Shoppers Stop Limited (SHOPERSTOP) Q2 2025 Earnings Call Transcript

Shoppers Stop Limited (NSE: SHOPERSTOP) Q2 2025 Earnings Call dated Oct. 23, 2024

Corporate Participants:

Mamta Samat — Investor Relations

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

Biju Kassim — Customer Care Associate and Chief Executive Officer, Beauty

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Analysts:

Resham Jain — Analyst

Tejas Shah — Analyst

Sameer Gupta — Analyst

Gaurav Jogani — Analyst

Devanshu Bansal — Analyst

Ankit Kedia — Analyst

Gaurav Gandhi — Analyst

Shalini Gupta — Analyst

Aditya Desara — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shoppers Stop Limited Q2 FY ’25 Earnings Conference Call. [Operator Instructions]

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

Mamta Samat — Investor Relations

Thank you, Sejal. Good morning, and thank you all for joining us on the Shoppers Stop Q2 FY ’25 earnings conference call.

Today, we have with us the senior management represented by Mr. Kavindra Mishra, Customer Care Associate, Managing 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 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.

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

Thank you, Sejal, and thank you, Mamta. Good morning, everyone, and thank you for joining the conference call of Shoppers Stop Limited today. This morning, we will cover the results of Q2 and first half of the financial year FY ’25.

On the call with me, I have Karuna, our CFO; Jaiprakash, who is our FP&A lead; and Rohit, who is our IR lead. We also have with us Biju, who is our Beauty CEO, who will come at a later stage to answer any specific questions on beauty. As always, I will begin with an update on the operating context, post which I will cover the overview of the performance in detail for the second quarter, KPIs and our strategic pillars. Thereafter, we’ll open for Q&A session. I’m sure you must have read the investor presentation, which is available on our website and it has been sent to both the stock exchanges.

Let me first start with an overview of the operating context for this quarter. The external factors weren’t conducive in the first two months. We had an early USS [Phonetic] impact in July sales. And in addition to that, we had excess rains disrupting the consumer traffic. Demand remained muted in July and largely in August. The discretionary spending was lower besides fewer wedding days this year. This impacted our sales in July, wherein we declined by 7% in August, we had a lower growth of 5%. However, we have begun seeing green shoots on September, our sales increased by 12%, particularly in East, which grew by 9% like for like.

You are aware Q2 is conventionally a slack season. With two out of three months muted sales, new businesses and stores having a longer gestation period, we had a lower EBITDA non-GAAP for this quarter. However, as I said just now, we have been seeing a lot of positives from September to as of now, which I will cover in detail in my outlook.

Let me cover this quarter’s performance with key KPI metrices. Our customer entry in Q2 declined by 8% largely in July and August with sequential improvement in September. Our beauty business continues to outgrow with all the KPIs, not only outperforming within shoppers but within industry as well. Beauty continues to add significant profits in our bottom line. We opened 25 stores, including 19 Intune stores. We opened our 50th Intune store on October 1. On the departmental stores, it’s a mix of cautious optimism from our end and regulatory delays, which may differ some of the large departmental store opening from this year to next. However, we remain committed in opening the stores to enlarge our footprint.

Our efforts to premiumize the departmental stores have begun delivering consistent results for the last one year. We are in a premiumization [Phonetic] driven by demographic shifts, digital innovation and economic changes. These factors have reshaped consumer perceptions across India. The rise in premiumization is evident. I have said before several times that the future optimization in India appears bright. As consumer incomes rise and aspirations evolve, the demand for premium products and experiences will persist. We at Shoppers understand the consumers’ changing needs and offer innovative premium products that cater to their aspirations.

We recently renovated our Malad store and opened it a month back. In the investor presentation, we have uploaded there is a — there is a web link and you virtually — you can — and you can virtually view the store and the offerings. In addition to that, I invite everyone, particularly who is based at Bombay to visit our Malad store and witness the change in our store look and feel and consequent increase in customer entry. We are still renovating the ground floor and that should be operation in the month from now. We are experiencing a 70% increase in productivity in the current format.

In addition to this, we launched premium watches such as Titan Limited Edition, Zegna, Swarovski, Cerruti, Aldo handbags, D&G, Jimmy Choo, Versace and Sunglasses, Ecco Footwear and lastly apparel, the most premium brand Armani Exchange, True Religion, iconic GANT, etc.

With these premium brands, our sale on premium brands has increased from 60% to 64%. Our premium categories grew by 6% like-for-like in quarter two. We’ll continue to launch aspirational brands to increase the P&Ls within our store and not only to sustain it, but become a leading premium departmental store. In my last speech, I said that our strategies are giving us desired results. We were expecting the market to be favorable. I can confidently say now external factors are improving and it gives us a path to recovery.

Here are the snippets on our KPI. First, our Q2 sales were at INR1,296 crores with a growth of 2%. I only informed you that July and August were not favorable, but September we grew by 12% with 9% like-for-like. Our Poojo sales in East had an exceptional performance with a like-for-like growth of 9%, which led to overall growth. Particularly on categories like watches, beauty and home, we outperformed other categories with high single-digit growth.

During the quarter, our gross margins are largely flat compared to FY ’24. On some of the other KPIs such as ASP, IPT and ATV, they grew by 7%, 2% and 9% respectively. As you observe, our ATV is on a constant increase. In the last three years, IPT [Phonetic] has cumulatively increased by circa 20%.

Our EBITDA was impacted by fixed cost in new business and incremental investments which we have made in technology. I have briefly spoken about cost reduction in my last speech, our like-to-like store costs absolutely remained constant despite large inflation in every vertical. During the quarter, we opened 25 new stores comprising 19 Intune, five HomeStops and one departmental store.

