Shoppers Stop Limited (SHOPERSTOP) Q2 FY24 Earnings Concall Transcript

Shoppers Stop Limited  ( NSE: SHOPERSTOP) Q2 FY24 Earnings Concall dated Oct. 19, 2023

Corporate Participants:

Mamta Samat — Investor Relations

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Devang Parikh — Business Head, Intune

Biju Kassim — President, Beauty

Analysts:

Ankit Kedia — PhillipCapital — Analyst

Sameer Gupta — India Infoline — Analyst

Gaurav Jogani — Axis Capital — Analyst

Varun Singh — ICICI Securities — Analyst

Aliasgar Shakir — Motilal Oswal — Analyst

Nilesh Saha — Bank Julius Baer — Analyst

Yash Bajaj — Lucky Investment Managers — Analyst

Rajiv Bharati — DAM Capital — Analyst

Manish Poddar — Invesco Asset Management — Analyst

Presentation:

Operator

You, ladies and gentlemen, good day and welcome to the Q2 FY ’24 Analyst Conference Call of Shoppers Stop Limited. [Operator Instructions]

I now hand the conference over to Ms. Mamta Samat from Perfect Relation. Thank you and over to you, ma’am.

Mamta Samat — Investor Relations

Thank you, Rico. good morning and thank you all for joining us on the Shoppers Stop Q2 FY ’24 earnings conference call. Today we have with us the senior management, represented by Mr. Kavindra Mishra, Customer Care Associate Executive Director and CEO Mr. Karunakaran Mohanasundaram, 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 and half yearly performance and to strategic questions only. Housekeeping questions will be dealt separately with the IR team.

I would now request Mr. Kavindra Mishra for the opening remarks. Thank you and over to you, sir.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Thank you, Mamta. Thank you, Rico. Good morning, friends. Thanks for joining us today to discuss Shoppers Stop financial results for our second quarter and first half results of this fiscal. This is my first call with all of you, after taking over as the ED and CEO of Shoppers Stop.

For most of us in the retail industry, it’s a dream to join Shoppers, and I am no exception. It’s a great company and it’s a fabulous brand. I can talk about this forever, but let me start the call post our publishing Q2 results last evening. Along with me I have Karuna who’s our CFO.

I will begin with Retail Market Update and then cover our quarter performance in detail, including the strategic pillars with broad outlook for Q3. The consumption slowdown in the discretionary category post Diwali last year continued in Q2 as well. Though we have seen some stages of recovery, some green shoots, particularly in September festive adjusted. Most of you are aware that we had Navratri or Pujo in Q2 last year and this year it’s in Q3. Secondly, the demand was also impacted by the customs, followed by people in large such as adhik maas, when customers defer large purchases.

Thirdly, the wedding season has shifted from Q2 to Q3 this year and subsequently in Q4 as well. Lastly, the demand environment remains weak across cities, towns and categories, unlike last quarters or earlier quarters, where it was more driven by rural or non-metro weakening of demand.

While these challenges continue in demand, our performance has been driven by engagement with loyal members, initiatives and swift responses to the market conditions, at the same time ensuring that we continue to drive strategic pillars for long term growth.

In such a challenging environment, we delivered sales of INR1,271 crores with flat growth. The performance was driven by non-apparels, particularly beauty. If we exclude the pujo impact, our growth would have been 3.5% over last year. Our gross margin declined 30 bps and we achieved an EBITDA of INR41 crores against INR75 crores last year during the same period.

Our gross margin and EBITDA declines are due to the following reasons; A, our performance on private brands last year was based on the pent up demand immediately post COVID. Given the slowness in the market, we liquidated part of our merchandise at a higher discount. As we are extremely conservative in our inventory provisioning, that has also impacted 60 basis points in margin. Our EBITDA was also impacted due to negative leverage due to overall muted sales, particularly in apparels.

In addition to above, we had a minor accident at Faridabad warehouse, which destroyed goods worth INR5 crores. We have lodged insurance claims and we are reasonably confident of recovering most of the amount from this loss. However, as a conservative accounting policy which we follow, and as per accounting standards, we have provided the entire amount. This has been included as an extraordinary expense. As I said above, we are reasonably confident of receiving this money this quarter, and will be included as extraordinary income.

Now I will talk about some of our KPIs. Our ATVs grew 5% versus last year with continued efforts on premiumization across the category and brands. We are witnessing a K shaped recovery. The increase in ATV can be attributed to higher price of premium categories in our basket and increasing HNI consumers appetite to purchase the BTL products, which is a part of our portfolio.

Our ASPs also grew by 5%, again due to premiumization in categories such as watches, where the ASP grew by 10% in Q2. We are also building newer categories like lab grown diamonds, which will further increase the ASP and cater to a newer and younger customer audience. With the increase in ASPs and ATV, we are delighted to share that our IPTs also grew by 1%.

Now let me speak about the operating costs. Our costs have increased by 9%, though on a like to like basis, the cost increases a mere 4%, which is rarely led by inflation. We have invested in people and technology and continue to invest — such as Jarvis, our analytical tool, which is helping us to analyze our customers sales strength and various other analytical tools. Jarvis recently has also won the Best Team in the World of Departmental Stores award in the recently conducted IGDS in Dubai.

In addition to this, other costs such as rent, electricity has also increased due to opening of new stores in Q3 and Q4. These are the investments which we have to make to deliver sustained growth.

Now let me speak about the opening — store openings. During the quarter we opened four large departmental stores, three beauty stores and four Intune stores. As always in the previous quarter there were some regulatory issues due to which we have to defer opening of three departmental stores. We are opening these stores before the end of this month in October.

As I mentioned, our KPIs have improved in the last 11 quarters and they continue to improve quarter-on-quarter. Our three C’s framework of consistent growth, customer centricity which is demonstrated by an all time high NPS score of 79, and capital allocation. And the three P’s customer centric strategy of personalization, premiumization and private label are effective and has helped us to drive these KPIs. We’ll continue to focus on these and execute them.

From the operations, I will now move to the performance of our strategic pillars. Our first strategic pillar is First Citizen. Our sustained success on KPIs is primarily due to our loyal members. Over the years, Shoppers Stop has been the benchmark for loyalty program. Our engagement with our loyal members has consistently yielded results and made the customer to visit our store again and again. During the quarter, the loyalty contribution was at circa 77%. In addition to this, the member shop has grown by 3%. Our repeat LTL members shopped in Black and Platinum grew by 31% and 5% respectively. The response rate for persona campaign, which is again based on the principle of personalization was 2.3x higher.

As an organization we make lot of effort for consumer engagement activities. We had circa 500 customer engagement activities across our stores and these engagements resulted in overall growth of 0.5%.

During the quarter, our new enrollments have also increased by 9%. Our contribution from the First Citizen Black card is at 12% and other KPIs are sustaining at a 2x of ATV and a black card customer is spending four times of that of a normal member.

We take great pride in customer journey for our loyal members. We firmly believe personalization is becoming more and more important in the coming times. Personalization improves the customer experience, as the interaction with the brand becomes more relevant and the messaging is also more meaningful.

I spoke about Jarvis. It’s a very strong internet tool, which is based on AI and ML and is helping us to throw insights into consumer behaviors. As a process, we will be increasingly using it to address business decisions for marketing which is selectively targeting the customer to the store selection criteria as well as to the brand selection in the categories which we are offering to an end consumer.

