Shoppers Stop Limited (SHOPERSTOP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shoppers Stop Limited Q1 FY '27 Earnings Conference Call hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Dipali Kumari from Arihant Capital Markets. Thank you. And over to you, ma'am.

Thank you. Good morning, and thank you all for joining us on Shoppers Stop Q1 FY '27 Earnings Conference. Today, we have with us the senior management represented by Mr. Kavindra Mishra, Customer Care Associate, Managing Director and CEO; and Mr. Pankaj Chaturvedi, Customer Care Associate, Chief Financial Officer. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I must remind you that the discussion in today's earnings call may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risks that the company faces. Please restrict your questions to the quarter performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. I would now request Mr. Kavindra Mishra for the opening remarks. Thank you, and over to you, sir.

Thank you, Manav, and Dipali. Good morning all. I'm joined with Biju and Mahesh in addition to our colleagues from finance team, Pankaj, our CFO; J.P. and Rohit. We have uploaded the investor presentation on our corporate and Stock Exchange website. Let me start with talking about the current operating environment. We have seen a pickup in demand from mid-February, and it sustained through Q1 and the momentum continued in July as well. While geopolitical uncertainties will persist, consumer demand trends remain encouraging and resilient. When we spoke last time, we had anticipated a more significant supply chain disruption in Q3. However, I'm happy to share that it looks better than what we had originally thought. All our key brand partners are well secured with their suppliers and providing confidence in inventory availability and readiness for the festive season, which I think is a very, very important and significant development for us. We'll now move to the key highlights for the quarter and then talk about the way forward. I'm pleased to report that the consolidated top line for Q1 FY '27 grew by 10%. EBITDA grew by 40% and most importantly, PAT turned positive at INR 5 crores versus a loss of INR 4 crores in Q1 FY '26. Our last year results basis GAAP included a one-off gain of INR 5 crores in other income on account of reversal of ROU liability attributed to store closures. Excluding this, the loss reduced by INR 7 crores Y-o-Y. Let me talk about the individual verticals starting with update on the departmental store business. The LFL business for departmental stores grew by healthy 6% this quarter, with a total growth of 7% in spite of uncertain macroeconomic scenario. Our focus on executing the constant messaging of premiumization and experiential retailing has started striking a cord in consumers' mind. Our customer entry grew by 3% for like-for-like stores and overall growth of 8.5%. We had the highest ever additions to our first loyalty program with 2.4 lakh new recruitment. The premium end of our loyalty, which is our Black Card program has reported the highest ever enrollment, 18,000 new recruitment and highest ever renewals of 21,000, which is a renewal rate of around 69%, demonstrating deep value proposition from a consumer perspective besides personalized service standards. The total loyalty membership base grew to 13.8 million. The total contribution during the year was -- in the first quarter was 85%, which is the highest ever, with a repeat rate of 69%. Noticeably, our numbers across the loyalty program metrics have grown over last quarter. With constant focus, the premium portfolio contribution in stores improved by 490 basis points and they stand at now at 72%, and the ABB for the quarter has gone up by 10%. It now stands at INR 5,704 showing core operational strength. Our personal shopper program, which is central to our experiential retail strategy is now contributing 26% to our revenue. Sales generated through personal shoppers grew by 12% with total sales reaching INR 321 crores. As a part of our premiumization strategy, we have always talked about the 5 power categories. The top 5 power non-apparel categories continue to outperform. Watches grew by 24% Y-o-Y, Hand bags grew by 18%, fragrances by 17%, sunglasses by 12% and footwear by 9%. We opened 2 departmental stores during the quarter Inorbit Vizag and Pavilion mall. And we have had one more store opening in July, which is at Sindhu Bhavan in Ahmedabad, taking the YTD store openings to 3. In line with our strategy, these are upmarket stores with elevated designs, modern ambience and premium assortment. Now let me talk about the private brand business. TV continues to be a strategic key pillar for us in terms of offering differentiated range and covering the gap for a set of categories. We shall continue to focus on driving productivity and improving profitability through premiumization and rationalizing discounts. In my earlier quarter speeches, I had spoken about launching of FRATINI Girls as a premium private brand. The success of the same has now encouraged us to drive renovation in brands like Kashish and Bandeya, and we'll see a positive impact of the same incoming festive season. We have launched premium Bandeya 2.0 correction in 25 stores and additional results are very encouraging. Interestingly, we'll also be announcing a major collab with one of the leading fashion houses for one of our private brands. We'll be talking about it in the coming quarter. During the quarter, we also optimized our private brand inventory by 11% vis-a-vis last year. Let me talk about the beauty business now. The company's beauty business, including Global Beauty delivered revenue of INR 327 crores during the