From operations now, I will move to the performance of our strategic pillars. First Citizen, I’m extremely happy to say that our loyalty contribution to sales has been the highest ever in this quarter at 81%, an increase of 240 bps against last year and sequentially it increased by 100 bps. Our Repeat sales was also at 70% — 67%, indicating strong bond with our consumers. Our first citizen customer base has now close to 11 million. Our premium Black Card customers contributed to 14% of sales mix and they grew by 17%.

We had number of campaigns during this quarter, including the Poojo campaign in East. Specifically, our conversion rate of the AI personalized message and WhatsApp campaign were much higher and has yielded positive results.

Now let me talk about private brands in Intune. I will briefly speak about private brands. Private brands is turning around with all non-performance across all categories. And as we had discussed in the last quarter, I think we are on this journey of making them really, really strong. We had a healthy volume growth of 6% from Autumn-Winter ’24 merchandise. In addition to that, apparel men’s and women’s Western grew by 24%, Kashish by 21% and Bandeya by 90% for Autumn-Winter ’24 season.

Overall, the private band volume in apparel grew by 9% in September. Lower markdowns with a higher full-price sale resulting in margin expansion of 6% in private brand apparels. This has helped us to reduce inventory by circa INR40 crores versus last year. Our Autumn-Winter ’24 had a great beginning with improved offerings at competitive prices. Our new merchandise planning system, [Indecipherable] is operational now and has begun to yield positive results.

From private brands, I will move to Intune. I’m extremely happy to inform you that we opened 19 stores during the quarter, taking the total stores to 50, the last store opened which was — which opened was on 1st October 2024. We had impact on sales with competitors offering USS in July, which we deferred to August. Our September and October as of now seems to be on track. As I said before, we should open 100th store this fiscal in Intune.

Now let me talk about beauty. Our beauty revenue increased by 10% with a quarterly sales of INR218 crores. If we include a 100% subsidiary Global SS Beauty, then our consolidated sales in beauty was at INR257 crores with a growth of 19%. We had 11% ASP growth leading to premiumization journey. Our fragrances grew by 17%, clocking highest quarter turnover. Our beauty contribution excluding the subsidiary is at 17%. Our HNI event, beauty, sorry, events primarily for HNI had increased participation. Overall, our campaigns such as [Indecipherable] and many brand campaigns help us not only to increase the revenue, but overall customer base.

We launched many new brands such as Mars Forever52, INGLOT, Pantheon Roma, Oman Luxury and on skincare [Indecipherable] Unique. Our 100% subsidiary Global SS Beauty business delivered INR52 crores sales with a growth of 130%. We have launched Reebok, Pepe Jeans, FCB, Women’s Secret and Ajmal. HomeStop. We opened five stores and generated our SIF both at Malad and in Vashi with an improved store outlook, an increase in Black Card contribution, we had a very healthy quarter-on-quarter growth of 18% in home.

Now let me talk about departmental stores and national brands. At the beginning of the speech, I discussed premiumness on our departmental store. Our departmental stores generate largest revenue and profits. Akin to Malad, we plan to upgrade a few of our top-performing stores in international look to elevate our customer experience. During the first six months, we also have decided to exit some of our low productivity stores. We will close circa five to six stores during the year.

With festive season in the offering, our elevated premiumness, state-of-art customer journey, we are confident that shoppers from departmental stores should be a congestration for our premium customers. Our departmental stores had a strong like-for-like growth in September of 9% across all the categories. During the quarter, our marketing department launched many campaigns such as Gifts of Love, Poojo and for the first time launched a fashion show just ahead of festive in few cities to display our impressive and grand range of products. We are launching India Weds

With Shoppers Stop, a marquee event in November. The objective is to establish our stores as a preferred wedding shopping destination.

Let me talk about capex and working capital. As I said above, we added 25 stores across all formats during the quarter. We had spent INR43 crores on capex for additions and renovations. Our working capital has reduced by INR30 crores with significant reduction in private inventory of INR40 crores.

Finally, the outlook. First of all, our premiumization drive will continue. With 4.8 million weddings to happen in second half, we are confident our stores should be one of the key destination for our consumers. September was good and as I speak to you, October is turning to be better than September. We expect a mid-tier — mid-teen growth in the month of October. I’m confident that the muted performance in the first five months is slowly leaning away and we should be able to grow by mid-single digits like-for-like in the next six months.

We’ll continue to invest in capital. We should open circa 60 to 65 stores across all the formats in the next six months. At the operational level, we will also invest in marketing through our campaigns to drive both our short and long-term strategic priorities and build Shoppers Stop as a destination. We are continuously rationalizing the cost. As you observe, sequentially operational cost for Q2 was lower than Q1, though we opened 25 stores during the quarter.

With this, I would like to wish everybody a very, very Happy Diwali and a great Samvat 2081. We can take the questions now. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Resham Jain from DSP Asset Managers. Please go ahead.

Resham Jain

Yeah, Resham Jain here from DSP. So I have three questions. First of all, in the presentation, I couldn’t see the revenue from the online or the omnichannel business. I don’t know till last year we used to give this number, but I couldn’t see that in the presentation. Is there any specific reason why it is not given?

Kavindra Mishra

Resham, nothing of that sort Resham. The net revenue, I mean net of GST is around about INR30 crores and including GST, it’s around about INR34 crores. I mean, there is no specific reason we have — I mean we thought with the other verticals growing and that’s the reason we have not included. That’s it, nothing. I mean there is no specific reason why we have not included, Resham.

