Shoppers Stop Limited (SHOPERSTOP) Q3 FY21 Earnings Concall Transcript

Shoppers Stop Limited (NSE: SHOPERSTOP) Q3 FY21 earnings concall dated Jan. 18, 2021.

Corporate Participants:

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Analysts:

Nihal Jham — Edelweiss Securities — Analyst

Aasim Bharde — DAM Capital Advisors Limited — Analyst

Ankit Kedia — PhillipCapital — Analyst

Gaurav Jogani — Axis Capital — Analyst

Binoy Jariwala — Sunidhi Securities — Analyst

Percy Panthaki — IIFL Securities — Analyst

Tejas Shah — Spark Capital — Analyst

Sameer Gupta — IIFL Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shoppers Stop Conference Call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Aasim Bharde of DAM Capital Advisors Limited. Thank you and over to you, sir.

Aasim Bharde — DAM Capital Advisors Limited — Analyst

Yeah, hi. Thank you, Ayesha. Good morning, everyone. On behalf of DAM Capital, I welcome everyone to the Q3 FY ’21 Results Conference Call of Shoppers Stop Limited. I would like to thank the management for giving us the opportunity to host this call. We have with us Mr. B. S. Nagesh, Customer Care Associate and Chairman; Mr. Venugopal Nair, Customer Care Associate, and MD and CEO; Mr. Karunakaran Mohanasundaram, Customer Care Associate and CFO; and Ms. Asawari Sathaye, Customer Care Associate and Head Communications.

We will start the call with a brief overview from the management before proceeding to the Q&A. Thank you, everyone, and over to you, Mr. Nagesh.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Thank you, Aasim. Hi, good morning, everybody, and welcome to this call. A very, very happy New Year 2021 and really a welcome new year after the 2020 that we all have faced. Hope you and your colleagues, family members, your dear ones are safe during this testing times, and thank you for joining us at this call.

Before we discuss the Q3 performance, I must say I’m very happy to introduce Venu, who has joined as the Managing Director and CEO of the Company starting November 2020. During the last call, I had briefly mentioned saying that he’s confirmed joining and he is going to be there with us, and I’m happy that he is sitting next to me on the call. Although Venu needs no introduction, [Technical Issues] introduce him, he is an International Retail Leader with 27 years of rich and varied experience in the retail and apparel industry across South Asia and Europe.

Before joining Shoppers Stop, Venu was the CEO of Westside looking after Trent, and Venu was instrumental both in organic and inorganic expansion of Trent. Before that, Venu was the Managing Director of Marks & Spencer Reliance, where he played a pivotal role in its growth, turnover and profitability. During his tenure, the number of stores under operations more than doubled with a significant growth in local sourcing. Venu has also worked in Madura and Arvind, both in India and abroad. He has already spent nine weeks to 10 weeks with us, and we are so happy to have him with us.

I’d request Venu to take you through the Q3 results. Post his brief update, Venu, Karunakaran, our CFO, and I are available to take any questions. Over to you, Venu.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Thank you, Nagesh, and good morning friends. Happy New Year to each and every one of you. It’s indeed a privilege to be a part of the Shoppers Stop family and speak before you after improved Q3 results. Just to remind you, our quarterly results, press release and investor presentation are available on our website. I hope you have had a chance to browse through the highlights of the performance.

Now I’ll go through the details of our performance for Q3. We had discussed in detail about the new normal in the previous quarter and it continues. I’ll talk briefly about COVID, followed by customer behavior, the customer connect that we had, our journey across stores and omni-channel, product, people, and of course our four strategic pillars.

Both at the macro level and at Shoppers Stop, there are several positive news during the quarter, which are as follows. When we spoke to you, we had 800,000 active cases of corona-infected people. It has now reduced to circa 200,000 in India. More than 50% of these cases are restricted to Maharashtra and Kerala. Both the central and state governments have now started vaccination for COVID. Our Prime Minister has started the vaccination drive from last Saturday, and we expect mass vaccination ahead of time which will augur well for the retail industry.

The Indian economy is expected to stage a better performance in the third quarter as compared to the V-shaped recovery seen in the September quarter. All the major indicators indicate positive recovery. In Shoppers too, our performance largely mirrors the Indian economy. From a mission-based visit, customers are now coming to our stores are spending much longer time. I’m glad to inform you that all our stores are fully operational in the last quarter accepting some brief interruptions, like the unrest in the North which impacted the NCR region, particularly in December.