year. During the quarter, registering a healthy year-on-year growth of 15% led by Fragrances, which grew by 34%. With consistent efforts and initiatives, including MAC royalty program and pushing exclusive services, we saw a turnaround in Estee Lauder business with a 4.3% like-for-like after 5 consecutive quarters of LFL decline. Our Beauty distribution business continued its strong growth trajectory generating revenue of INR 129 crores, which is equivalent to INR 200 crores of GMV with a stellar 53% growth Y-o-Y. During the quarter, we launched one boutique each of NARS and Shiseldo, taking the total number of premium boutiques to 9. We right now have 4 Armani, 3 NARS, 1 Prada and 1 Shiseido stores. The performance underscores duty as a strategic pillar for Shoppers Stop, aiming high growth through strategic partnerships, digital acceleration and store expansion. With all these concentrated efforts across verticals, the core business delivered an EBITDA of INR 48 crores, which is showing an increase of 18% Y-o-Y. Now let me talk about the new initiatives starting with Intune business. Our continuous commentary last year on Intune was that we need to stabilize the operations, improve the unit economics and liquidate the old inventory before we start seeing the growth in this business. I'm happy to share that the execution of the business has started showing initial pickup. We recorded revenue of INR 82 crores with a Y-o-Y growth of 21%, while the like-for-like growth was 10% after 4 consecutive quarters of decline. Relentless focus on inventory freshness to in-season clearance and online accessibility helped us in reducing inventory by INR 34 crores Y-o-Y and a further reduction of INR 11 crores versus March '26. This is currently operating at an optimal inventory level of 13 weeks cover. We are confident of having a similar discipline in coming months, driven by improved full price sell-through, robust supply chain and more frequent drops. The structured CRM outreach drove improvement in key KPIs. Repeat customer mix improved to 45% in items per ticket sustained at 3.8. I'm also happy to share that Mahesh has joined us as Head of Intune business. With extensive experience at Trends and MAX, he brings deep retail expertise and I'm confident he will lead Intune to its next phase of growth, scale and profitability. Let me talk about the e-com business. Our investments and efforts over the last year are improving the UI/UX and integrating the sites have started showing initial results. We grew by 58% over Q1 last year. Interestingly, we are seeing the impact of premiumization online as well. Our average bill value grew by 6%, and power categories like watches led growth reflecting the premium behavior of our consumers across channels, both offline and online. As planned, we have completed the integration of ssbeauty.in with ss.com platform, which will deliver significant cost savings and operating leverage in the coming quarters. Now I will talk about the store expansion and financial discipline. We maintained a disciplined and prudent capital allocation approach during the quarter with a strong focus on driving returns and strengthening the balance sheet. During the quarter, we opened 8 stores, 2 departmental stores, 4 beauty and 2 Intune alongside 2 MAC shop-in-shops. Total inventory was optimized by INR 80 crores Y-o-Y and by INR 36 crores versus March '26. As stated before, we are on track to be debt-free by end of FY '27. Let me throw some light on the usage of AI. Over the past couple of years as an organization, we have been working a lot on both machine learning language and AI in various parts of our business. Within Shoppers Stop, we look at AI with 2 perspectives, revenue generation and cost. Under revenue generation, our focus is on personalization and targeting the customer activation, usage of camera vision to improve conversion and store layouts and recommendations and focusing on the personal shopper app. Under cost mitigation, our focus is on sharpening the backend systems and processes; and lastly, the inventory planning and optimization through demand forecasting. We'll keep on discussing the impact of AI and how it is improving our efficiencies as we go forward in the coming calls. In the last, let me talk about the way forward for business. First is -- we'll continue to double down our premiumization as a strategy. Premiumization as a strategy has started delivering results on ground for us. As we speak, we have become the first quarter of almost any premium brand coming to India. And we are using this trend to work with strategic partners to drive efficiency. We'll be launching 2 exclusive Swiss Watch brands within Shoppers Stop in the coming quarter, which is quarter 2, which demonstrates our commitment to the strategy. Focus on growing consumer walk-ins. We have built on this in Q1 and past quarters, and we'll continue to work on the same. To make Shoppers Stop brand is aspirational and stand out for experience in premiumization is something which we'll continue to work on with all our GTMs, which we keep on talking about. Drive expansion of the brand in key markets and premium malls. I'm delighted to share that our repositioning efforts have started yielding results, and we are increasingly becoming a department store of choice with some of the leading mall developers. We are on track to reduce losses in Intune business substantially. The same will be affecting from Q2 onwards. And finally, we remain committed to inventory optimization and operational rigor. Our commitment to become debt-free by end of FY '27 remains in place and we are 100% sure to achieve that. With this, I would like to open the floor for an interesting Q&A session.

