Shoppers Stop Limited (SHOPERSTOP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shoppers Stop Limited Investors Conference Call. [Operator Instructions] Please note that this conference is being recorded. On the call, we have with us the management of Shoppers Stop, represented by Mr. B.S. Nagesh, Customer Care Associate, Chairman and Non-Executive Director; Mr. Venu Nair, Custom Care Associate, Managing Director and CEO; Mr. Kavindra Mishra, Customer Care Associate, Executive Director and CEO Designate; Mr. Karunakaran Mohanasundaram, Customer Care Associate and CFO. I now hand the conference over to the management. Over to you, sir.

Good afternoon, friends. Thanks for joining us today. We call this meeting to discuss the recent management changes approved by the Board yesterday. Along with me, like Darwin said, I have Venu, I have Kavi, and I have Karuna with me. You would have read the information that we sent to the stock exchange last evening. Well, it definitely makes me sad to share that after nearly 3 eventful years of being at the helm and driving growth at Shoppers Stop, Venu has decided to move on for personal reasons to spend more time with his family and to pursue other opportunities, but I will let Venu speak on that. Venu's leadership came at a time when we had just come out of COVID and he was instrumental in strengthening the business post the COVID era and of course, all the strategic pillars that we had decided upon, I think he worked very diligently on that. And that has led Shoppers Stop fairly strong compared to where it was 3 years back. I'm also very happy to inform you that we appointed -- promoted Kavi, who was our Chief Commercial Officer and CEO of HomeStop, as the Executive Director and CEO, with effect from 1st of September. Kavi comes with a lot of background. And in the last 5, 5.5 months, I mean, he's settled in very well. And he's also brought in a lot of changes in HomeStop, which is one of the verticals that we wanted to drive, and we are seeing some very positive growth there. Before I introduce Kavi, I also want to on behalf of the board assure you that transition would be absolutely smooth and seamless. In the last 3 to 4 years, we've built a very strong management team and have enough management bandwidth, a strong executive team at the senior level, at the middle level to drive the company. Kavi has been with us, like I said, for the last 5 months. And all of you would know that Shoppers Stop is a board-managed company, promoters own more than 65% of the shares, but the business has been run by professionals. And therefore, in every transition, the company has managed to come out of challenges and has pushed ahead. And we believe that with Kavi being there, Venu's supporting us during his transition period and I coming into the picture to handle the company, we are very confident that all the strategic pillars that we have taken on, we'll be able to build on it as we gain month after month, quarter after quarter. Let me now talk briefly about Kavi. Kavi comes with a background of more than 24 years of experience, and I am Bangalore graduate, has worked in Madura Garments, which is ABFRL now, was a co-founder of Zovi, which is a dot-com business, which was started -- funded by Sequoia at that point of time, has worked in United Colors of Benetton, was the Managing Director and CEO of Pepe, in fact was part of the transition when Pepe moved from Indian operations to international operations, the shareholders shifted. And then he was a Managing Director and CEO of Anita Dongre where he was heading the business and was responsible for the And Girl, which was launched, which was probably one of the most successful children brand launched in the country in the last 2 years' time. I'm very confident that whatever Venu has left us with, okay, we only will be building on that. So the foundation that he has built for the company, Kavi will be making it stronger, and I'm there to hold on during this transition. I will now stop and ask Venu to comment and probably ask Kavi to comment before we open the house for question and answer. Venu, over to you.

Thank you, Nagesh, and good afternoon, everyone. Thanks for joining in for the call. As Nagesh mentioned, I have -- as you know, I have chosen to move on from Shoppers Stop, and that decision which I arrived at after quite a bit of thought. I had joined in for a 3-year contract, which till November 2020 -- sorry, November 2023. The Board had kindly extended it in April of '23. However, over the last few weeks, I have been evaluating what I do and on the personal front, what I would like to do. And I've come to the conclusion that I would like to explore some new avenues at this stage and also spend some quality time with my family and hence, took the decision to give notice to the company. And I think the important thing here is that I am going to be around for the next 6 months to guide, advise Kavi and ensure that the transition is smooth. There is a lot of emotional commitment that I have put into Shoppers Stop and I'm absolutely committed to make sure that we continue on that journey, ensure a seamless transition and continue to grow as the journey that we have embarked on. Thank you once again. I will now hand over to Kavi.