As I said before, footfall improved month-on-month. We had 5% of last year’s footfall in Q1, 19% in Q2 which improved significantly to 50% of footfall in Q3. We continue to see improving footfall in non-metros, particularly in Tier 1 and Tier 2 cities with improved sales. East is outperforming other zones for us with metro stores recording good footfall.

Sequentially, we observed the footfall growing 36% in October and November and 6% in December on a much larger base. Similar to previous quarters, we had 77% of last year sales in non-metros, whereas the metros have same number as 60% — 61%. Sequentially, as I speak to you, we see improving trends in January also.

The average ticket size increased by 4% versus last year. We observed better sales trajectory in home, inner wear, casual wear, fragrances and kids wear. With offices now starting, we are seeing slow recovery in men’s formal wear as well. Number of our customers who are not visiting our stores have also preferred to purchase online with our Personal Shopping — Shopper assistance.

Our response to COVID has been as follows. We have been talking about connecting customers in different ways, improving the overall performance, adapting to the new normal by focusing on omni-channel, maintaining liquidity, and sustain cost through various initiatives.

As we said in the last two quarters, we continue to exceed our internal targets. Our focus on cost reduction initiatives continues. We have renegotiated every cost. We are conservative in our spending. We had set ourselves a savings target of INR450 crore and as on date, we have saved INR390 crores, including INR75 crores in the last quarter. Our savings could have been higher, but we do need to invest in omni-channel. We are on target to achieve INR450 crores of savings for the year. We may invest part of that savings in our omni-channel.

Our rights issue has been oversubscribed. Post the issue, we have repaid debts of INR125 crores, and after two quarters, we are now debt free. We have a net cash surplus of INR46 crores at the end of the quarter. There is a continued focus on cash conservation across the Company. Cash and bank deposits are at INR224 crores as of December 31, 2020. The most heartening feature of our cost savings and liquidity is that there is an ownership at every level on cost and liquidity during these critical times.

Our safety protocol for COVID continues. We discussed our new normal and omni-channel being the game changer in retail. I am extremely pleased to inform you on the progress in omni-channel, which are as follows. We had tech-related teething issues in July and August, particularly after implementing SAP Hybris for our omni-channel operations. I’m pleased to share that our tech is now functioning very smoothly. I would also like to add that we have completed the implementation of the ERP system S4/HANA with SAP HEC, which is the first implementation in the retail industry in India.

We have been continuously improving our customer interface and experience on our app and website and are satisfied with the progress that we are making. We completed our tech stabilization project, Trishul in November and have now started the scale-up project named Everest. Our average daily orders are at an average value of 2,349 and we had 30 million visits in Q3. Our delivery turnaround time reduced to less than four days. Our customer satisfaction has increased to 4.24 on a scale of 5.

We are now working on new beauty experiences with virtual makeup and virtual skin analyzer, which will be launched in February. In addition to the above, with Amazon, we have more than 50 stores and distribution centers live. Our SKU count live on Amazon has gone up to 61,000 and we have — we are fulfilling 99% of orders to Amazon acceptable nodes[Phonetic]. This has helped us to make a quantum jump on our omni-channel e-com sales. Consequently, our e-com sales for the last quarter is three times that of last year. The e-com share of our sales increased to 6% from a mere 1.5% a year back. Our sales in Amazon also increased three-fold versus last year.

We started fulfilling mac.com[Phonetic] with our beauty partner, Estee Lauder. We have now begun with M.A.C and progressively will be adding other brands and products.

Now let me talk about this quarter’s performance. Our performance in Q3 significantly improved versus the last two quarters, despite most of our stores being in malls and the cinemas being closed for most part of the quarter, it impacted footfall. We achieved 68% of last year sales. We recorded INR885 crores in sales with 32% margin. Our margin impacted by higher discount on private brands and obsolescence provisions on our stocks. As we’ve said in the last quarter, our inventory provisioning policy is conservative and we have provided for INR16 crores this year-to-date. As I said before, with our continued focus on costs, we saved INR77 crores versus last year. Despite reduced sales, we made positive EBITDA of INR21 crores.