[Operator Instructions] We have a first question from line of Sucrit Patil from Eyesight Fintrade.

I have 2 questions. The first question to Mr. Mishraji. Just to understand the forward guidance. What is Shopper Stop's strategic road map for balancing its premium brand positioning with the need to attract younger audience, value conscious customers, especially given the challenge of rising competition from online platform than changing consumer habits. That's my first question. I will ask my second question after this.

Sucrit, if I understand correctly, the question was, how are we balancing our premiumization strategy with completion online? Is that the question? If that's the question, as I correctly understand, then our stated intention is to be the aspirational luxury departmental store, omnichannel store for the young Indian family, right, which means that we'll continue to premiumize. We will continue to bring more and more exclusive brands within the ambit of Shoppers Stop. So I don't see where we are actually directly competing with the e-com player because lot of consumer behavior is very different from what we are trying to drive. We are looking at a little bit more mature customer, maybe the age, which is around is 30-ish year of age, and that's the young family we are targeting as a strategic thing. For our younger customers, we want to be relevant. So our current association with Hive, which is one of the -- which is the leading group, which has created brands like BTS and yes, like the leading Korean brands. So we obviously are working with them to create that particular consumer and be attractive to them. But fundamentally, as a business, we want our customers to come to us to satisfy the aspiration, which are rising and which are more towards the premium set of business rather than only a value or around that discipline.

My second question to Mr. Pankaj, again, a forward-looking one. Store expansion, omni-channel investment and rising operating costs, what are the key financial levers you're using to sustain profitability while funding growth?

See, we are very focused on our capital deployment. So if you see, we have grown our cash from operations or EBITDA on a Y-o-Y basis. We've given our guidance of opening the 9 to 10 department stores every year. We also mentioned that we'll go cautious on a value format, which is Intune. Once we stabilize the profitability, get the unit economics right, then we'll expand on that. On the online part, we are optimizing the costs by integrating our various online platforms. So you will see a turnaround there as well. As far as the funding is concerned, our internal accruals are going to be sufficient to meet this expansion strategy that I just mentioned. And apart from that, we are also investing in our subsidiary company, which is GSSB which is also doing very well. So the returns on that investment are also very healthy. So even with all the capital deployment that I spoke about, the investments that we continue to do in stores and our subsidiary companies, we plan to be debt free by the year-end. Did I answer your question?

Yes.

We have our next question from the line of Sameer Gupta from India Infoline.

First of all congrats on good set of numbers. First question, sir, is on beauty. Now if I exclude the distribution revenues, the beauty sales is flat. And if I even look at the last year or a few years before that the contribution has actually not increased. In fact, if I look at 2 years back, it was slightly higher than what it is today. So I just wanted to understand, I mean, this is a category where premiumization as a lever probably is higher. We have had a head start in this category, creating it. Is it like online -- the large bulk of the audience has now shifted online and the online players like Nykka, they are able to market it better with influencers or how to use categories, et cetera, where we are lacking? Or is it just a still order an issue? I heard you said that it has finally come to LTL growth after 4, 5 quarters. So is it the -- is it a brand-specific issue or something lacking in our proposition, any turnaround that you can basically guide towards will be helpful.