Now let me talk about private brands and then we’ll speak about Intune. Our private brand sale declined by 5% during the quarter, but the share of the business sustained at 14%. The private brand apparel share also continued at a number of 21%. Within the private brand portfolio, the Indian wear continues to have a strong growth trajectory with a 27% growth. The pujo performance in east has also been very positive, with a double digit growth which we are seeing. We are aware that the growth of private brands has been muted over the past quarters. However, we will continue to have an increasing focus on private brands, we will sharpen the consumer product offering and thereby ensure that the journey from label to brand is strengthened. We are also spending and investing on building campaigns around our private brands which is — you must have seen the [Indecipherable] Sanya campaign in the last quarter, and this quarter we are talking about the Kashish x Sania campaign.

From private brands, I will move to Intune, our recently launched fashion for all, small format store. You are aware we had initially opened two stores at the end of June, both in Hyderabad. We have now opened six stores, three in Hyderabad, one in Bangalore, one in Dombivli and one in Pune. I will briefly speak about Intune before I dwell into the performance and future plans.

Intune is a fashion for all brand aimed at providing the latest fashion at great quality at affordable prices. Our product is specifically curated for the young Indian family with varied fashion needs across men’s, women’s and kids. Our assortment starts as low as INR199 for adults and INR149 for kids, with more than two thirds of the in-store assortment under INR499 and everything under INR999 bucks. Approximately 40% of our In-store assortment not only has sharp value, but bundled offers. Things like buy two with an offer for the enterprise [Phonetic] to offer even greater value to our customers. We stand committed to offering the best product quality across all segments.

As I said above, we have opened six stores. The margins which we are achieving are above our expectations and we have made positive EBITDA at store level within the first four months of operation.

Our future plans are to add another 20, 25 stores by year end. I must say that from the time we opened Intune we have favorable response exceeding all expectations. As we begin this journey, I am fairly confident our team will course correct and make our Intune store a destination for customers.

Now let me talk about another growth pillar which is — strategic pillar which is beauty. Beauty continues to be the fastest growing category and contributed 16% to the overall sales with INR197 crores of sales, with an increase of 6% over last year. In addition to this, our distribution business through our subsidiary Global SS Beauty recorded INR23 crore sales during the quarter. We take pride in our customer engagement and this differentiates us from our peers. We had highest makeover engagement with approximately 240,000 customers during the quarter. We also conducted 128 master classes for them.

On the social media, we recently launched an Instagram, SS Beauty which has already achieved 52,000 followers. We had new campaigns in influencer marketing such as Monsoon Love, Parfum Global [Phonetic] and Showstoppers.

For the first time, we executed a campaign on Google to drive clicks and store visits for SS Beauty stores. We have also revamped SS Beauty Digital storefront on Google to improve the organic search. During the quarter, we launched 13 brands in beauty across personal care and fragrances. In addition to that, we also launched 200 SKUs in our private brand category Arcelia. With this, we have now 700 SKUs in our private brand beauty, Arcelia.

Our beauty distribution is progressing as per the plan. We launched Armani Perfume flagship brand from L’Oreal International Distribution at the end of September, and launched the prestigious makeup brand last couple of days back from Shiseido. As I said above, the recently launched beauty distribution business contributed to INR23 crore rupees worth of sales and has achieved positive EBITDA. We have Circa 20 retailers with 292 retail doors as at quarter end.

Omnichannel; our preference is to create a seamless end to end customer journey regardless of the touch points throughout their lifecycle. As we gain comprehensive understanding of the Omnichannel customer journey, it becomes easier to harmonize the marketing and customer service efforts across interaction channels, while keeping consumer needs in prime focus. We have been investing for this and will continue to invest in the future, as we believe omnichannel is the way going ahead.

From strategic pillars, I will move to capital expenditure, working capital and cash flow. We opened four large departmental stores, four Intune and three beauty doors, and renovated our department store at C-Scheme, Jaipur during the quarter. Our total investments during the quarter on capex and deposit for new stores was INR55 crores. The working capital for the quarter remained intact. Our net borrowings remained at circa INR100 crores with no further increase in borrowings. I am reasonably certain, given our performance, our borrowings would be minimal if not net negative by the end of third quarter.

During this fiscal year, we are planning to open 15 to 17 departmental stores, 20 plus stores of Intune and 15 plus stores of beauty, including the largest beauty store at Quest Mall. On the expansion for this fiscal and next two years, we have included a slide in the investor presentation. We are planning to invest in growth and will open 15 to 17 departmental stores, 60 plus Intune stores and 25 plus beauty stores every year for the next two years.

Outlook; overall, our continuous emphasis on business levers and strategic pillars of First Citizen loyalty customers, private brands, beauty and beauty distribution, store expansions, omnichannel presence are in place. Our success in the past were due to effective implementation of our strategic pillars. I once again emphasize that we will continue to drive the strategic pillars for future growth, as these are our recipes for success.

As I am concluding my speech, I conclude with a broad outlook for Q3 and Q4. Sales post pitrapaksha are above expectations and we believe customer sentiments are looking healthy. Our pujo performance has been very, very good. Our like to like stores growth is in high single digits with strong growth across all categories, and our overall growth is in mid double digits. Our ATV or basket size has increased by 8%. Our stores across the region, particularly in east, have recorded their all time high sales, including the performance as of last evening.

In addition to Pujo, we have Diwali the biggest Indian festival coming in the next one month. We are fairly confident we’ll sustain our performance during the season as well. We expect the festive and shopping moments to grow from here. We have launched four stores in the last quarter and we are planning to launch another six stores in this quarter. Of the above three we would be launching three — of the above, three would be launched by the end of this month. The success of the new store launches makes me further bullish about the way ahead.

We are very excited about the Intune. We have opened six stores and planning to open under 15 plus stores before this year end. The theme on premiumization continues. We have seen ATV increase of 5% and ASP of 5% increase and we firmly believe that this will increase and it will continue the trend during the festival and wedding season. Last but not the least, we expect a mid digit LFL growth this quarter and next.

As we have said in the past multiple times, any recession is temporary in India. I am fairly confident both Indian economy and retail will witness a good growth from now on.

With that optimism, I’ll end my speech and open the forum for questions. As I’m ending the speech, I have been joined by CEO of Beauty Biju Kassim and our Business Head for Class Section [Phonetic] Intune, namely Devang. While Biju will answer any questions on Beauty, Devang will answer the questions on Intune. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Ankit Kadia from PhillipCapital. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

Hi Kavi. Three questions from my front. First is on the capex for 2.1 million square feet, you have alluded INR300 crore capex every year. That’s around INR900 crore capex. Now, if I back calculate for the departmental store, it’s typically INR2300 per square feet. INRIntune is 1800, Beauty would be around INR10,000. Still, the number comes to around INR500 crores, INR550 crores. Even if I include security deposit of around INR30 crores, INR40 crores per year, what am I missing in the total capex, if I back calculate versus your assumption?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Ankit hi, Karuna here. Can you hear me?

Ankit Kedia — PhillipCapital — Analyst

Yes, Karuna.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Okay, let me give the breakup. You are right. We are planning to open 15 to 17 departmental stores. That should cost us between close to INR100 crores to INR105 crores depending upon the area. The capex per square feet will be INR2200 to INR2300. We are opening 16 beauty doors. Normally beauty doors, the capex are bit high between INR10,000 to INR12,000 per square feet and EBOs will be slightly higher than that. So the beauty capex would be anywhere between INR24 crores to INR30 crores.