Resham Jain

I specifically asked this because over the last five, six years, I think we have spent a lot of money on omnichannel on online. And I couldn’t see in the whole presentation in KPI that is being talked about. So has there been any change in priorities over here? Because if I look at most of the retailers, the — probably the amount of money we have spent on the digital and on the technology side has been quite high. But from the — from the numbers perspective, we are still not able to see it flowing through.

Kavindra Mishra

Resham, Kavi here. So in our — in our vision and the way we want to drive the organization, I think the number one priority is to be an omnichannel retailer. I think that’s something which as a strategy, we have put it, as you rightly said, five or six quarters back or five or six years back and we continue to drive it. Right now as we speak and I think I mentioned it in the last investor deck or investor call that we are in the process of upgrading our platforms and getting into the new version of both SS Beauty, which has just become stabilized. And then we will also have innovated platform for ss.com.

So for the beauty part of it, I think we have not only upgraded the platform, but we have also onboarded talent who will focus specifically on growing the beauty online and omnichannel business. So I think that’s a clear thing both from platform and human resources as well. In case of ss.com, the new app or the version 2.0, which is on a headless architecture should be up and so it’s already up and live. We are right now in a testing phase. And I think by the end of this month, we should be able to roll it out for the entire 100% of our consumer base. The day that happens, we will start seeing a lot of positive numbers around that piece as well. So the investments have been made. I think in the last stage of rolling out the app after ensuring that any errors or any ticks are taken care of. So the priority remains the same, Resham. There is no dilution in that.

Resham Jain

Okay. The second one is on Intune and I presume that Intune in its initial years would have an impact on the overall consolidated margins. So let’s say, if we just look at FY ’25, ’26, next one, two years, how much margin impact Intune could have on the overall margin for the company because earlier we used to mention 7% to 8%, 9% kind of range of EBITDA margin pre-IndAS. With Intune coming in, how is your overall margin trajectory looking like?

Kavindra Mishra

The overall margins — EBITDA level Resham for the company, it should — we are still giving more or less the same guidance. Specifically on Intune, we do expect the store level it should be positive at the end of this fiscal while it may not be able to contribute the same level of the overall company, it should still contribute a mid-single digit in the next two years, Resham. So it should not — see, please understand from the overall context, Intune is still probably 6% or 7% this year and it will go slightly higher when it will go to the double digits next year. So in the overall context, it should not impact though the EBITDA margin of Intune will be lower.

Resham Jain

Okay, understood. And the last one is on the beauty business. I think you have done quite a good work there. How are you thinking about, let’s say, next three years, five years kind of plan here in the overall beauty business? What will be the levers of growth and what are your overall mid-term plans in the beauty business?

Biju Kassim

Yeah. Hi, this is Biju here. On the beauty part of it, clearly, we are confident that we will continue the growth trajectory. And particularly in the near-term we will look forward to consolidating the good progress that we have achieved. And as I always say, we are quite focused on three levers. One is the expression, one is the engagement and one is the education.

And also to the benefit, the distribution business is also really scaling up well. Quite some progresses that we have achieved with the brands that we have brought on board. Some good work that has happened in the short-term. But again, this is a good testimony for the — for the important things to come. More importantly, we are just launching our private label, 100% private label by the name Geologie and this is another important lever that we thought along with e-com, Kavi spoke about the e-com piece, should help us really accelerate the momentum that we have achieved in the beauty space for the moment.

Resham Jain

So from growth perspective, any numbers which you can give, will it grow at any specific rate?

Biju Kassim

I can only tell you that it should get better around the same or better. That’s the view I can give you.

Resham Jain

Okay. Thank you. All the best. Thanks.

Kavindra Mishra

Thanks, Resham. Thank you.

Operator

Thank you. The next question is from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go ahead.

Tejas Shah

Hi, thanks for the opportunity. Couple of questions. Could you please share some initial insights or operational data from Intune? And additionally, which key operational parameters are you tracking internally to monitor the format’s acceptance and whether the product market fit has kind of worked or not?

Kavindra Mishra

Thanks, Tejas. I think for a business which has — not close to a year old with most of the stores, I think which we have opened over the last six or six or seven months, Intune has had a good start. I think for us, two parameters are very important. One is how is the IPT trending, right? And how are the conversions because they actually show the love which the customers have for our products. So we are seeing a strong trend in both IPT and conversions. They continue to remain steady. That’s one part of it.

Secondly, when we thought about Intune, we had envisioned a business or a brand which is kids first and it’s for a family with a strong kids appearance. I think this is something which we see to — see that it is continuously doing well. Kids as a category continues to outperform, has a substantial contribution vis-a-vis other players in the market. And I think that’s something which we also look at very, very strongly.

If I look at specific product categories, there are product categories like T-shirts where for which eventually we are becoming a destination and that’s the data which we keep on tracking very, very closely. But to answer everything put together, the love of the customers are shown by two things. One is the conversion and second is the bill value. And we are seeing that both in terms of IPT and conversion, there are very, very strong traction, which we are seeing.

Tejas Shah

Super. And last one, what are the plans for the Intune rollouts for next year or next three years? Where do you see this number kind of going to?

Kavindra Mishra

So for sure, we should — we should be in a situation where we’ll be — our earlier guidance when we started the year was around 80, but we look at close to 100 stores by the end of this year. FY ’26, we should be opening another between 120 to 125 stores. And my sense is it will be a greater number in FY ’27. So we see this lot of opportunity sitting there. We have just started with cluster. So we have just entered very few markets. I think there is — there is lot of potential which is there. And slowly as we understand the consumers, learn the markets, also learn from what our competitors are doing, I think it becomes a good learning ground for us to break.

As I always keep on saying, the market size is very huge and there’s a lot of shift happening from unorganized to organized. So people who are able to offer great products at or activation [Phonetic] products at great pricing, which is what we want to drive through into, I think we are in a good space.