Thank you, Sameer, for the question. So I think there are 2 or 3 parts of this how I would like to address it. So obviously, let's assume that we are keeping the GSSB business aside for a minute and we're only talking about the retail business, right? Now if I look at the retail business, which basically means the department store business and then the business which is there in our stand-alone order doors, so the department store business continues to grow. In fact, the non-ELCA business for us is growing by around 10%. We see a healthy growth there. When you look at the base of order stand-alone doors, there are 2 parts of it. One is, we have shut around 14-odd stores over the last year or so, which sits in the basin where you don't see a growth. But if I look about stores which are existing, they are actually growing by 4% like-for-like. So in our minds, the challenges are more towards -- or we have taken out the nonperforming stores of Estee Lauder focusing on what we have and growing that business, that's one. The non-ELCA business actually is growing really, really well. So we spoke about the fragrances business, the overall growth there. I think the departmental stores. The non-ELCA business is growing around 10%. So we see strong growth there.

Sorry, non -- I didn't get that term that you're using. It's just department stores that you're talking about, right, which are going well.

The departmental stores are doing well. The non-Estee Lauder business is growing well by 10% or so. Estee Lauder business has also turned around and now is growing. The reason why you see there is no growth or the numbers look flattish because we have shut around 14 stores over last year, which are sitting in the base.

All I can remember is that department stores still used to be like 80%, 90% of our beauty sales at some point in time. So is that still the case? Or has the salience kind of in between gone up for the SIS or the stores?

So I think, Sameer, there is some -- I mean, maybe there's some misunderstanding there. The Estee Lauder store actually and especially for the Estee Lauder business, the stand-alone goes always at a 50-50 kind of contribution.

Yes. Maybe I'm misconstruing I think the overall revenue piece was 90%, not just beauty, sorry about it. But is this 50-50 now materially shifted towards department? Or is it like still a healthy 60-40 or something like that?

So it is a shifting towards department. We are also within the department building the non-Estee Lauder business. So while Estee Lauder continues to be an important partner for us, and we are growing that business. As I said that we are not seeing a like-for-like growth there. We are also building the non-Estee Lauder portfolio to balance the whole mix.

Sure. And just last one bookkeeping here. If you could also give me the salience of Estee Lauder versus non-Estee Lauder within beauty across the whole -- I mean, whichever way you analyze?

So it will be around -- 60% would be non-Estee Lauder, around 40% would be Estee Lauder.

Okay, okay. And when you say 40% Estee Lauder, it will include the Estee Lauder, which is sold across department stores also?

Across departmental stores, across stand-alone doors. So what's happening now is that the non-Estee Lauder order piece anyway is going very high, is going very fast. The Estee Lauder business within the departmental store is growing, but we are also seeing a turnaround in the Estee Lauder stand-alone doors.

Got it. And the marketing of these brands is not under your. They are individually marketed by the brands themselves in India.

Yes, of course. Other partnership with any other fashion, for example, right.

Yes, yes. I just remember that at one point of time, it was an exclusive partnership with Shoppers, but of course, the times have changed. Second question, I'm sorry, I took a long time on this. If I can squeeze another question.

Yes, please.

Yes. So second is on Intune. So last quarter, we had said that we need a sales throughput to go up by around 25% to 30% for us to be back in terms of store additions free. And first half, probably we would not see any store addition. Now this quarter is 10% healthy LFL. Is there any change in the strategy here? Or are we still saying that it's still a wait and watch in terms of store additions? And you probably would want to look at this full year before committing any store additions here? Or like is there any change? I mean that's the question.

Okay. So 2 parts to that, Sameer. As you rightly said, we have grown by 10% like-for-like, right, in Q1. We had said that we should be doing around 20%. So there are parts of it. So the mall stores for us and the like-for-like stores actually are very close to what we wanted. It is the high street where we need to still see that pickup happening to the extent which we want. My sense is, as we initially guided in the last conferences, in the last call is that we'll take the first 6 months to stabilize and see the operational pieces are in place before we take a call on this. I think the guidance remains same on that. We need -- we are focusing on improving the productivity and with Mahesh coming also. I think there is a lot of action happening there. We would be in a much better place to answer this question in the next call, but we're in the right direction. So the problems which Intune had over the last year, which was the inventory, specifically the inventory and then operational issues, I think we have been able to link those. We are -- the inventory is much fresher. The operational strength has come in place. We are seeing that the KPIs, which are an important reflection on whether you are running the business well or not are all in a much more positive sense. So we are in a good direction. I think we have got a good set of stores, we have got around 90 stores right now. It's -- that's a good number to fix these things. And we will see -- this business is important, and it will see a big growth from our side. We just need one more quarter to demonstrate internally that what we are doing is right and that we are there. When all those problems are fixed, which my sense is where we are, but we want -- I want to wait for the quarter or so before giving a guidance on store openings in India.