Intune it’s a smaller amount. We are planning to open 60 stores next year. That should cost us between INR55 crores to INR60 crores. And renovation is around about INR40 crores, because every year we plan to renovate between seven to eight stores. So that should give us INR225 crores. Plus deposits, what we have to give to the landlords will be around about INR50 crores. That is INR275 crores. And we also want to keep some cushion for our other IP, distribution, logistics and everything. So that will be around about INR20 crores to INR23 crores. That’s the breakup of INR300 crores, Ankit.

Ankit Kedia — PhillipCapital — Analyst

Sure, that’s helpful. Karuna but given the cash flows we have been generating, our debt is increasing since last multiple quarters and with more risk on inventory, with Intune inventory on our books and even in departmental stores, we are taking some risk on inventory now. Do you think this capex, you will be able to fund internally or the debt will continue to remain at elevated levels?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Again, a great question. Let me answer in two phases. For this fiscal year, the debt has been INR100 crores on Q1 and with the Q2 performance we have retained at INR100 crores. I’m talking about the net debt. Kavi spoke briefly about that. In Q3, we should make it zero or we should be close to zero. That’s because the entire sales got shifted from Q2 to Q3. So I don’t expect the net debt to be anywhere between INR30 crores to INR40 crores by the end of this fiscal, if not negative. So that’s for this year.

To answer your next question, we do expect a decent EBITDA and you are aware our EBITDA is equal to the cash flow. Plus, on the non-business, like non-private, non-distribution business, we generally have a working capital negative. So with these two things we are reasonably confident again, we can fund the capex of INR300 crores.

Ankit Kedia — PhillipCapital — Analyst

Sure. My second question is regarding the private brands. We have seen some of the brands cut prices by high single digit to near double digit for autumn winter. We have been losing share because I believe Shoppers Stop private label, we haven’t cut prices. So going forward the price cut will come next season or this season. We have corrected the prices and we are looking to gain share in the festive season itself?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Okay, great question Ankit. So there are two parts of it. One, if you look at the entire private brands portfolio, we have four categories with us, which is men’s, western wear, women’s, Indian wear and kids. So if you look at the two parts of — so if you look at the Indian wear and the kids part of the business, that’s really firing. If you look at the menswear and the western wear women’s, those are the areas where we need some correction, both in terms of the product offering to the end consumer sharpening of the lines, and also the price correction in certain table products.

So the price correction as we speak is happening. We are looking at those corrections and through the form of certain consumer offers. I think the bigger ask for us and the bigger things which you are working on is to get the product right. Because I think at the end of the day the product sells more than the price equation. We have cracked that piece really well in case of Indian wear and in case of kids. And we are on this journey of correcting that for both men’s and Western women’s wear.

Ankit Kedia — PhillipCapital — Analyst

Sure. And my last question is on Intune. What is the fixed cost in this business? While it’s excellent at store level within a quarter, you are doing double digit margins, but how much is the corporate overhead of the fixed costs, and at what revenue or at what store number do you think this business can break even at the corporate level?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

So, again, Ankit a great question. See the margins — let me go one by one. The margins would be more or less at the company level, between 35% to 37%. That’s the margin we are expecting on the way forward. On the cost, I’m talking only about the store cost, it is between 23% to 25%. So that gives a decent margin of close to double digit on the store EBITDA level. As of now, the G&A costs or the FO costs for the Intune is relatively small. But as we plan to expand, we will have some costs, probably not more than two to three percentage. So we do expect the EBITDA to be anywhere between 7% to 9% in the first three years, Ankit.

Ankit Kedia — PhillipCapital — Analyst

Sure, that’s helpful Karuna. Thank you so much. I’ll come back in the queue.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Thanks a lot.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Thanks Ankit.

Operator

Thank you. Our next question is from the line of Sameer Gupta from India Infoline. Please go ahead.

Sameer Gupta — India Infoline — Analyst

Hi, sir. Thanks for taking my question. Just a clarification on the previous participant’s question about the capex. So this annual guidance of capex for INR300 crore, I believe it is for the FY ’25-’26 more so? Because for FY 24 last time we had given a guidance of around INR200 crores, and based on the numbers that you shared, it probably should be in that range. Would this understanding be correct?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

You are absolutely right, Sameer. For this fiscal we should spend anywhere between INR200 crores to INR225 crores. Not more than that. The guidance, what we have given is for next year, and that also includes deposits, which I clarified to Ankit.

Sameer Gupta — India Infoline — Analyst

Great, sir. That’s very helpful. Second question. Just trying to understand this business metrics on Intune that you have shared. First of all, thank you very much for sharing this, but just trying to understand more. So INR14,000 sales per square feet in Intune in just four months, is there some adjustment that you’re making or this is the pure play, INR14,000 per square foot that the Intune stores have generated in the first four months of operations?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

It’s a pure play of INR14,000. There are no adjustments here.

Sameer Gupta — India Infoline — Analyst

But sir, there is an initial ramp up that is assumed right? I mean, people will know that there is an Intune store opened. So the steady state could then this format run upwards of like INR30,000, 35,000. Is that not very high?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

No. Sameer, when we say INR14,000, INR14,000 is the annualized sales per square feet. Like, for example, on the first month, if it is one month, multiplied by 12, if it’s two months, multiply by six, like that. So the annualized sales per square feet will be close to INR14,000.

Sameer Gupta — India Infoline — Analyst

I understand that, sir. Fair enough. That’s great, then. And on the EBITDA margin also, this 10% is the pure play that you have generated in the first four months, and this is after the rental costs or pre IND-AS basis? Is that right?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

You’re absolutely right.

Sameer Gupta — India Infoline — Analyst

Wow. Okay. Fair enough. Sir, just a bookkeeping question. The like to like growth for this quarter? And also during the opening comments, the CEO mentioned that they’re guiding for a mid single digit LFL for this quarter. And also the pujo, festive period so far is at high single digits. So just wanted to understand, is it just conservative or it’s more of just trying to understand the thought process between this moderation?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

So the numbers which we shared about the Pujo and the kind of growth we are seeing is something which is in Pujo adjusted data right? Because the dates keep on changing. But the trend which we see for the quarter, we are very confident that we will have that mid-single digit performance. It’s a number which we are very confident about.

Sameer Gupta — India Infoline — Analyst

But, sir, if high single digit is pujo to pujo, and last year pujo was predominantly in 2Q, technically 3Q LFL should be more like double digits, right?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

No, that’s because Pujo is only for three weeks. And after that, there are other — we have almost 12, 13 weeks Sameer. So what we are seeing in the pujo — see, generally, we are very strong in east. Then there is also — we have December — there is an end of season sale. So all those things are there. So when Kavi gave a guidance, it includes for the quarter, not for the three weeks.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Not only for the festive period.

Sameer Gupta — India Infoline — Analyst

Got it, sir. And LTL for this quarter 2Q. I don’t think we have shared that?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

LTL for this quarter, as sales remained flat LTL is in negative with mid single digit negative, Sameer.

Sameer Gupta — India Infoline — Analyst

Got it, sir. That’s all from me I’ll come back in the queue if I have any follow ups. Thanks, sir.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Thank you.