Thank you, Venu. Good afternoon, everyone. Thanks for being on the call with us. I'm really grateful to the Board to give me this opportunity. I've spent now close to 5, 5.5 months with Shoppers, and I'm really excited to take on this new responsibility and work with a very, very strong leadership team as well as the management team which we have to drive growth and the 4 pillars of business, which we have all spoken about and word upon the past for many years. So looking forward for a great journey with Shoppers. Thank you.

Thank you, Kavi, and thank you, Venu. Darwin, we can open up if there are any questions. I will take all the questions around the subject of the leadership change and will not be able to answer anything on financials because this is not the part of agenda for today.

[Operator Instructions] We have the first question from the line of Pankaj Tibrewal from Kotak Mutual Fund.

Yes. As long-term shareholders, we are first shocked and surprised on this news. I thought the commitment of Venu was clearly there and this sudden news came as a big surprise to us. What I would like to understand is that in the last 12, 13 years, there have been 4 leadership changes. Govind was there, Salil was there, Rajiv was there, now Venu is there, and now Kavindra is there. What is leading to such frequent changes that the company has not been able to retain the senior leadership beyond 2.5, 3 years? That's my first point. And Mr. Nagesh, you have been there as a mentor to all the 4 CEOs during this transition phase. So something is -- maybe it's just a coincidence, but something is worrying us that the leadership stability is not there, which one would expect it to be. The second is that, Rajiv had its own style, Venu brought its own style and capital allocation and thought process on growth and other 4 pillars, which we spoke about. What we would like to understand is there a strategic shift which probably the new leadership will bring along. Period. These are my 2 questions and wish Kavindra the best and wish Venu all the best in the future endeavors.

Thank you very much. Wonderful questions. And let me answer the second question first. When Venu joined -- when before joining, my discussion with Venu was, Venu we already have decided to have 4 strategic pillars, and Venu will work along with this team in order to execute the strategic pillar. So if you are to ask Venu in private, okay, the strategy has not changed in the last 3 years. We have just been implementing it, and we have been implementing it within the helms of the capital that we have and the capital allocation we have done. I just want to assure everybody that there is no shift in the strategy, in fact, with Kavi coming in, and with me also being involved, we would actually drive the strategy further. Be rest assure, the 2 strategic pillars of growth, which is adding up stores, beauty, both are running at a full net speed, okay? And we will continue to talk about how we are adding up value there. So there is no shift in the 4 strategy pillar, that's all. In fact, we may add a little more growth based on what we see in the next 2 quarters. Venu had already mentioned to you all that this year, we will be opening 13 to 15 stores. [Foreign Language] will end up opening more than that. On the change, I mean, you have a very, very right question. When you look at the span of 10 years, you would definitely say there has been a leadership change. Well, I think as an organization, everything that is required with us to hold on to the senior leadership, we do, whether it is ESOPs, whether it is compensation privilege, whether it is culture mapping. Let's not forget that under Venu's leadership and even before, we were among the best place to work, best place to work for women. I think we also have to respect individuals in today's world, and they want to take on calls in order to grow and achieve their own personal objectives. I mean, very few people like me are there who work 32 years in the same company. So I think we need to appreciate that part. The challenge will be if the organization is weak and it cannot carry forward. I believe the organization is strong enough. The shareholders are extremely committed, the promoter shareholders who are only increasing their shareholding at 65% less and the Board is very committed to the decision and what we are taking. So I think -- I hope I have been able to answer your questions to the extent that I think I can answer you.

Yes. We appreciate that. But our only worry is that the strategic pillars may be the same, but a lot of people had come along with Venu. Do you foresee any attrition happening at the senior level or the second level out there, which can disrupt the execution because let's appreciate that in the second phase, you guys have also started on Intunes which is itself a very significant development on the value retailing which we have never done. So is there a slightest bit of worry on the attrition picking up post Venu or you feel that it will be business as usual.

