Detailed Narrative
Operating Environment and Strategic Response
Q2 FY26 was characterized by sluggish growth in discretionary categories and cautious urban consumers due to inflationary and geopolitical concerns. Despite these external challenges🌐, Shoppers Stop maintained its performance, attributing success to a focused premiumization strategy and key initiatives. The company also noted an overhaul of GST amendments, which is expected to enable long-term growth.
Strong Core Business Performance
The core business demonstrated robust growth, with overall sales rising 7% and departmental store like-for-likes achieving 9.4%, the highest in a decade. Customer entry increased by 6% like-for-like, and Average Transaction Value (ATV) was up 8%, driven by a 6% increase in Average Selling Price (ASP) and a 2% increase in Items Per Transaction (IPT). The premium product mix grew 16%, now constituting 69% of the total mix, reflecting the success of the premiumization strategy.
Profitability Turnaround and Margin Outlook
EBITDA for the core business grew by 42%, and Profit Before Tax (PBT) turned positive, moving from a loss of ₹12 crores to a profit of ₹9 crores, an improvement of ₹21 crores. Management expects to achieve a mid-single-digit or slightly better EBITDA margin for the core business for the full year FY26, attributing lower H1 margins to seasonality and anticipating stronger performance in the festive Q3.
Performance of Key Categories
The Beauty segment continued to outperform, growing 22%, with fragrances leading the charge. Watches and Handbags also recorded strong double-digit growth of 13% and 11% respectively. The First Citizen Club, with 13 million members, contributed a significant 83% to total sales, marking a 270 basis points increase in contribution.
New Business Investments and Distribution Growth
New ventures, INTUNE (value fashion) and ssbeauty.in (digital beauty platform), are in an investment phase and incurring planned losses due to front-loaded investments. However, INTUNE showed positive like-for-like growth in Q2, improving from negative growth in Q1. The Global SSBeauty (GSSB) distribution business delivered outstanding performance, growing an impressive 103% year-on-year, marking a significant milestone in the company's beauty strategy.
Store Expansion and INTUNE Breakeven Revision
New departmental store openings were delayed in Q2 but the company plans to open five stores in Q3 and four to five in Q4, targeting 9-10 net stores for the full year. For INTUNE, three stores opened in Q2, with five planned for Q3 and 8-10 for Q4. The breakeven target for INTUNE at the store level has been revised from FY26 to FY27, with management expecting to be very close to breakeven by then.
Q3 Outlook and Festive Season Momentum
Management anticipates double-digit growth momentum to continue in Q3, driven by early festive demand and strong performance in beauty and fashion categories. Early October results are described as 'fantastic' with 'incredible numbers of growth', indicating a strong start to the festive season, which is seen as a combination of improved market sentiment and the company's strategic initiatives.