Operator

Thank you our next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead

Gaurav Jogani — Axis Capital — Analyst

Thank you for taking my question, sir. Sir, my question is with regards to Intune. While there has been an aggressive expansion plan for Intune. If you can highlight what has given you the confidence over the last two quarters, to now aggressively take the store expansion to now 18 stores in H2 and then subsequently 60, 80 stores in the coming years. If you can share more highlights on the same.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Sure. We will ask Devang because he’s leading this entire piece. Devang, if you can, please [Speech Overlap].

Devang Parikh — Business Head, Intune

Sure, am I audible to everyone?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Yeah, you are audible. Go ahead.

Devang Parikh — Business Head, Intune

Okay. Good morning. I’m sorry, I didn’t catch your name because there was some glitch in the audio.

Gaurav Jogani — Axis Capital — Analyst

This is Gaurav sir, from Axis Capital.

Devang Parikh — Business Head, Intune

Yes. Okay, so there are two reasons for this confidence. First reason for the confidence is — I mean, three reasons. First number is the first four months sales have been above expectations that Kavi and Karuna have already said. One layer below the second reason for confidence is the kind of customer profile that we are getting. We shared — we stand for the young Indian family and we are getting that family to shop from us. There’s a lot of bill level analysis which is pointing to that target group being realized in actual transactions, which is giving us a confidence that we are on the right track product wise. This is also validated by a lot of very active customer listening that we’ve done in these four months and everywhere we are getting some very strong feedbacks on the product and the proposition that we’ve put. So that’s the second reason of confidence.

And the third reason of confidence is, to a large extent, if you see the mix right, the category mix again our strategic positioning is standing out. We would possibly be one of the best ones when it comes to kids, which is a good direction of being a family oriented fashion brand that’s standing out. So I think between good performances, the family customers coming to us and our stated dominance and kids realizing in numbers, I think all the pieces are falling in place. That is not to say that we don’t have anything to learn or we will not have any scope for improvement. That’s an ongoing endeavour, but it gives enough confidence for us to expand more rapidly than what we initially said we will.

I hope I have answered to some extent your question.

Gaurav Jogani — Axis Capital — Analyst

Yeah, sure. That’s helpful. Just one more follow up on this one. I mean, given that you’ve already given the guidance for opening 40 and 60 stores in the future, so are these stores already shortlisted? Are those areas already being scouted for, or it will still be in the process?

Devang Parikh — Business Head, Intune

As we stand right now, a lot of work has already happened, a lot of shortlisting has happened. I wouldn’t go to the extent of saying the next two years of stores are already shortlisted. That’s generally not the case. It’s an ongoing effort. But the ramp up has already happened. So I think when we say that we will open 20, 25 stores this financial year, I think most of that is already in place, and we will similarly be ahead of the game for next year also.

Gaurav Jogani — Axis Capital — Analyst

Sure, thank you. And one more question on Intune to the fact that, because it’s a separate vertical now altogether. So would we also be having a different team that will be looking into this? How will be the team structured her, and given that the scale is right now smaller, can we expect the margins to improve on the gross level, especially once the scale also increases?

Devang Parikh — Business Head, Intune

Okay, that’s two different questions. The first question I will partially answer, maybe Kavi can talk from an organizational point of view. Right now, the Intune team has dedicated representation for all customer facing functions. So buying, sourcing, merchandising, VM [Phonetic], marketing, the functions where the difference in identity needs to come out is all there and all other functions. We are obviously leveraging the organizational infrastructure that Shoppers Stop has. As we scale up, I think that’s a conversation that’s work in progress and Kavi would be able to shed more light on where we will head in 12 to 18 months from now. That’s the first part.

On the margin front, I think as we expand by the sheer increase in volumes, there will be some improvement on gross margins, for sure. Having said that, it’s a very-very competitive and crowded space where price sensitivity is very dynamic. So I don’t think at this point in time, anything over and above what Karuna quoted as margins, we can say for sure. The endeavor to deliver better margins as volumes increase will always be there. What happens in the end will be a function of how the market shapes.

Gaurav Jogani — Axis Capital — Analyst

Sure. Thank you for that. And just one clarification on the private brands piece. So the private brand sales number, is the INR8 crores sales of Intune also included in that, or that is excluding the Intune number?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

That is excluding the Intune number, Gaurav.

Gaurav Jogani — Axis Capital — Analyst

Okay, thank you so much for answering my question. That’s all from me. Thank you.

Operator

Thank you. Our next question is from the line of Varun Singh from ICICI securities. Please go ahead. Mr. Varun Singh, your line has been unmuted. You can go ahead and ask your question, sir.

Varun Singh — ICICI Securities — Analyst

Am I audible?

Operator

Yes, sir. Please go ahead.

Varun Singh — ICICI Securities — Analyst

Okay, sir. Thank you for the opportunity. My first question is on Intune. So I just wanted to understand that what’s the reasoning behind adding 60 stores and 80 stores in ’25 and ’26 and maybe not for example, 50 or 100 stores?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

I think it’s a function of two things, Varun. One is, what are the market opportunity available. We are also going by a cluster approach. We are looking at developing the Intune strategy based around key clusters and what are the right locations available. We have also mapped the competition and seen what kind of opportunities available. That number is a guidance number, depending upon how things are moving, if the things are ramping faster, if we hold on to the key KPIs which we are all targeting, I think we can even look at a higher number. But this is a guidance number which we are working on, and very confident of delivering these.

Varun Singh — ICICI Securities — Analyst

Okay. And secondly, I could see that 5,000 square feet is the store size which is mentioned in the PPT. So also wanted to understand that how you are thinking about the unit economics. You believe that this is an ideal size for Intune kind of a store or you think 5000 square feet to 8000 square feet or any other number is an ideal kind for — right size for the store?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Devang, you would like to take this question?

Devang Parikh — Business Head, Intune

Yes Kavi. So Varun, I think that’s a tricky question. I’ll share my view on this. I think the ideal size of a store for a brand is a dynamic metric. I think with the categories that we’ve introduced, we are primarily apparel focused, with just a dash of non-apparel that we are doing. I think in this current space 5000 square feet feels sufficient, and that’s why we are going with this. Obviously, as the brand evolves, if more categories come into play or if the demand for a certain category expands, I don’t think we are saying that we will never explore beyond 5000. It’s just that as of now, 5000 feels sufficient to deliver our business expectations.

Varun Singh — ICICI Securities — Analyst

Okay, but for most of the store, or like while we are scouting the real estate, they would be conscious about the 5000 square feet as a size. And of course I understand that depending upon availability, the store area keeps on changing. But otherwise we are more than happy if we get 5000 square feet compared to 8000 square feet space.

Devang Parikh — Business Head, Intune

Yes. No, I think I should have been clearer. Right now our guidance is 5000 square feet. That guidance will remain as a precondition to our property shortlisting. It will only change if our category play changes in the future, which will be a function of how our customers respond.

Varun Singh — ICICI Securities — Analyst

Understood, understood and in private labelm I understand Karuna has pointed out about men’s and western women wear which need some correction with regards to product and pricing, etc. But do we — my question is, sir like we have invested significant amount of time behind making a course correction in the private label category itself. And instead of putting even more effort and energy, would it not be prudent, for example, to maybe change our approach towards the segment itself or the category itself, and whatever is underperforming, it is best to switch it with prospective much more significantly outperforming categories itself instead of trying to solve for the same problem where it is becoming tougher to kind of get it right.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Okay. If you look at Shoppers Stop, it’s a house of brands. We have brands across category. We have good, better, best and that’s how we look at the customer, and we offer them a choice. In our mind, private brands have got a significant role to play. As I said, while in case of Indian wear and kits that is really firing all cylinders on the KPIs, it is the menswear and it’s the western women’s wear, where we need some work to be done. We know the markets. In fact menswear is the biggest market for any apparel category. So there is lot of potential there and the fixes which are — which we need to do is what we are aware of and which we can deliver as a team. So I think that’s something which is important.