So if you look at attrition, I think there's 2 ways of looking at attrition, 1 by name, 1 by past data, and 1 by percentage, okay? Currently, we're talking of attrition by name, which is Venu, and I do emphasize what you're saying because yes, Venu's loss is going to be our loss. But if you look at the attrition level at the top level has been in the region of 10% to 15%. Attrition on the front end, like any other retailer is in the region of 25% to 35%. I think the attrition we contained within the same level. I don't see anything more than that. And everywhere in the last 3 years, thanks to Venu, we have actually built up a very strong [ N minus 2 ] teams. I mean till now, it was the [ N minus 1 ], which is exposed to all of you we have talked about, but the N minus 2 in the last 6 months also has been strengthened. So when Kavi came in, came in as the Chief Commercial Officer and CEO of HomeStop, but has the background to handle the company and lead the company. And that's why you found that we had to do an internal promotion on Venu's exit and not have a gap and hunt for a personal outside.

Fair enough. We hope that everything settles down quickly and the company embarks on the growth path and there's no change in the strategy per se.

The next question is from the line of Nihal Mahesh Jham from Nuvama.

Am I audible?

Yes, Nihal. Go ahead. Nagesh here.

Yes, Mr. Nagesh. Just 1 question actually. Was that -- you did highlight about the 4 pillars, but there have been 2 aspects which have incrementally come in over the last 12 to 18 months. One is obviously, the beauty distribution and second is on the Intune part of it. How do the expansion plans for that change given the transition of management that happened? Because the core Shoppers Stop business, as you highlighted, the 4 pillars, along with the N minus 2 team is very much in place. But the new initiatives, I think, was something that Mr. Venu were very much driving. So if there is any pause or maybe just a relook that these 2 initiatives would take?

So thank you very much for this question because we wanted to keep it around the leadership change. I didn't want to comment, but since you've asked the question, let me tell you that on Intune, we opened 4 stores. The stores have performed so well that instead of opening another 10 stores, we have decided to open another 20 stores, okay? So capital, people, resources, organization, team is all in place, and it is run very, very independently, very young gentlemen, who runs the business. I don't see any slowing of growth there, absolutely no. As far as beauty concerned, I mean, there are 3 parts of our beauty business. One is the beauty within the department store. Second is the beauty, which we run at standalone, which is the Alka stores that we have, Estee Lauder, MAC, Clarins, Clinique. So that's the second line. And the third is the distribution line, which is an independent vertical as a 100% subsidiary of the company. In fact, in the distribution line, we have been only adding more names. And we hope that we will be able to continue to add and actually perform on that. As of now, the distribution business is online to perform to what it has projected for itself.

Thank so much, Mr. Venu and best wishes for Mr. Kavindra ahead.

Next question is from the line of Sameer Gupta from IIFL Securities.

My question is to Venu. So in the opening remarks, Mr. Nagesh mentioned that how instrumental you have been in strengthening the business. So just wondered if you could just elaborate on some of these aspects as how you have brought value in the last 3 years. And if you could also elaborate if these are more process-driven or process-oriented or people-oriented approaches? Just this question.

Sure, Sameer. I think over the last 3 years, if I look at it, the areas that I have focused on, and I will put it as 3 Ps and Cs, the 3 Ps being product, process and people. So I think in that order is where my focus has been and the organization's focus has been. And if I were to elaborate on that from a product point of view, it is around ensuring that we have the latest trends. We have the latest fashion. But equally importantly, making sure that we are offering a curated range rather than just offering a lot of everything. So it is that curation, which we have been focusing on. And that is something which is a absolute strength for Kavi, and he will take that forward even more strongly. In fact, one of the reasons I choose Kavi to join us 5 months back was with the strength -- with that strength that he brings in. The second was on process and again, taking on from what I talked about process not just process on product, but also process in terms of how we buy, what we buy, process in terms of the selection of property, process in terms of projects and the process in terms of the whole CapEx allocation that we do. And the third one was on people, and I'm very proud of the fact that we have built a very strong team. Nagesh touched upon that, the senior executive team that we now have are individuals who are absolute leaders in each of their individual functional areas whether it be on fashion, whether it be on digital, whether it is on e-commerce, Kavi, of course, on the product side. So we've got a very, very strong team. And under succession planning has been something which I have spent a lot of time on. So under the leadership team, the N minus 2, as we call it, building succession at that level also. And the fact that my replacement is an internal succession is illustration of that strong planning on people that we have done. So that's the 3 Ps that I had worked on and the 3 Cs that I worked on was customer centricity, and I think that is something which we have been absolutely focused on in terms of -- and that's at the heart of everything that we do. And during the investor calls, I have elaborated on the customer centricity and what we do. Second is on cost and from the time when COVID happened, we had managed to relook at our whole business and take a lot of cost out of the business. Keeping that control and ensuring that the discipline is carried forward to the second area. And the third is on capital allocation, which again, I think was touched upon earlier. So that's what I have done over the last 3 years. And I think the numbers speak for itself in terms of what has been delivered because of that.