Tejas Shah

Yeah. And the way you have designed the model and the way you are kind of planning the merchandise mix also, is it safe to assume that for this model to work, at least we should be clocking INR8,000 or INR9,000 per square feet kind of throughput to make it profitable?

Kavindra Mishra

100%. 100% in a steady state, I think we are at a — at a much higher number.

Tejas Shah

Perfect. And then last one, I’m not sure if it is relevant as on today, this question to your model. But the quick commerce, the way it is growing and the way they are perverting and the way they are envisaging themselves also in overall retail space by adding categories. Do you see any threat coming from that point to your online ambition or omni ambition and even to the offline, if they pivot very aggressively on fashion and general merchandise also, how do you see that shaping up for us? That’s the last one.

Kavindra Mishra

Yes, I think it’s a brilliant question. So let me answer in two or three steps on this one. One, as we speak and even in the first question, I think Resham talked about our omnichannel ambition. So we are very clear that, so I will answer in two or three perspectives. One from the Shoppers Stop perspective and then other from the Intune perspective. I think quick commerce is a great benefit for the consumer. We have to see how it evolves for fashion and I think it’s a very evolving thing.

For us, we are looking at in two ways. One for our departmental stores, we are looking at how we can offer within the — within three hours or we can — how we can offer within the same day. I think — and where our departmental stores become the center of service. So that’s something which we are testing out. For our SS Beauty side, that’s something as we speak, we are in the stages of testing and I think by end of November, we should be able to drive that and that becomes a very powerful statement from us for the consumer. That is one.

In case of Intune, little too early for us to comment, but what we are seeing is right now when brands are engaging with the quick commerce side, they are primarily engaging on certain product categories like innerwear or I think solids or cores, which will become the point of it. So we’ll keep on evaluating and as and when we feel that we have to drive that piece, we will do that. So definitely, Tejas, this is evolving. It will impact all of us. We will see how to mitigate and especially for departmental stores, we really want to drive it. And for us, I think quick commerce really, really expands the market size. So I think it’s a great phenomenon and a good space to be in.

Tejas Shah

Thanks and all the best and Happy Diwali to the team. Thanks.

Kavindra Mishra

Thank you, Tejas. Thanks a lot.

Operator

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

Sameer Gupta

Hi, sirs, and thank you for taking my question. Firstly, wanted to just analyze the brand pull power of Shoppers Stop as a concept. So — and you could give any number or metric that you have handy, but specifically looking for, let’s say, 90% of the stores are in malls. So the footfall of the mall and the footfall of the Shoppers Stop store in that mall, how has this ratio trended over time or any other thing that you track which basically points to the pulling power of Shoppers Stop for footfalls?

Kavindra Mishra

Yeah. So I think two things, obviously, footfall is something which we look at. Then we also look at mall to store and how we go about it. And the third KPI which is which we look at is the net promoter score, right? I think if I talk about net promoter score, it’s quite high. It’s one of the highest among the retailers. It’s anywhere between 75 or 78 plus. So I think that’s a very positive score, number one.

Number two, if I look at the mall to store conversion, that’s also been steady and it has not deteriorated over the last two, three, four years. So I think that — and that’s a KPI which we really measure continuously. I think the third thing which we always look at is also how are the conversions, whether when the consumer is coming, are we able to convert it through the offer of brand and offer of services which we have. And what we are seeing Sameer, is that our conversions are increasing quarter-on-quarter.

So as we spoke in Q2, we grew in conversion and we are seeing a higher number in October. So I think a lot of work is happening on that part. If I talk about the ATV, which is another thing which we look at, that has continuously grown for quarters. So I think there are a lot of these KPIs which we look at. And finally, I think as a departmental store, we always want to drive the experiences. So we have — so expenses come through product, but it also comes through great service. So we have a concept called personal shopper and that — and I’ve spoken about this a lot and because for me, you can get the best product, but if the experience is not good in the store, you won’t be able to get that customer loyalty.

So for me, I think that’s one of the biggest KRAs and we are seeing that our personal shopper contribution in our business has gone up around 22% last quarter and that’s the highest-ever. And we see a higher number happening as we speak in the month of October. So I think there are these KPIs which we look at. And also we engage with our customers a lot. So there is a lot of customer listening, which we do. In the last quarter, we must have spoken to around 40,000 customers, got their feedback on product, on the service and trying to improve it continuously. So I think, Sameer, it’s a mix of lot of things. In retail, you need to look at all the aspects and drive it and that’s what we are doing.

Sameer Gupta

Great, sir. Just a follow-up here then. So if Mall 2 [Phonetic] store is steady and SSS is not growing or is disturbed, then it’s basically the mall traffic, which is not coming through. Anything that you can do in this to drive — I’m not sure. So I mean, how to come back to that good SSS growth trajectory without depending on the mall?

Kavindra Mishra

So Mall 2 store can be driven through various things. So we had a tech intervention, which is what was called AR where we were actually showing the fashion show for the new look, right? And that — those AR schemes were kept in the center of the non-atrium. And when people used to see, then I think obviously things were driven around that. If you look at our September and October SSGs, they look very, very promising. So it’s also the entry in the mall, how we are converting them, how we are driving. So that’s multiple factors which we look at, right?

And obviously, we are trying a lot on building the brand. So if you would have followed the brand for a long time, I think after a lot of quarters, we are focusing on Shoppers Stop as a brand and doing strong marketing campaigns and giving reasons for the customers to come and shop. So I think we need to get the customers within two shoppers. And obviously, as you said, if they are in mall, the mall to store conversion will increase. If they are in High Street, obviously, that’s an easier one. So we are driving this. So we are not leaving it to chance. There’s a lot of work happening on marketing and 360 degree marketing, right, and customer — consumer activations to drive it.