The private band business also gives us differentiation. It gives us a margin edge, it’s accretive to profitability. So I think there are fundamental reasons why we have private brands in our portfolio. I don’t think we should be moving out of that zone. That is one also I think somewhere the base is that last year we grew by — in private brands by 50%. This is pre-COVID. So there is some work done. It’s a question of correcting the lines which we are very confident of doing.

Gaurav Jogani — Axis Capital — Analyst

Understood, that’s a fair point. And sir, last question if I may, coming back to Intune given that Zudio already has a significant headstart, now there are more than 350 stores and we are aiming 24 stores for example by the end of this financial year. So how are we ensuring that we are winning it in a right way, the segment itself? What in your rightful mind you think is our basic winning proposition? Is it restricted to product differentiation? Because of course pricing is a commodity everyone can match it. So I mean just wanted to listen to your thought or commentary, other than product differentiation and quality, I think you already mentioned about getting feedback of customers. Anything else you wish to call out compared to Zudio as a competition and the significant store presence that they have compared to ours? Or don’t you think we have joined this journey a little late? That’s my last question sir. Thank you very much.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Devang, you want to address this?

Devang Parikh — Business Head, Intune

Yes. So you mentioned about product differentiation. I think with Zudio, our fundamental differentiation is on the customer we speak to, which we will hold on to. I think between Zudio and Intune, we talk to very different profile of customers, that’s one. Two I think Kavi mentioned about the clustered approach of expansion for Intune. So while at a national level, you will find the difference of Zudio being a much largely distributed brand than Intune. Of course, Zudio is in its eighth year, we are in our first year. Having said that, the clusters where we are focusing, I think by the end of FY ’26, we’ll be comparable to Zudio. We may not match store basis, but we will be comparing. And I think that’s what we are focusing on. We want to build dominance versus the biggest player in the market, in the clusters where we prioritize.

Gaurav Jogani — Axis Capital — Analyst

No, on customer profile. I mean, what exactly is the difference between Zudio and ours?

Devang Parikh — Business Head, Intune

I would say the level of family. Also, we predominantly talk to the family, whereas Zudio, from the best understanding that we have, talks to the youngsters. So when you visit a store, you will realize everything from the tone of communication to the priority of category, the handwriting of products. Everything changes when you are talking to a 70 year old or you’re talking to a 25 year old parent of a young child. And I think that’s the fundamental difference between Zudio and Intune [Technical Issues].

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Gaurav, I think Diwan’s voice is not clear, because he’s [Technical Issues]. Just to give you the context, Gaurav, we don’t talk about the competition. Okay, second, last time also we clarified that to you. The market for the value segment is anywhere between INR130,000 crores to INR140,000 crores. The average market is just between 28% and 30%. And with the overall improving economy, that is what we are seeing, the expansion that’s happening. So whether — whoever is a competitor, whether it’s Zudio or anybody else, with the shift from the public from to the unorganized market to the organized market, we feel our expansion is completely justified.

Gaurav Jogani — Axis Capital — Analyst

Got it. That’s it from my side. Thank you very much, sir, and wish you all the best.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.

Aliasgar Shakir — Motilal Oswal — Analyst

Yeah, thank you so much for the opportunity. I think you did answer a lot of questions on Intune. I just wanted to understand more from a product supply chain point of view, just to give you a context, that this is a particular category where you spoke about Zudio, but that’s just one format which has done well, and there have been many other challenges which have failed or not really been able to ramp up. And what we gather is that the product supply chain is a key factor. So can you just share some insights in terms of what is the work we have done to gain USP, in terms of our product supply chain, how quickly we can turn around good value fashion products and anything related to that?

Devang Parikh — Business Head, Intune

Sure. I think when you mentioned supply chain, I am interpreting that more as a sourcing question than pure play supply chain, because in fashion, sourcing is the variable not so much supply chains.

I would put this in three parts, the first part is I think there is a lot of sourcing infrastructure in the form of relationship that already exists because Shoppers Stop has been a player in the segment for a very long time. So I think when Intune took off, Intune was a startup, but it was not really a startup. We were able to leverage Shoppers Stop’s heritage and we leveraged it to the full. So that’s point number one.

A few minutes back to someone else’s question I answered, saying that all the customer facing functions, including sourcing, are dedicated to Intune, which also means that collectively, the Intune team brings a lot of sourcing exposure over the last 10, 15 years. And that sourcing exposure brings understanding of which vendors work the best, which products need to be done, where relationships with those vendors. So I think the team experience is again something that we are leveraging very strongly over and above the surface of parentage [Phonetic] experience right. So that’s the second part to this question.

And the third part is, the visibility that we are getting, the support that we are getting from the management in the form of clarity of expansion is giving us a chance to plan ahead. We are already planning how we will source when we are 50 stores, how we will source when we are 100 stores, and building our vendor relationships accordingly. So I think coming from the house of Shoppers Stop, having a bunch of 10, 15 people who have worked in the fashion industry over the last decade or so, and having the foresight of a group backing you up to 100 stores and therefore knowing the kind of volume ramp up in the group, these are all three factors which are making us feel confident that sourcing will not be a challenge for us as we feel scale up.

Aliasgar Shakir — Motilal Oswal — Analyst

Understood. This is very helpful. Also, if you could just share some insights on the designing part, are you doing entirely in house? Are you taking the help of your vendors? How are you ensuring that the design capability will help you create exclusive products and things like that?

Devang Parikh — Business Head, Intune

Sure. So I think one part of that question is I think today no one in fashion design can afford to have a one track solution. So I think we will never be completely in house, we will never be completely vendor dependent. We have multiple sources ranging from designers in house to vendors who will do exclusive designs for us, to consultants who will work for us. And we’ll continue pursuing multiple design avenues so that the dependence is not on one factor alone. That’s point number one.

Point number two is how we will manage our design exclusivity is really not a question that can be theoretically answered. That’s a dynamic that — day in and day out. I think with every drop that we do, the idea is to push the boundaries on design. Some of that is evident in the kind of response that the customer has given, and a lot of it we will keep learning and improving. So I think the design exclusivity, you will see on floor. It’s difficult to theoretically explain how we will chase it. The tangible answer is we have multiple avenues of design creation which we will continue to build.

Aliasgar Shakir — Motilal Oswal — Analyst

Understood. And obviously also the frequency factor right, because in the value fashion, you’ll have to be very far more frequent in terms of new design drops?

Devang Parikh — Business Head, Intune

Yes, we will be very frequent.

Aliasgar Shakir — Motilal Oswal — Analyst

Got it. Second question is on your expansion. So you did answer in terms of Intune, how you are going to expand. But I’m just coming from the point that we have not done this kind of an expansion in our past history of maybe probably 8, 10 years. The kind of expansion we are thinking in Intune. So how are you preparing with your teams internally to ensure that you create a bandwidth to take care of that large expansion? And also if you could share in terms of tier, because of course, as Karuna indicated that you are working with 25% store opex, which of course will include rental. And I understand that rental will be very high in top tier cities. So how are you taking care of what geographies, what tier and what is the kind of focus area in terms of geography that we will operate in?