I’ll now provide a brief update on the performance of our strategic pillars. First Citizen, during these critical times, we have been innovative to reach our customers. Our First Citizen sales continued to exceed 80%. For the quarter, our First Citizen has contributed 83% of our sales as against 81% last year in the offline. We have new enrollments of 309,000 with average ticket size increasing 6% versus last year. 33% of our new members repeated sales within 90 days of enrollment. We also continue with our Black Card, our premium subscription service apart from First Citizen enrollment, which is also fee-based.

On the shopping trends, we have the 40-plus customers now starting to come to our stores. With offices starting, we have also seen good recovery in men’s apparel. With an increased focus on omni, our First Citizen contribution in omni-channel increased to 20.45%, an increase of 230 basis points.

Personal Shoppers, which is our second pillar. Our Personal Shoppers continued to excel and contributed 16% to total business and an average cash memo size of 2.7 times of average transaction size. Our Personal Shoppers continued to be innovative during these critical times to reach out to our customers. We responded with range of digital initiatives, such as video-assisted White Glove Service and chat-enabled real-time online transactions. We have also developed an exclusive in-house app for our shoppers — Personal Shoppers. Our repeat customers served by Personal Shoppers generated INR65 crores of sales with an average ticket value of circa INR12,000, three times that of non-assisted shopping average ticket value.

The third pillar is our private brands, and our private brand share has increased to 13.4% this quarter, an increase of 230 basis points versus last year. As in the previous quarter, our decline in private brands are lower than brands both in offline and online. I’m extremely happy to inform you that our private brands have a unit growth of 4% versus last year. Also the proportion of sales online of private brands was 21%. We had introduced several growing categories, such as Sleepwear, Loungewear, Athleisure and men’s Indian wear.

We are also significantly growing our infant wear and baby wear business through our private label named Karrot. We are creating a bottom wear destination for women’s Indian wear by offering a large consolidated range. We are focusing on sell-through and move towards monthly launches to ensure we’ve got freshness in stores at all times.

Moving on to the pillar of Beauty. Our Beauty business continues to remain strong and the beauty mix sustaining at circa 16%. We have launched our private brand, Arcelia, the bath and body range, and the initial response from customers has been very positive. The two Arcelia stores opened during the pre-COVID times have delivered the KPIs and we would be opening another three to five stores in the next financial year. We have launched a number of new brands in fragrance, skincare and other ranges. We also opened the first two-faced store in India, in DLF Promenade Mall, Delhi. Our beauty event with Malaika Arora for talent and beauty show called The EyeStoppers, which was done during the quarter, received an excellent response.

Before I end, I will also update on the following. We believe the COVID impact will continue for the next two quarters. Our business should be continuously improving towards the levels of FY ’19 by quarter two or quarter three of next financial year. With COVID impact coming down, our store openings — our new store openings for the next year will gain momentum. We are planning to open between 10 to 12 department stores, mostly in Tier 2 cities, which will add additional footage of approximately 2,50,000 square feet. We have also identified some of our existing non-profitable stores for renegotiation or closure during the next financial year. This exercise will ensure that our chain becomes more productive.

Our omni-channel should continue to grow exponentially to contribute to a larger share. We have commenced our digital journey and we expect e-com to have large share in the near future. Our focus on cost controls and maintaining liquidity will continue. Our safety measures for customers, employees and stakeholders will continue.

Once again, I thank you for attending this call and wish you and your family to stay safe.

Aasim Bharde — DAM Capital Advisors Limited — Analyst

We can open up the question-and-answer, please.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss. Please go ahead.

Nihal Jham — Edelweiss Securities — Analyst

Yes. Thank you so much, and good morning to the entire management. Sir, three questions from my side. First on the recovery, if I just try bifurcating our performance, while our footfalls for the quarter are down 50%, but our sales are down around 30%. So as you mentioned, there is obviously quite a decent increase in the average transaction value. What I wanted to get a sense of is that in the coming quarter, do you expect that the footfalls will come back to pre-COVID level and similarly even the transaction values may normalize? Or is the increase in transaction value a trend that may continue and that can drive better recovery in the coming two, three quarters?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Okay. So, we see continuing footfall growth. So to that extent, compared to last year, we expect that improvement in footfall to keep growing and we are seeing that consistently in January as well. And we reckon by quarter two to quarter three, it will come closer to what it was in FY ’19. The transaction value will also continue to be higher. I suspect that the footfall may not come back to a 100% of where it was for FY ’19, but close to it. And given that drop and with improved conversions that we are seeing and a lot of focus which has happened on conversions over the last two quarters, we expect to see the benefits of those continue and hence a higher invoice value.