Very, very elaborate. Just 1 more question, and pardon me for my ignorance, but I'm just wondering with Kavi joining 5.5 months back, was it sort of a planned thing or it just happened and just a coincidence.

No, it's just a coincidence, i think. And if you look at it, whenever we are bringing in people at every level, always like Venu mentioned, the succession plan is always kept in mind and therefore, he comes from that kind of a background. But let me honestly assure you, there's absolutely no doubt in mind that there is no plan as such.

The next question is from the line of Ankit Kedia from PhillipCapital.

Sir, only 1 question from my side. Historically, the MD and CEO have been same in the organization. This time around, Kavi has only been made the CEO. So are you looking to get an external MD for the organization?

So if you look at it historically, we always kept this role and always looked at this role as a succession plan. okay? So Kavi has been promoted to the CEO's level. We have not declared in -- or declared the position of MD that remains vacant. I would play the role, although I'm a nonexecutive Chairman to handle the company over the next 6 to 9 months and the Board will take a call in the [ end call ]. The reason for doing MD and CEO was also to say that at any point of time, we can cushion the organization with 1 role between the 2 roles. So currently, Kavi has been appointed as an Executive Director and CEO.

The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

Yes. My first question is to Venu, sir, that you CEO for next 6 months to guide Kavi to -- for the smooth transition. So in this 6 months, what would be your key focus areas or aspects where you want to focus so that this transition will be smooth and there won't be any break or clause [ as far as volume and ] growth aspirations you have.

Thanks for that question. Over the next 6 months, our focus continues to be on delivering the strategy that we have put in place. We have got the budget and the plan for this year. And our focus, Kavi's, mine and the rest of the team is to deliver on that plan. And as we speak, we don't see any change in that plan. And the way between Kavi and me, the way we would operate as, Kavi would take the lead, and I would step in as and where needed based on mutual comfort in terms of to ensure that it is completely seamless between us.

Right. And my second question is to Kavi, sir, you have worked with specific brands, for example, Anita Dongre or for that matter creating impact on various levels. So when you work with a brand like Shoppers Stop, which has the element of all the -- you have apparel range, you have beauty products, you have other services. So in that context, are you seeing taking this business over to the next phase of growth.

Okay. See, I think the strength, which I have is to understand the brands and the way brands can be connected with the consumer. Shoppers gives me an opportunity to see different kind of brands work out, as we spoke about customization and curation of the line. It allows us to do and offer a differentiated offering to the consumer. So I think that is where I see each of the brands playing a specific role for the consumer. So that is something with my experience, I would be able to drive further. And we believe that whether it's nonapparels or beauty, they all add up to the whole consumer experience, and that's how I look at the entire thing.

All the best to you and all the best to Venu, sir, for your future endeavors.

The next question is from the line of Aliasgar Shakir from Motilal Oswal.

Question to Mr. Kavindra. So a couple of things. I think a couple of strategy that has played very favorably and positively for Shoppers Stop in the last couple of years. One is Venu's strategy to open smaller size store, which has helped the company add about 10 stores in the last 1 year. And if I see in last year, in the last 5 years, you would have added barely about maybe 5, 6 stores, not because probably they wouldn't have had been store additions, but probably because the stores were larger size, and therefore, there were probably many shutdowns or changes in the format and so on. So I wanted to understand your -- how you are looking at this strategy of opening smaller size store. Do you think there is any change in that strategy and in terms of the growth in number of stores in the smaller size, how do you look at the economics of that? So I just want your perspective over there. I'll stop here. I'll let you ask the first question and then go to the second one.

Okay. So I think over a period of time, we have been able to optimize and understand what store size works well for us. And given the fact that a certain kind of store size works well for us, it's something we'll continue to drive as BSN has spoken about, we are looking at opening around 15 to 17 stores this year, which will be across various sizes, obviously. But we understand as a business, what is optimum size, and we keep on driving around it.