Devang Parikh — Business Head, Intune

Again, two part answer, the first part about how we are ramping up our internal capability to open these many stores. I think within the first four, six months, six to eight months of property shortlisting, we’ve had a sense of what is needed to be done differently for a small size store like Intune versus a department store. And accordingly, what are the gaps we have in our internal capability which are addressed. So as we stand over here and say that we will go to 25, 30 stores this year and add another 50 stores next year, that is on the back of actions already taken on the team front. That’s the first part of your answer.

The second part of your answer in terms of how will we manage rentals and peers. So the idea is like what Kavi said, a majority of our expansion will be in our focus clusters. Even within those focus clusters, we are not letting go of our frugality and we are putting in the extra effort to find properties which meet our commercial expectations. Having said that, we will experiment a little bit beyond the clusters, which is also where we will get our net rental savings, which will be beyond these top clusters.

Aliasgar Shakir — Motilal Oswal — Analyst

Okay. So will this be in both tier two, tier three markets than tier one markets?

Devang Parikh — Business Head, Intune

Yes, but that will be a small segment. So it will be like if 75% of our expansion will be in these clusters that we’ve identified for ourselves, the other 25% will be in markets where we will be a little more experimental. And by virtue of the markets being experimental, they’ll bring down the rental averages also.

Aliasgar Shakir — Motilal Oswal — Analyst

Got it. So when you mean 25%, you’re saying 25% will be in the — probably where basically the economics will have to be worked out?

Devang Parikh — Business Head, Intune

Yes. And these are all guidance numbers again as Kavi said, but the broader idea is this.

Aliasgar Shakir — Motilal Oswal — Analyst

Got it. Just last question is on a private label…

Operator

Mr. Aliasgar Shakir maybe request that you.

Aliasgar Shakir — Motilal Oswal — Analyst

Sure, I’ll come back in the queue.

Operator

Thank you sir. [Operator Instructions] Our next question is from the line of Nilesh Saha from Bank Julius Baer. Please go ahead.

Nilesh Saha — Bank Julius Baer — Analyst

Yeah, hi. Are you able to hear me?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Yes, Nilesh.

Nilesh Saha — Bank Julius Baer — Analyst

Okay, thanks a you know, thanks for really taking the time to explain in a fair amount of detail the various new initiatives and formats that you are working upon right, I think that I’ve actually seen Shoppers Stop brand over the years and I would say that it’s a very interesting point in time where you are foraying into multiple retail formats and trying to expand in many of them at the same time and in a short span of time.

I have two questions following up on this. First is for each of these formats, can you help me understand what is your pre-IND/AS EBITDA margin expectation and ROCE expectation? And second, how will you fund this expansion from a balance sheet point of view? And I’m referring to a slide in your presentation where you have shown the expansion pathway till ’26. So that’s the context in which I’m asking this. Thank you.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Hey, thanks a lot Nilesh. That’s a great question. In terms of EBITDA margins, I will not be able to give you the exact numbers, but all I can tell you is at the store level, they are between high single digit to double digit, excluding the ESOP. So all the store formats at a maturity level should give us anything between high single digits to double digits across, be it departmental store, be it beauty. And I just explained about the Intune also.

Okay, let me go to the second question. In terms of financing, again, we explained that at the beginning of — someone has asked us, we have internal accruals if you’ve seen the last year properties around about INR325 crores. Generally our departmental stores has a negative working capital. So with these two we can able to fund the entire capex plus deposits.

Nilesh Saha — Bank Julius Baer — Analyst

When you say your departmental stores have negative capital, you are referring to the Shoppers Stop format where you don’t necessarily have to own the inventory but you are increasingly moving to formats where you have to own the inventory. So this advantage you will not enjoy right?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

You’re absolutely right. Again, what we are also seeing is we have worked out the numbers. For Intune we don’t expect the working capital — net increase in working capital between INR15 crores and INR20 crores. And even for the beauty distribution, it’s 100% subsidiary, we expect somewhere closer to that increase in working capital. So considering all those things as of now, and we did the mathematics, we don’t foresee any large borrowings. We should be able to fund from internal approvals. And even if we have to borrow, it will be a very small amount Nilesh.

Nilesh Saha — Bank Julius Baer — Analyst

Yeah. If I may ask you one last follow up right? See, one thing that is slightly concerning to me, is the fact that you are also talking about expanding the traditional Shoppers Stop format right? And I would commend the team that you guys have done a fair bit of work in terms of not expanding in the past, trying to make sure that the stores turn around, right? Do you believe that you have reached a point that your turnaround is done and now you have a format proposition that can meet your margin expectation?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Nilesh I will take this question. So I think the answer to this also somewhere gets carried forward from what you had asked before, what Karuna was trying to answer. So let’s look at three formats. One is beauty, one is Intune and one is the Shoppers Stop Box, right. While there’s ROC and there are financial KPIs, I think what we have tried to do well, is to build expertise around each of these projects. We have Biju Kassim, who is an expert in beauty and he’s driving that part of the piece. We have Devang and we have spoken a lot about Intune. So he is a specialist in that area. And there’s a team which is already existing in the Shoppers Stop system, which is able to drive this business.

We have a model which works well for us in Shoppers Stop. As I mentioned to you, the Box has started performing well. We have seen consistent growth over a period. The KPIs are also showing a positive trend. So we are fairly confident that the model which we have for Shoppers works for Shoppers. The teams which are there, which are driving Intune and Beauty are separate teams built through separate experts and they are not getting confused with any other model.

Within the Box itself, we have Beauty, which plays an important part, non apps, which plays an important part, which have been seeing the growth over a period of time. So we are fairly confident around that. We have optimized our store size. We are in the process of optimizing our square foot capex as well. So whatever levers which we need to use to drive business, we have that with us.

Nilesh Saha — Bank Julius Baer — Analyst

Sorry, I hope you’ll pardon me if I probe a little further. When you say that the Shoppers Stop Box format works has turned around, can you point me to a couple of metrics which is giving you this confidence?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

See, previously our capex used to be between 2800 to 3000. Right now the capex has come down between 2200. In addition to that we used to have 40,000 square feet to 50,000 square feet stores, now we have restricted to 25,000 square feet to 30, square feet 000 stores whereas the sales per square feet has also increased from INR8000 to INR10,000 to INR12,000 to INR13,000 per square feet. So these are the two metrics.

In addition to that, we have also spoken about our increase in ATV, our increase in customer entry and all those parameters and plus the number of black card customers that has increased and resulting into further increase in ATV on the black card customers. So there are a number of metrics Nilesh, probably I can talk for a few minutes, saying that these are the metrics that has increased. But the most important thing is sales per square feet and the capex, which is the two important factors which resulted in a significant increase in the productivity.

Nilesh Saha — Bank Julius Baer — Analyst

Sure. Okay, thanks a lot, thank you and I wish you and the team all the very best in this new expansion mode. Thanks.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Thanks a lot Nilesh.

Operator

Thank you. Next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

Hi, just a question on Beauty business from my side. This quarter we have seen around INR22 crores of revenue from the beauty distribution business. It’s slightly lower than a INR200 crore guidance for the full year given the first half what we have performed. Is there any delay in business [Indecipherable] INR200 crore guidance for our beauty distribution business?