Sameer Gupta

Got it, sir. That’s great. Second question on Intune, specifically looking for the sales per square feet, which you used to share around INR12,000 couple of quarters back. So I understand that you have opened a lot of stores, but specifically the 22 stores that existed before March of ’24, if you can give that number? And also overall EBITDA drag of Intune pre-IndAS for first half of FY ’25 on the INR75 crores of number that you have reported.

Kavindra Mishra

Sameer, I did not understand the last sentence. Can you please repeat if you don’t mind?

Sameer Gupta

Pre-IndAS EBITDA loss in Intune for the first half of FY ’25 on that INR75 crores of revenue that you have reported?

Kavindra Mishra

Okay. At EBITDA level, it’s a very insignificant amount, Sameer. So I mean, you know that pretty well, we don’t share vertical wise numbers, but all I can tell you it’s a low-single digit number. It’s nothing a significant number on that. Coming to sales per square feet, see, we can’t compare a slack season which is a peak season, like for us, October, November, December is a peak season, which is July, August, September. So as of October, for stores, whichever we have opened last year is anywhere between INR11,000 to INR12,000 per square feet.

Sameer Gupta

Got it. This is helpful. I’ll come back in the queue for any follow-ups. Thanks.

Kavindra Mishra

Thanks Sameer. Thank you.

Operator

Thank you. The next question is from the line of Gaurav Jogani from JM Financial Limited. Please go ahead.

Gaurav Jogani

Thank you for the opportunity, sir. Sir, my question is with regards to the October performance that you mentioned. So did I hear it right that it is growing in mid-teens and you are doing — you’re hoping for a mid-single-digit kind of like-to-like growth for the next six months going by the performance that you are seeing.

Kavindra Mishra

Hi Gaurav. So basically the thing is in the month of October, right now, the trending for like-for-like growth is very similar to September. Maybe it might end up a little bit more, but we will see because we still have a very big week coming up, which is the main Diwali week. But we are seeing similar like-for-like growth like the way what we saw in September and October, which will result in a mid-teen performance for the month of October, which includes new stores, all the concepts put together, that’s one.

If I look at the entire H2, what we were saying is that given the fact that there are weddings going forward. And even if there is a little bit of a drop, we are confident that we will touch a five to a mid-single-digit like-for-like. So if you look at October, for sure the like-for-like October would be very similar to September, if not more, and we will touch a mid-teen number for October. The other guidance was on for the full H2, where we said that we are confident that we’ll be a mid-single digit like-for-like at least, if not more.

Gaurav Jogani

Sure, sir. Thanks for the clarification. Sir, the other thing is on this the new brand, the beauty that is Geologie, the private label brand. So it will be — will it be only an e-commerce brand? And how different — different it will be from the Arcelia? Because I think Arcelia was another brand in the beauty space that we are trying out. So any updates on that and this new venture?

Biju Kassim

Yeah. So Biju here again. Geologie is a private label in the sense that it is developed by us along with [Indecipherable] which is one of the best-in-class manufacturers in the globe. This brand is going to be available across all retailers, e-tailers, including Shoppers Stop. So it’s a brand that will be available in the trade and this is something that we really want to build because this area particularly with a quality manufacturer, we feel at a sweet-spot pricing, we think that there is a very, very big opportunity. And this will be working on a end-to-end label. I wouldn’t want to say private label alone. It’s a label. It will be an independent brand and it will operate across all e-tailers and retailers available in the country.

Gaurav Jogani

Sure. And sir, update on Arcelia, I mean, where are you on that journey with Arcelia right now?

Biju Kassim

Yeah. So Arcelia is a private label currently available only in Shoppers ecosystem. And Arcelia, the clear winner within Arcelia are the fragrance range. And Geologie is 100% makeup brand. So we are just making sure that we have the right to win in each of these categories and Geologie will be focused especially dedicatedly in the beauty space, which is the color space.

Gaurav Jogani

Okay. Got it, sir. Sir, my last question is with regards to the margins again. Given that the first half has been impacted clearly due to the overall environment not doing well. But what would be your guidance then in terms of the margins for this year and the next two years in terms of the — with pre-IndAS margins that would be there.

Biju Kassim

Thanks, Gaurav. We did mention last quarter also. Our — IndAS — I’m sorry, our non-GAAP margins would be in the mid-single digits at the end of this fiscal, I’m talking about EBITDA margins. Next year, we definitely see an improvement at least by 100 basis points, if not more than that. It’s a bit difficult to say that number right now, but that’s the — I mean we are internally targeting a high-single digit number for the next year.

Gaurav Jogani

So that means because the way the performance has been in the first half and the way we are guiding mid-single digit for this year as well, do we see a significant acceleration in the H2 in that case?

Kavindra Mishra

Yes. So I think H2, as we mentioned, H2 should be something which will be much stronger Gaurav for us both in terms of —

Gaurav Jogani

In terms of margins, my question was that the cost would largely remain where we are right now. And given that the leverage that we have, that is the right thesis for this.

Biju Kassim

Your voice is fluctuating Gaurav, bit difficult to hear us.

Gaurav Jogani

So what I’m saying was, yeah, the margins, I mean my question was more on the cost side. So we expect that the cost overall largely to remain now under control, that would be contributing to this margin expansion. Is that understanding right?

Biju Kassim

Absolutely right, Gaurav. In fact, again, in the last quarter, we spoke, I mean internally, we have taken a cost reduction exercise. So I know that the numbers in the first two quarters are not significant, but the drive is already on. We are reasonably confident that that will definitely improve the overall margins.

