within the single shift, we are forced to close on Saturdays, Sundays. So we are renegotiating. In fact, we want to -- we are renegotiating even for the retrospective period, for the Q1 also, okay? A bit difficult, Abneesh, to go -- I mean, though internally, we have some estimates what should be the savings for the lease rental for Q3 and Q4. We don't want to make it public right now because we don't want others to know or we don't even want -- because this call go to the public domain. Yes, but we do have an internal target, and we are renegotiating for Q3 and Q4 also.

Right. And last question on the e-commerce with Amazon because of all these changes, is there some step-up there happening in terms of more percentage, stronger relationship?

We had -- I think Rajiv had mentioned that we were working that as soon as our SAP gets launched and SAP hybris gets interconnected, which is currently happening and the consultant who's sitting with us and working on it, we will connect many of our stores to Amazon directly. So which means that when the customer shops on Amazon and Shoppers Stop, they're actually seeing our store inventory. We're still targeting by the end of this quarter, the second quarter, the connect should happen. And that could be a very, very huge movement in terms of the shopping as well as delivery. Because if you're in Andheri and you happen to shop and we identify that stock to be sitting in an Andheri next to you, I mean, the delivery could be the fastest. So we are on that project, and we believe in the second quarter, we should be launching this connect.

And eventually all stores will be visible?

We will have to really see. I mean honestly, if you look at theoretically, it's not worth connecting all the stores because all the stores don't have the full assortment, okay? And between distribution and all the stores, if you are able to meet the benchmark which currently the best benchmark is probably a delivery within 24 hours, we should be able to do. But more than the delivery and the experience to the customer, it is the optimization of inventory and not stocking inventory in all over the places incremental to what we have in the store, that's the big advantage we'll get. But I mean, this is an important integration. And like I said, lots of things are happening together, keeping my fingers crossed till this happens. This is a big moment for us.

Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

Yes, I would like to thank everybody who came on the call and everybody who asked the questions, because your questions not only help us in understanding what you are thinking but also help us in start thinking differently. So thank you for asking the questions. And hope all of you remain safe, your family remains safe. And together, we are able to come out of this situation over the next one quarter. So we'll touch base again, next quarter for this call. Thank you once again. And thanks to all of our team members who have worked towards making this call successful. Thank you to Rohit and IDFC for helping us put this call through.

It is totally our pleasure, sir. Thank you, everyone.

Thank you. Thanks. Bye.