Biju Kassim — President, Beauty

Well, yes. So the context here is that, we have started the beauty business towards the beginning or end of last year. We are ramping it up and as you see, we are adding up more brands coming in. And when we look at the number of retailers that we deal with, that has also been going up along with the number of retail stores that we are present.

So going forward the ramp up is going to be more aggressive and we foresee that we should be around the expectation that we have given to you in the beginning of the year.

Ankit Kedia — PhillipCapital — Analyst

Biju, today we are at around 300 odd stores. What would be the TAM for this kind of a product where the average ASP would be upwards of INR3000 to INR5000? What is the retail outlet which you would be catering to today, apart from the onlines of Nykaa, Purple and others? But in offline distribution, what is the number, if you can just throw and how much network have we covered today?

Biju Kassim — President, Beauty

So in retail, particularly on the offline part, we have largely about five retailers. So to name them Shoppers Stop, Lifestyle, [Indecipherable], part of Nykaa, [Indecipherable] and so on and so forth. But therein again we have, what we call independent retailers, which is also bringing in significant amount of business. So between them, I think the current context is about 295 but I think we should be able to expand to about 450 by the end of the year.

Ankit Kedia — PhillipCapital — Analyst

Sure. And on SS Beauty, now it’s been two years, three years we have started. While in Intune, we saw the ramp up within two quarters and the stores are doing well. SS Beauty, it’s taken some time for us to come to that optimum level to see this expansion now. And some of our competitors are much faster in terms of the 1000 square feet odd store, given the capex is also lower. So why such a low number of store count in SS Beauty today, or you think we are yet to get the right unit economics in this business and then we will expand faster?

Biju Kassim — President, Beauty

Good question. So on SS Beauty, we have been trying out few models, because we have few models that are Estee Lauder dominant models, we have other models which we have got national brand models. But also we have been trying to get the right location and the right sizing. As we speak, we have commissioned a beautiful store in T2 Bangalore airport, with a 3,200 square feet space which is actually a good ambitious move, which will also be followed up by a 9,000 square feet large format store in Quest Mall in Calcutta.

We are experimenting with some of the models and we see that it is important to get the capex optimization and the productivity improvement to reach to a stage of further expanding rapidly. But this is in the pipeline. And also what has helped is that, there are many new brands, particularly in the prestige domain. Because we are, and we have been an expert in the prestige domain, we want to capitalize our competencies in the prestige domain with new many brands coming into that, we are seeing a good level of productivity improvement. But you will see going forward that the ramp up is going to come up.

Ankit Kedia — PhillipCapital — Analyst

And last question is on NARS, what could be the opportunity for this brand in India in terms of because we are doing that both for distribution and in the EBOS and shopping shop format in Shoppers Stop as well. Is it like a regular brand or do you see it disproportionately getting some share in the market, in the medium to long run?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Beauty, particularly makeup as a category has been growing up very fast and we have had the opportunity of having some traditionally very strong brands, but NARS is one of the most researched brand in the country by consumers. The initial indications are extremely healthy and positive, because it comes from the stable of Shiseido as a group but also they have been very clear about building the brand equity and this is a brand that will really work very strong, keeping the fundamentals in place.

Having said that the journey is going to be omni, and we will definitely expand rapidly going forward. But as you also know, we have been managing MAC and MAC has been one of the most successful brands in the beauty domain and it continues to be an aspirational brand. I think NARS is going to be, let’s say, another important brand in the makeup domain together. But yes, MAC and NARS cater to the prestige segment of the business, and that segment by itself is also growing dramatically. So, NARS has a distribution opportunity for us as global SS. We see that it will be between boutiques, it will be between shopping shop, and it will be between free sell. Free sell will also mean that we will be in SS beauty, we will be in Sephora, we will be in Tira, Nykaa and so on and so forth.

Ankit Kedia — PhillipCapital — Analyst

So if I look at your portfolio between perfumes, fragrance, makeup, skincare, right. We are very strong on the perfume domain, which is there where the repeat customer buying behavior is still lower. If I look at makeup and skincare, the repeat purchase behavior of the customer is much faster, right. So do you see a missing link in a portfolio out there? And how are we looking at brands in that space from a distribution side or in the SS beauty side?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Okay, so traditionally, perfumes has been a dominant player within the beauty category in India. And this is reconfirmed from the fact that at Shoppers — Beauty within Shoppers, close to 50% is coming in from fragrances. Now, within makeup, you obviously have prestige makeup, you have [Indecipherable] makeup, you have bridge makeup. We are consciously playing in the prestige category, and that’s where I think there is a lot of opportunity that will come through.

Yes, NARS has been the first pure play makeup brand, but we will soon have Armani Beauty, we will have Valentino Beauty and Prada Beauty, which will also be makeup driven. So we are working on it. And the fact of the matter, we are still a very young company given the context of distribution.

Now, coming to Skincare, we have a beautiful brand by name, Clara. It is one of the, I would say the most sought after brand globally. And we are also launching another brand by name, Fray, which is actually an Israeli skincare specialty brand, which is positioned for the young aspirational customer. So going forward, while we have the strength of fragrances, we’ll continue to build and get more beautiful brands in the makeup and skincare domain also.

Operator

Thank you. Sorry to interrupt. Mr. Ankit Kedia, may we request you to rejoin the question queue for follow up questions, as there are several participants waiting for their turn. [Operator Instructions] Our next question is from the line of Yash Bajaj from Lucky Investment Managers. Please go ahead.

Yash Bajaj — Lucky Investment Managers — Analyst

Hi, thanks for the opportunity and congratulations, team, on an impressive performance on Intune. All my questions on Intune have been answered. Just one question, like we have mentioned, that the INR14,000 square feet kind of revenue per square feet we are expecting out of this segment, do we see this going upwards as we reach that scale of, suppose, 150 stores? That’s my first question.

Devang Parikh — Business Head, Intune

[Speech Overlap]. I think this should go up, right? This should go up. This is the number that we’ve seen in the first few stores, and possibly not the most — the biggest peak of the year, seasonally speaking. So I think as we listen to customers and become better, as we get into the parts of the year which are naturally more demand generating, and as we create the halo effect of a cluster where you have multiple stores in a city, and therefore a customer has multiple touchpoints for building confidence in Intune. I think this number should definitely go up.

Yash Bajaj — Lucky Investment Managers — Analyst

Got it. And just on the previous point that how are we leveraging technology when it comes to the supply chain part of Intune, considering that it’s a high inventory turns business? So, versus our traditional model, what are we doing different from a technology point of view?

Devang Parikh — Business Head, Intune

Again, when you say supply chain, are you referring to sourcing or pure play supply chain as in logistics and DC [Phonetic]?

Yash Bajaj — Lucky Investment Managers — Analyst

I would say procurement and the inventory which is at your existing store and how do you keep track of that?

Devang Parikh — Business Head, Intune

Sorry, please repeat.

Yash Bajaj — Lucky Investment Managers — Analyst

I was just saying that in terms of procurement at the existing store and how do you track which products are doing well and should do well?

Devang Parikh — Business Head, Intune

Sure. So I think let me tackle procurement. I think on the procurement front, a lot of efficiencies will come on the back of processes and planning — more processes and planning than technology. We have a team which keeps us abreast of what is a new technology and how we can leverage and pilot it. But prima facie procurement efficiencies will be through processes and prior planning and not so much technologies.