Gaurav Jogani

Okay, sir. Thank you. And that’s all from me.

Biju Kassim

Thanks, Gaurav. Thank you.

Operator

Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.

Devanshu Bansal

Yes, sir, hi, thanks for taking my question. Festive greetings to the team and all the best for the upcoming season as well. Kavi, I wanted to check on two things. So one, you mentioned that 4.8 million weddings are expected in second half, right? So overall, I guess for full-year, the country sees about 10 million weddings. So wanted to check if this number I heard is correct because H1 typically had a lower wedding season, right? So H2 should have — should see higher number of weddings. So 4.8 million is — is the number correct that I heard?

Kavindra Mishra

Okay, 4.8 million weddings is in the second quarter — second half, I’m sorry, second-half. That’s what it has reported in economic times. If I remember right, it’s either 2nd October or 3rd October dated. So it was all in the press saying that the second half will have close to 4.8 million weddings. Whether that will turn to 10 million weddings for this fiscal? I don’t think so because the first half the weddings were far and few.

Devanshu Bansal

Understood. Second, I wanted to check that we are planning to open about 65 stores across formats in H2, plus we must have invested in inventory also for existing stores in preparation for the festive season. Do you foresee a rise in debt levels from H2 end or we’ll be able to sort of service this expansion through internal accruals?

Kavindra Mishra

No. We expect the debt levels to marginally come down from September 30.

Devanshu Bansal

Understood. And what would be the overall capex and working capital investments Karuna for these 65 stores if you could just highlight.

Karunakaran Mohanasundaram

Okay. Let me give you the number. For the full year, we expect the overall capex to be anywhere between INR200 crores to INR230 crores give and take it here and there because our capex includes not only Intune, Departmental, Beauty, Home plus also renovation. Like for example, what we renovated in Malad almost costed us more than INR20 odd crores, between INR20 crores and INR25 crores. So it includes renovation as well as all these things. In addition to that, we are also investing INR20 crores in a new warehouse in [Indecipherable]. So I mean, if I add all these things, our total capex will be anywhere in the range of INR200 crores to INR240 crores Devanshu.

Devanshu Bansal

And any working capital investments or is this included in this number itself?

Karunakaran Mohanasundaram

No, working capital will be different. See, working capital by and large will remain at the same levels. Except for Intune, we expect a marginal increase in the inventory. That’s it. Other than that, you are aware, rest of the brands are primarily [Speech Overlap] so that’s not the issue.

Devanshu Bansal

Understood, Karuna. Thanks for taking my questions.

Operator

Thank you. The next question is from the line of Akshay Kothari from JHP Group. Please go ahead. Mr. Akshay, I would request you to unmute your line and speak, please. We do not respond from the current participant. We will move on to the next participant. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia

Kavi, just a question on non-app business. We have seen a lot of global retailers, position themselves department stores to non-apps. You are one of the biggest non-app retailers in India with more than 40% contribution. And non-apps margins are also significantly higher. So is it that in the app will business, the pain is much more to you today versus the non-apps and three years out, how should we look at the mix between app and non-apps for the department store?

Kavindra Mishra

Thanks, Ankit. You always ask strategic question. So okay, let me try to answer them. So as you rightly said, so if you look at Shoppers Stop journey, we started with apparel heavy and then over a period of time, we have moved to a 45% non-apparel and a 55% apparel contribution. If you look at the non-app business, it works for us in two ways and there is a challenge. How it works for us is that in this journey of premiumization, it’s always easier to premiumize for non-apparel. So I think we have picked up categories like beauty, watches, handbags and we are seeing amazing benefit out of it. That’s one.

The sales productivity of non-app is much, much higher than of apparel business. The only challenge for a non-apparel is the margins are lower, but the fact that when we look at the business, we look at [Indecipherable] or the net margins which we get from the categories. I think non-apps is a preferred category for us and we will continue to drive it. If you ask me how I see the business going forward, in the next three years, I see either a 50-50 or a 55% towards a non-apparel and a 45% toward apparel. I think that’s the zone in which we’ll be slowly driving the business.

Obviously, it has to come, through getting the brands which are only available with you to doing tie-ups with your partners in beauty, in watches and handbags, which are exclusive for you. So it’s a journey in which we are in. In certain categories, we are already ahead in that journey in certain categories, we have just started the journey, but I think non-app is a clear differentiator for us and something we continue to drive.

Other product category, which really works very, very well for us is footwear. I think there is some amount of churn in the industry right now because of BIF. But as it settles down, I think footwear is another interesting category. As we speak, we have partners like ECCO, which have come to us very, very strongly and I think we are looking at performance there. And obviously, we have — we also, if you would have seen, we have just opened five HomeStop stores. We are seeing a lot of traction in home. The early signs are very good. And I think there is a lot of opportunity there because the market size is huge and we are a very small player there. So I think that’s another area of growth for us going forward. But to broadly answer your question, non-apps is a area of focus and I see them growing much more faster than apparel.

Ankit Kedia

So today, how many consumers shop for non-apps because the ASP would be much higher. So how are you targeting these consumers, because if you look at the malls on layout as well, they’re also focusing a lot more area to non-app guys today, right? So competition there will also increase, not from the Atwell guys, but from a D2C brands perspective.

Kavindra Mishra

So as I said, because we had this journey of premiumization, lot of the brands who wants — who want to be in a multi-brand environment and want to have a penetration across the markets for them, Shoppers Stop is a great offering. We have seen across product categories, as we have premiumized, brands have moved them and have been able to get that customer. That’s one.