Only one follow-up here, Kavindra. So basically, why I'm asking this is because, let's say, in first half, all your metrics are satisfied, but would you still want to wait for an autumn winter season before going ahead, plus you're targeting our net cash by FY '27. So from a company perspective, also you might be in a better position or a comfortable position in accelerating store additions here from next year onwards rather than middle of this year. That was the only thing, even if you achieve the metrics that you're targeting, that was the thought.

No, no. [Foreign Language] It's a good thought. I don't think even if you have to open 5 to 10 stores in Q4 of FY '27, that should be a problem for us. Okay, because there are cost reductions and productivity happening across the board in the organization. So if we have to invest also maybe offer 5 or 10 stores, with the investment which are there, Intune, it's a much lesser -- opening 10 Intune stores is equivalent to opening one Shoppers Stop. So I -- one more Shoppers Stop. So I don't see that as an issue, Sameer. I don't see that as the issue. Obviously, Q3 [Foreign Language], but we already have identified the spaces and all. We're just waiting for our internal numbers to be leaked before we move into the next one.

We have our next question from the line of Ankit Kedia from PhillipCapital.

Sir, my first question is on Beauty distribution business. This business is continuously growing at 40%, 50%. How much more investment is needed because our stand-alone entity is continuing to fund this business through equity. So what's the medium-term target in this business? Can we see margin expansion here, given that it's more of a B2B business, kind of profitability of the business includes somewhat we are seeing today?

So I'll take the second part of the question, which is on the okay, first, thanks. The growth has been quite robust. And if you think about it, the base was small. So I think initially, we achieved about 100% growth, but we are now settling at about 50%, 53%. It is a function of 2 sets. One is existing brands and one is new brands and existing brands are growing quite healthy as well, along with the new brands that's coming on board. On the financial side, margin expansion, I think we are at a relatively strong and good level. because we have a strong mix of organized and maybe a little bit unorganized channel. So I would say, yes, there could be, but it's not going to be significant. The margin element will play around there. We also have plans to invest around INR 40 crores in this year. And currently, we have healthy ROCs of about 16% to 17%. So as of now, I think all the moving pieces are factored, and we are looking quite comfortable in terms of continuing this type of growth or maybe even slightly more as we move into the festive period.

And from the medium term, if I have to ask what could be the target, say, for FY '29 for this business?

Well, you know what, I would leave it to your judgment basis what we have tried to achieve because there are multiple factors, so I just don't want to cloud your judgment or our judgment based on that. It's a very strong -- it's a business that has got very strong opportunities. But it's also dependent on the macro elements and also based on the industry movements. So I think we look to have high double-digit growth. But beyond that, I wouldn't want to make a statement at this stage.

So typically, when the brands on board, is there a time frame for these brands to be exclusive with Shoppers Stop or they can go with your competitors anytime the deals can be nullified for you? And how much is the lead in the sense if there are more brands which you are targeting? Typically, how much time frame does it take to close the deal with this brand to be exclusive distributor partnership for India?

So the exclusivity element is a conscious call. There are brand partners who are long-term, serious and wanting to build their brands at a very strong level in the country. And India has been globally a very, very important market. But unfortunately, the progression has been a little slow. So there is a -- it's a mixed bag. Some of the partners who have been here for a very long period have not seen really dramatic growth. But we believe that we are at that cusp of that next big wave. So -- and partners also believe so because if you look at many other markets, most of the markets are either stagnant or degrowing, China under pressure. So technically, globally, all the international and important brands, serious brands see India as the next big growth engine. Having said that, exclusivity is a norm that we prefer to get into because at the end of the day, there is so much of good work and strong work that needs to be done, and we can't have distraction. So we prefer and very, very rare, we take on exclusive distribution. In terms of the horizon, it's normally between 3 to 5 years because there are elements that need sustained investments. And that is the reason why we think that exclusive midterm period is very, very important. To your point, yes, on the landscape, there are other partners, other competitors who are also pitching and bidding for brands. But honestly, in the last 3 years, we have really managed to secure much more than what the competition has. Having said that, yes, we are quite cognizant of the landscape and the beauty as an industry is really getting quite interesting. So that will always have a healthy level of competition.