As far as inventory optimization in the store is concerned, we have all the building blocks in place. We use a very sophisticated automated replenishment mechanism. We have all the supply chain efficiencies in place in the sense that frequent deliveries to the store to ensure that the inventory is centralized and available for whichever store needs it, all of those things are in place.

I think as we get more and more sales data, what Kavi and team mentioned about Jarvis and its capability of predicting what will sell more where, that will also help us drive inventory optimization at store level. Shoppers Stop is already reaping its benefits, and Intune will soon follow. Once we have some credible mass of data.

So I think technology will play a big role amidst existing infrastructure itself on Intune inventory optimization, procurement, maybe not so much.

Yash Bajaj — Lucky Investment Managers — Analyst

Okay, got it. And just one last question. I think in the opening remarks, we mentioned about lab grown diamond jewelry. So just wanted to know what is the kind of response we are seeing from customers, and your general thoughts on introducing this category?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

So we have introduced two brands within that. One is Fiona, other is Limelight. We did it close to six to seven weeks back. The initial response has been very encouraging. The idea is that there are newer categories which are coming into the play. Over a period of time we also want to showcase Shoppers as a wedding destination or as a gifting destination. And we believe that this is a category which we can play with and start with. Initially I think many years back when we started with Gini, there was an amazing success which we had and we want to replicate that and become the category owners for this. So it’s a new thought. The initial response has been quite good. We have launched in seven stores and we see this becoming stronger and stronger over a period of time.

Yash Bajaj — Lucky Investment Managers — Analyst

Got it. And what’s the price point on this?

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

The price points are typically around INR30,000 to INR40,000.

Yash Bajaj — Lucky Investment Managers — Analyst

Okay, thank you so much.

Operator

Thank you. Ladies and gentlemen, going forward, each participant will be allowed to ask one question only. Thank you. Our next question is from the line of Rajiv B from DAM Capital. Please go ahead.

Rajiv Bharati — DAM Capital — Analyst

Yeah, good afternoon, sir. Thanks for the opportunity. So my question is on the inventory bit per store on the Intune side/ You mentioned that the working capital is close to INR15, INR20 crores for the 60 stores, right? That’s like INR30 lakhs per store. How much is the inventory per store here?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Sorry?

Rajiv Bharati — DAM Capital — Analyst

On the Intune side, usually what is the inventory?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

See the inventory at the store level, we don’t expect anything between eight to 10 weeks. And it’s a high turn inventory so we don’t expect anything between eight to 10 weeks at the store level.

Rajiv Bharati — DAM Capital — Analyst

And the supporting inventory at the warehouse for this would be a similar order?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Will be about another four to five weeks max. I’m talking about the initial stages. As we mature, it will be — overall we should be able to manage 12 weeks of inventory for both stores at the DC level.

Operator

Thank you. We move to the next question. Our next question is from the line of Manish Poddar from Invesco Asset Management. Please go ahead.

Manish Poddar — Invesco Asset Management — Analyst

Yeah, hi, I just have two questions. I’ll take them together. So the first one is you mentioned about SSG being mid single digit in the coming quarter. If what you’ve seen on the pricing growth and pujo shifting, is this number conservative? That’s the first one. And the second was in term of Intune, so what do we do of the inventory, let’s say, which is slow moving? Thanks.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Okay, let me answer the first point. I think what numbers we are putting here is what we are fairly confident about. As I think I have mentioned before, we mentioned about pujo, which is a specific three weeks activity for one market which is east. As we normalize over the festive season of till November and then there are weddings later on and then the USS impact so it can go up or down. We are very sure about this 5% or 7% or the mid level numbers which you are talking about. So I don’t think it’s conservative. It’s a good number which we will deliver on.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

On Intune Devang, the question was is there any slow pieces?

Devang Parikh — Business Head, Intune

I think any fashion business will have that sale that will have to be liquidated. The margin estimates that Karuna gave Manish, they were assuming liquidation impact. So that’s point number one, right?

Point number two is the first four months of sell through trends are telling us that we are doing better than what we had provided for. So I think between these two things put together, there will definitely be some slow moving inventory or leftover, given that it’s the nature of the business. But it will all fit within the estimates that we’ve given to you at a broad level.

Operator

Thank you. We move to the next question. Our next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.

Gaurav Jogani — Axis Capital — Analyst

Thank you for taking my question again. Sir given the — in light of the performance of the H1, we have always been guiding that the margins to be — moving more towards the high single digit. So what possibly could be the margin expectation for ’24? And given that we are expecting the recovery in ’25, so the guidance that we used to share earlier, that remains?

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Our guidance what we have given earlier remains Gaurav. We said for ’25 it should be still in the high single digits and for ’26, we should be — for the entire year between high single digits and low double digits. So that still remains, Gaurav.

Operator

Thank you. We move to the next question. Our next question is from the line of Aliasgar Shakir from MotilalOswal. Please go ahead.

Aliasgar Shakir — Motilal Oswal — Analyst

Yeah, thanks for the follow up opportunity. So my question is on your private label. So Intune is moving away from our traditional third party products, selling to more own brand private label. So just want to understand, how will you balance growth with inventory risk and provisioning policies, and should this rub on a private level business in Shoppers Stop also, which has been at about 14%, 15% for a long time? Do you think that could also go up? So if you could just share your insights on this.

And also last follow up is on an average typically a store would take give or take about INR1 crore, INR1.5 crore if I assume about three months average working capital inventory. So the capex you gave INR300 crore which includes INR50 crores, INR60 crores of Intune. Should we build another INR100 crores additional for working capital in Intune? Thank you so much.

Karunakaran Mohanasundaram — Customer Care Associate, Chief Financial Officer

Ali. I will take the last one. The rest of the things would be answered by Kavi and Devang. See, we have already clarified, the inventory for Intune incremental will not be more than INR15 crores to 20 crores. It can’t be — INR100 crores is too high a number. So that’s not…

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

And Ali to the point. I think these two are completely different businesses. These are a different set of customers. We don’t want to mix the shoppers or private label business and the Intune business. We want to give a lot of wings to the Intune team to deliver that. They have got a task at their hands. We want to keep these two things very separate.

Devang Parikh — Business Head, Intune

On the Intune front, what you asked, I think I already answered the previous person that the expected liquidation margin hit is provided for. So the margin estimates that Karuna gave at some point in the conversation, they are assuming the liquidation and the impact of killing the leftover ones. That’s point number one.

Point number two on how we will manage as we go forward, I think I answered to someone else’s question that our sourcing efficiencies will be more on prior planning and leveraging the increased volume. That answers this question also. As we increase scale, our buying will become more and more sharp. It will become more and more closer to trades. So we will not place bets long in advance or we will not buy too much. We are okay with the concept of celebrating a stock out and then replenishing it with something else. That’s going to be the broader principle. That’s what every fast fashion player who’s been successful has worked inventory on. And that’s going to be our approach also.

Operator

Thank you, sir. That was the last question of our question answer session. I would now like to hand the conference over to the management for closing comments.

Kavindra Mishra — Customer Care Associate,Executive Director and Chief Executive Officer

Thank you, Rico. In the end, I would like to wish a very happy pujo and happy Diwali to each one of us. Thank you for taking time out, for engaging with us, and I hope that we will keep on giving you the clarity on the questions which you have and keep on driving on performances, which we are committing as a team. Thank you.

Operator

[Operator Closing Remarks]