Second, I think we have got a very strong loyalty base in a loyalty base of 11 million, we also have personas which focus and sell a lot of non-apps. So I think through the mix of that through our loyalty, we have been able to drive and target that customer. We also do a lot of — we do also a lot of cross-category driving. For example, as we speak, one of the — one of the differentiating factors which we have is we have a Mac combining with apparel brands and seeing how we can — how can we drive revenue.

So I think for us the non-app is the ladder to start the journey of premiumization. And we provide that 112, 115 stores base, which not many players have. So I think that’s the whole thing. Also, if you look at our layout, as you enter Shoppers, you have beauty and then you have the non-apparel. So to get a ground floor for a lot of these brands becomes very, very critical part. And I think that’s how we are able to drive these partnerships with them.

Ankit Kedia

And do you think in Intune, this non-app journey will start after couple of years first the app settles down or Intune will be more of an app player, not a non-app player.

Kavindra Mishra

So definitely, as we mature the brand, you will have the play of non-apparel as well. I think as I always keep on telling people that it’s just the start for Intune. As it settles down, we will also start getting learning. So I wanted to fix the — or we as a team want to fix apparel and penetrate those markets. For example, if you’re moving to North, right, you need to fix the piece of winterwear and how you will do it in Intune. I think some of these lessons and learnings which we are capturing. But for sure, FY ’26 is when you will start getting the sense of non-apps and Intune.

Ankit Kedia

Sure. And, Karuna just a question on debt part. Our debt has increased in the first half, given obviously subdued performance. Do you think — you had given us a three-year target of INR300 crore capex each year and being debt free, do you think you’re still sticking to that target of yours?

Karunakaran Mohanasundaram

Not this year, Ankit, which again a great question, not this year. This year, we will still have a debt of INR120 crores to INR130 crores net. But next year onwards, we should able to come down to a lower level. And from year two, we should still see a surplus because I think you also made a statement, right, because of the lower EBITDA, the debt is higher. Otherwise, we should be able to manage less than INR100 crores next year and probably a debt free in year two Ankit.

Ankit Kedia

And from a capex perspective, are we exploring the franchisee route in Intune earlier than expected or do you think that will still be from next year onwards?

Kavindra Mishra

Ankit, I think in couple of quarters you will hear from us on that. It’s WIP as we speak. In couple of quarters I think we’ll be able to share.

Ankit Kedia

Sure, sure. Thank you so much.

Operator

Thank you. The next question is from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.

Gaurav Gandhi

Yeah. Thanks for the opportunity. Sir, my first question is how the company is trying to position itself in the market like should we look at Shoppers Stop stores as premium offering competing in that area and Intune as fast value — fast fashion value offering competing in that respective category, what are the thought process here?

Kavindra Mishra

So Gaurav, thanks for the question. For Shoppers Stop business, we — the vision is that we are only — and what we try and drive every single day in the organization is either India’s largest and the best omnichannel premium retailer. That is a journey in which we are on. And every single management decision we take as a team is focused around that. It’s into — the focus is very clearly we are in the segment of value fashion and that is where we want to be India’s number one or and India’s leading family first fashion retailer.

Gaurav Gandhi

Okay, okay. And the other question is, the appeal of the store matters a lot for many customers and impacts their decision making. Also the efficient utilization of the space in the store matters for the business. How are you working on that front in terms of renovation of existing stores and new stores and make them more effective because these things will lead to improving footfalls and eventually higher sales for the company. So can you throw some light on that, please?

Kavindra Mishra

Okay. So there are two parts of it and let — and Karuna will answer the capex part, but I will try and answer the decision-making part of it. So there are two things, Gaurav. One is, we look at the brands and say that what are the brands which perform well for us and which don’t perform well. So in the cases where we feel that the brands are not performing, we do a churn of brands. So that’s one thing for sure we do. In terms of — if you’re looking at the store, we all — we have this continuous tracker around the life cycle of a store. So we know that after a certain period, the store starts having a trouble in terms of whether it’s the throughput or the number of walk-ins and that is when we go for a store renovation.

Typically if — so as we speak, around 70-odd-percent of our stores are with the new identities. I think that’s something which we — which we do that. In fact, that’s in that context only which we spoke about Inorbit Malad, which is where we have taken the whole store look and feel to the next level. And if you are based in Mumbai, Gaurav, we would love to show you the store, right? So I think that is — that is the — that is the journey which we are on. And obviously, wherever feasible, we optimize space as a part of the innovation. So for example, Malad, we had three floors. We have got all the brands now on two floors and I think the throughputs are really, really strong.

Karunakaran Mohanasundaram

Yeah. Coming back to your next question, Gaurav, on renovation, normally we spend anywhere between 1,500, 1,600 or 1,700 per square feet on the renovation. And every year, we internally evaluate which are the stores we need to renovate. And accordingly, we renovate anywhere between four to eight stores every year. Sometimes it happens in the first half and most of the time it happens in the second half because February and March are the peak of slack season. So that is the time it happens. So there is a structured program within the company, which are the stores we have to run away and we do it without any phase.

Gaurav Gandhi

Okay, okay. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Shalini Gupta from East India Securities. Please go ahead.

Shalini Gupta

So sir, two questions at my end. One is that we found — we would have found some amount of festive purchasing, which has happened during the quarter. Yet we find that the gross margins have come off. So why would that be, number one? And number two, we find that the other — that the interest has shot up quite substantially. In fact, it’s double what it was in the first quarter. So what is the reason?

Karunakaran Mohanasundaram

See, in terms of gross margins, last year also we had end of season sale and this year also we have end of season sale. Margins are — other than post-August 15, it’s a full-price sale. So the margins would be something similar to last year, except there were some one-time benefits last year. They did not come up, but that was not significant, that maybe 30 basis points to 40 basis points. That may not be significant. I did not understand your second question, what you were saying?