Got it. The quick follow-up here is that when we're opening larger size store probably the catchment area requirement for that is way larger and therefore, probably it kind of restricts our number of cities or I mean, locations that we can go to. So in that context, when you open a smaller size store, probably that helps you go much more deeper. So certainly expands your penetration, your opportunity quite significantly. So this kind of -- has been a really key factor that allows you to expand quite rapidly. So therefore, that's where I was trying to understand that if that strategy changes, then will there be a concern in terms of new cities that we can go to for our expansion plans.

So I don't see a change in the strategy. For example, we have just opened [indiscernible] We are talking about opening the store in Warangal. So I think we have just opened the store in Cochin as well. So the store size, different markets can have a different market, different cities can have different sizes of store, and we are aware of that and work accordingly. So I don't see any change in that strategy going forward.

Understood. Second question is on the private label strategy, which has been a key strategic pillar for us for quite some time. But in terms of the contribution, it is still being quite low versus a lot of other brands where private label share is way higher. I understand we are in a departmental format where we -- our value proposition is to offer party products, but across the industry spectrum, if you see most retailers today are trying to sell their own labels, which has led to a very significant value proposition, price point benefits to the customer and that drives a lot of sticky customer base. Do you think this private label share that we have, you would like to drive far more significantly from what we are presently, probably high teens odd to probably for 40%, 50%. I'm asking this also in the context that when I see your smaller format stores, I see the shelf space provided to private label is already significantly higher, but we've not seen the contribution of private label really growing very significantly in the overall portfolio.

So private brands continues to be a strategic pillar for us. With my experiences in brands, I think I would be able to work closely with the private brand teams and drive that business. So that is an important part of our strategy going ahead. The percentage is something which I think should come naturally. The desire is to grow this further and ensure that this business is a strong business for us.

Got it. Do you think this can grow meaningfully to probably 40%, 50% plus? Or you think that will kind of grow but maybe probably around way lower percentage points, and you will still focus on the third-party brands or -- yes, third-party brands?

Ali, Nagesh, at the beginning of the meeting, I said that we can't share any financial data. I'm sure, you're aware the regulatory constraints we have. So will take this call some other day.

We have the next question from the line of Varun Singh from ICICI Securities.

Sir, my question is to Kavindra. Like how -- what's your vision for Shoppers Stop in the multi-brand retail ecosystem given that there has been so much intensifying competition from the multinational brands, companies, et cetera, into the space? And also given that the last 3, 4, 5 years, under Venu's leadership, all rightful strategic intervention, which has already taken effect. But still, I mean, we see relatively slower pickup in the format itself, I mean the multi-brand retail format. And rightfully, we have entered into the value fashion category, which is of course, growing fast, et cetera. But still, given this context and also I think, I would like to highlight the degree of transparency and disclosure which Venu has started imbibing the analyst community, we -- almost all of us loved it very much. I hope that, that level of transparency and the disclosure continues under your leadership as well. So given this context, Kavindra, I just wanted to pick up your thoughts with regards to how do you see the Shoppers Stop' main multi-brand retail format. So given all this competition, et cetera, I understand the growth pillars remain intact, but still, I just wanted to pick your thought.

So Varun, thanks for the question. I believe that Shoppers as a business as a stand-alone box will continue to grow. As we have been talking about the 4 pillars, those remain existent and each one of them has got a role to play in the strategy going forward. As we mentioned about Intune and Nagesh also spoke about that, it has got a great future ahead, and we will keep on investing in that. And I think as you rightly said, Venu has done some amazing things and the desire is to keep -- take each one of them and grow them up even further.

I just want to add 1 thing, be rest assured on the transparency, Venu has taken it to [ 9 ] or [ 10 ], okay, the team here will take it to [ 11 ] and [ 12 ] and not [ 9.9 ] also. Okay. That's an assurance I want to give to all investors, all analysts on this call. I mean, this is a standard that we have set for us for many years, Venu has kept it and taking it forward, we continue to do that. However, I would like to thank each one of you who participated in the call and thank you for coming at such as short notice. We definitely wanted to talk to you since this announcement were done yesterday night after the Board meeting. Thank you once again. Thank you very much. We'll see you in the next quarter call.

Thank you. On behalf of Shoppers Stop Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.