And Biju, any brands which you onboarded 3 years back, which have come for renegotiations and you have won them back or you have lose them? If you can just share some examples?

Well, I can only tell you that we have continued to have good success. In fact, brand partners who started with 1 or 2 brands have given us multiple more brands. At this point in time, it's looking to be quite strong and healthy. And as I said, fundamentally, we are -- as a group, we are always focused on something that is long-term sustainable, and we believe in long-term partnerships. And this is a reflection that we give and the comfort that we have given so far makes us look like a preferred partner for the long term.

My second question is for Kavi. Kavi, can you share some cost-saving measures for this year, which you are undertaken. One is the SS Beauty cost savings which could come in dot com, which could coming. At the store level, I see a lot of the retail area has actually increased versus the back-end area in some of the stores. So how does that help in profitability with higher retail space productivity improvement versus profitability?

Thanks, Ankit. This is the favorite topic, which we keep on discussing continuously within the system because for us space is the resource. On how we optimize it is something that's super important. So if I just go back 2 years back and when we started talking about private brands and the role which each of the categories play, we said, for us, the GMROF is the most important criteria. So we actually went through and we looked at all our portfolio and said, there are certain categories, certain brands which are not adding value to us, for example, menswear, private is something -- except Bandeya which did really well. We figured out that menswear something where we need to optimize. So we have actually converted a lot of those spaces into brands. In fact, I just hinted upon a partnership also we'll be announcing in the coming month or so with one of the leading fashion houses who will start working in our brand as a collab. So I think a lot of that is happening. And how it helps us is Ankit, it takes the productivity more or less the space -- the productivity for that space goes up by double. So I think that's something which really is working well. And we will start seeing the impact of all of those. All of these changes between H1 is what we are targeting to execute. So we will see the full benefit of this in. So I think that's something very, very important for us. The second thing what we are doing is we have also seen that around 35 or 40 stores, we had smaller home area, which was around 500 square feet, which were actually delivering 25% of the GMROF of the box of that particular store. So that's also some where we have actually converted those business to national brands. So we will see at least a doubling of the productivity, if not more. So all these things are happening as you speak. Finally, as a project what we have said is, we looked at our spaces and said, can we actually reduce the areas which are nonproductive and increase the spaces. So we believe that all these initiatives put together over the next year or so, have a potential to increase the like-for-like for 3% to 4%. So I think that is one thing. So it will -- on base case, it is accretive with that level. So that's one. Second is at the OpEx, obviously, there is a lot of work happening around that and taking care of that. Electricity, I think all our store now moving into IoT. So that is also working out for the new stores, which we are opening. We have actually moved into a journey where we are moving into for the first year, for first 6 to 12 months, we are focusing more on the rev share. So I think the productivity increases and the optimization is happening across the categories, and I foresee that H2 is something where we will -- it gives me a lot of confidence on the base level execution which is happening. Lastly, I think in terms of marketing, smarter use of CRM and smarter use of the personalization engine, and we see the result of that in the loyalty revenue increase. So I think that's working really well. And I mean there's other income, which is now growing. So we have seen around a 20% increase. And when I say other income, I'm talking about non-GAAP. We may use it in a stronger way. That particular income is also growing strongly. So I think a lot of initiatives on cost and other streams are happening. And especially as a team, we are very, very focused and excited about the space productivity project, and you will see the benefit of that in H2.

And any use of AI, which we are doing, which could actually aid productivity or profitability for us on the cost side?

So I mean, we spoke about -- I did speak about -- I touched upon the AI impact. I think the most important one, again, would be on the one which we are piloting on camera vision, because what it does is it tells us about the hot areas of the store, which part of the stores are doing well, where the conversions are lower. So the way we are doing a layouting and all. So a lot of work is happening on that piece, Ankit. And obviously, on back-end systems and processes, we are now using it across the board, whether it's in our cataloging, whether it's in the way we are treating our ads and all, it's working across the board.