Shalini Gupta

Sir, what I was saying is that in this quarter, we find very high interest expense at INR120 crores, INR122 odd crores — INR122 odd crores. So I’m just asking what happened, what changed between first quarter financial year ’25 and what has changed now? Because the interest expense has doubled.

Karunakaran Mohanasundaram

Okay. So Shalini, the interest as per the gap includes the lease cost. If the lease cost goes up, the depreciation and the interest cost goes up. That’s as per the accounting standard 115, that has nothing to do with the actual interest cost what we pay on the loans and the overdraft. If you see our investor presentation where we have given financials first half of FY ’25, we have clearly given both the non-GAAP and GAAP financials. And if you see the finance cost, it remained exactly INR6 crores last year and INR6 crores this year. So you have to see that because the interest cost of the GAAP includes the lease rental. If the lease rental goes up, the interest — the finance cost will also go up.

Shalini Gupta

What — but I mean, why is it happening only in this quarter? It would have happened in the first quarter as well.

Karunakaran Mohanasundaram

Yeah, it has, it could have, right?

Shalini Gupta

But in the first quarter, we find an interest expense of around INR61 crores and that has shot up to INR120 odd crores that the lease cost would have been included last quarter also.

Karunakaran Mohanasundaram

No, Shalini. You’ve seen in the first quarter, the finance cost has gone up by — I’m talking about the GAAP numbers. The first quarter, the finance cost has gone by INR6 crores and second quarter has gone by INR9 crores. Totally INR15 crores has gone up in the first half. Again, I’m repeating, it’s purely because of the lease rentals. If you see sequentially, our lease rentals are higher. That’s the reason. See, when we open the newer stores, obviously, the interest cost, which is nothing but disguised as a lease cost will automatically increase. My only request would be, please go through the non-GAAP financials where the actual interest cost remain constant at 6% and 6%.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aditya Desara [Phonetic] from Motilal Oswal Financial Services. Please go ahead.

Aditya Desara

Hello?

Operator

Mr. Aditya, I would request you to please use your handset.

Aditya Desara

Hello, am I audible?

Kavindra Mishra

Yes, you are audible? Go ahead.

Aditya Desara

Yeah. So basically, as you mentioned in the last con call that you have made a conscious effort to reduce private brand inventory by INR65 crores. So can you elaborate on the specific strategies which have implemented to achieve this reduction?

Kavindra Mishra

Aditya, I missed it. So can you please repeat the question?

Aditya Desara

Yeah. So in the last conference call, you mentioned a conscious effort that we made to reduce private brand inventory by INR65 crores. So can you just throw some light on specific strategies that you might have implemented to achieve this reduction? And how these strategies are expected to impact your trading margins in the coming quarters as well.

Kavindra Mishra

Okay. So Aditya, thank you for the question. I’m sorry, I had missed it in the first go. So there are two parts of the strategy, which we did. One is we looked at the brand and said can we reorganize the brands and see whether some brands especially in men’s wear we had brands which were of course, getting replicated in similar format. So for example, we had a lives and we had a jeans and a casual. We had brands replicating their presence. So we looked at the brands and made them cleaner in the sense that each brand will talk to a certain customer and certain value. That is one part of it.

Second, we looked at our OTB buying in the process. We have also implemented Goldrac [Phonetic] which is a merchandising software, which looks at the real option plan for each store, each unit and then throws out the inventory requirement at option level and also helps us in the entire [Indecipherable] transfer. With the help of these, we’ve been able to put the right, made the right assortment for each which will help us order left but order right. So the idea is not to have lot of inventory, but the idea is to have the right inventory [Technical Issues] got implemented over summer and so Q1 and Q2 and that is where we are seeing the benefit of that.

In terms of margins, I think we will — we will have a substantial or we will have a substantial impact of margin expansion, especially in Q3 from private brands. Even if we speak about Q2, we have seen that there is a — there is a margin expansion in private brands business, especially apparel. And we see that and we forecast that it will increase further as we go forward. So I think a lot of discipline has been put in terms of the way we are ordering and managing the business. We had some excesses of the past, I think which we have now got over. So very confident that this is something which will be an increasing. So one of the key factors which we drive and after is the demand from the avid brands and we are seeing a strong expansion there.

Aditya Desara

Okay, understood. Thank you. And one last question from my side is, in light of growing competition from the EBOs, how is Shoppers Stop differentiating its department store experience and strengthening brand partnerships to attract and retain customers?

Kavindra Mishra

So, Aditya this is something which —

Aditya Desara

Beyond premiumization, what are strategies are being implemented?

Kavindra Mishra

But yes, yes, I’ll say. So if you look at the first — that the customer who comes and shops in a departmental store, he is the customer who is looking for options and he wants — he wants to look at different product categories, different brands within the same product categories, people who want to shop — shop, shop across product categories. So I think that’s something which we really build on. And if you look at each of our product categories, there are some leading products, which are clearly defining that customer journey. So I think that becomes an important thing.

In fact, we have been speaking to brands and we are very happy to note that for most of the brands, especially in markets like Poojo, which had just finished, the departmental store — the departmental store business was more than or growth more than their own EBOs. That’s one part of it. So our promise for the customer is based around service, experiences, engagement, the cost category shopping, the personal shopper which comes in and helps the customer to shop right and for — and able to predict and satisfy that consumer need. I think there are a lot of elements which are there, Aditya which is across product category expansion service, right, which helps us to differentiate from any plan.

Aditya Desara

Okay, understood. Thanks so much and all the best.

Kavindra Mishra

Thank you. [Operator Closing Remarks]