Sure. And Kavi, last question. This time festives in quarter 3 versus quarter 2. Do you foresee a significant impact in some of the brand side in quarter 2, where the profitability could be impacted, footfalls are now shifted towards quarter 3 fully?

No. So there might be some impact of that in Q2 but between Q2 and Q3. So Ankit, the baseline, when we started this year, we were talking about a 5% for this year. I think the LFL growth. My sense is after the way that -- after Q1 has happened, that number should be around 6 and not lower. So even if there is some impact on Q2, between Q2 and Q3, we will do really well. That's the confidence.

We have next question from the line of Avinash Karumanchi from Motilal Oswal Financial Services.

Congrats on some good set of numbers. My question is regarding the gross margin. I mean the rest of the metrics are all tracking well and seeing the kind of improvement, but gross margin is the only one which is seeing a continuous decline. Is it because of the premium brands or an absolute higher rupee gross margin but a lower percentage point? Or how should we see this going forward?

Thanks, Avinash. Great question. I was waiting for this question to come. As we change our journey from -- towards prevention and as we think a stated strategy that we will work more and more on premium brands, nonapparel. So what will happen there is that the margins -- the gross margins not -- might not be as a percentage point, we've seen as a high, but the rupee flowing, which happens because the productivity is going higher is much higher for us. So you will -- there will always be an impact of mix, which will help us, as we spoke about and Ankit had spoken about the -- what are we doing around -- and I was answering about private brands and for example, private brand men's would have a higher margin upfront, but the productivity is much lower. So when you are making these changes of premiumizing and putting higher -- more higher throughput brands, the margins might not appear to be percentage-wise the same. But the flowing in terms of the growth. So for example, from a 4.7% full last year, Q1, we ended at 6%, and I believe that we should be at 6% for the entire year. So that piece is -- so the margin mix or the gross margin percentage is more than enough met by the productivity increase. And I think that's the journey in which we are on. So I would urge everybody to look at the overall flow of EBITDA rather than only focusing on this because we are doing a transition in the strategy. And that -- and it's not something we have just thought about it. It's something which you have been stating quarter-on-quarter in our call so this is the way we want to take things forward. I remember in my first call with the entire group, where we said private brands may -- there's a place where we'll premiumize on women and kids and men's is something where we don't see a future. So I think that's what we're executing. Similarly, we always said that there are 5 power categories, which is the basis of how we are going to premiumize and that's what we are doing. So while the percentages might be lower, the resultant throughputs are far higher, Avinash.

Okay, sir. Understood. And the other one is regarding the beauty distribution. If you think that like there is a continuous improvement in the productivity of POS. So it's just because you're adding a newer branch and like can you exactly what is the POS and what could be the potential that a POS can generate?

Sorry, what do you mean by POS, point of sales?

Point of sales, yes.

Okay. So basically, as you know, and as I said earlier, we have a certain set of brands that are moving into the Stage 2 of accelerated growth. We also have a set of brands that are new that is adding up to the current base. So what is also happening is that the POS is quite well diversified between multiple players in the beauty segment. So if I have to name a few, for example, Shoppers Stop, Lifestyle, et cetera, in the department store, Nykka Tera Sephora in the specialty retail store. And obviously, Myntra, Amazon, et cetera, Tata Cliq, et cetera, on the e-commerce plate. So I think what is helping is also with the marketing element kicking in because technically, when you have the brand, there is -- sometimes it's a relaunch, sometimes it's a new norm. Once the marketing money and marketing campaigns kick in, naturally, the goodness is seen on the productivity of the brand. And that is normally, let's say, between multiple quarters and depending on the new launches. So it's a combination of things. But for you to know, the existing brand business, which is already reaching maybe 24 months or 36 months of business, you're still growing at a healthy 35%. When the market is around the 20% or 22% at the best. So I think we are doing ahead of the market, which also means that the ranking of these brands in the country is growing up and the market share also growing on the market share, and we are also growing on the ranking. So it is also simple because we are reaching out to all the white spaces that exist because we are quite focused on the push on our support in terms of infrastructure, whether it's people, whether its CapEx, it is -- which is Tier 2, Tier 3 cities, et cetera. So I think we are starting to see a very, very strong and healthy growth for all these existing brands as well as the new brands.

We have our next question from the line of Rehan Saiyyed from Trinetra Asset Managers.