Nihal Jham — Edelweiss Securities — Analyst

Sure, that’s helpful. My second question was to Mr. Venu Nair. First of all, sir, congratulations on joining the Company. You did mention about the four strategic pillars that Shoppers Stop has been speaking of. I just wanted a more specific comment that out of these four, is there anything that will be a first focus for you? And also specifically on online, you mentioned that we are at a 6% share, but just from your perspective, is there a thought of where you want to take this number as your term progresses in the next two, three years?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

So in terms of the four strategic pillars, and if you — if I were to nail or rather call out the one which would be the most important for us, omni-channel is definitely the first of — first of the four, and that’s one which has become significantly more important post-COVID. And as a company, that’s an area which has been elevated to having the top most priority for us. Currently, we are at 6% and we expect that to continue to grow and we would expect it to get to between 15% to 25% over the next two years to three years.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Also, if you look at it — Nagesh here. Also if you look at — with Venu’s expertise and his background from Madura, Arvind, Marks & Spencer, Trent and now to Shoppers Stop, I believe omni-channel will be the front-end customer-facing initiative and private brands will be the back-end supply taking initiative. And the combination of this is what should really benefit the organization.

Nihal Jham — Edelweiss Securities — Analyst

Sure, that’s helpful. Just a last question on the omni path. I think last quarter also the tie-up of the number of stores was around 50, which has stayed stable. So just wanted to check that is the target of getting all the 84 stores on the Amazon platform by Q4 still in place, and if it’s possible to share any metrics on those stores which are already on boarded?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Okay. So Nihal, I’ll answer it in two parts. So first part in terms of the stores, the first focus was to get the stores on to Amazon.com and circa 50 of them had got on around the end of September. And then during the quarter, the focus was increasing the number of SKUs which were online. So we started off with about 15,000 SKUs to 20,000 SKUs which then progressively went up and now currently, we are at about 61,000 SKUs being online and available, across these 50 stores.

The second focus then was to improve our delivery performance and Amazon have a very strict performance criteria where we have to achieve a 99% CPT, which is a turnaround time of within 24 hours. And that took us about four weeks to six weeks for us to stabilize and get that sorted. So two things which have improved, one is the number of SKUs available going up to 61,000 and then the turnaround time being at — consistently now at 99%.

The third phase or what we go next once we get out of our end-of-season sale towards the end of January would be then to add the balance stores also on to Amazon.com, so that’s the next phase which will happen from February.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Also, it is important to understand that it is not necessary that we should connect all the 80 stores. The connection of the stores to Amazon will be based on the consumer journey that we see and also productivity and profitability of the assortment that is there in the store. So if there are two stores three kilometers away and one store has a larger assortment, if it can serve this community around five kilometers, then we’ll prefer to add only that store and not the other store because it is not about number of stores connectivity but it’s about the reach that we can achieve through our physical network into this community that we want to serve.

Nihal Jham — Edelweiss Securities — Analyst

Sure, I get that. And then just, on that follow-up that any metrics in terms of how the store — the revenue per store, maybe, improve the ballpark once these stores are on-boarded on Amazon? Maybe the matured ones which are on-boarded first?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

No. If you look at it, the incremental business that we are getting from Amazon is all going through the stores only. So if your — total improvement that we have seen is about 6% from a 1%, 1.5% contribution and Amazon is contributing to 20% of the total online, that’s the improvement that we are seeing in the stores.

Operator

Thank you. We would request the current participant to please come back in the question queue for any follow-up questions. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

Thank you. And sir, my first question is on the revenue recovery. On last quarter, we were targeting to have a flattish kind of a revenue from quarter four onwards. Now we are guiding for next year, quarter two to quarter three for full revenue recovery. So, are we seeing some demand pressures from the customer side in last three, four months with December month being soft and while January is also in the similar lines are marginally improving? So could you throw some light on that?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

So what we are seeing — we had — if I start with Q3, so in Q3 itself, we saw a significant improvement in the — both footfall as well as the recovery levels and it can — especially the festive period was very good at 75% to 80% recovery, and that continued pretty much till the end-of-season sale. End-of-season sale, also the absolute numbers were good, it’s just that the spike that normally gets associated with the end-of-season sale was not as high because of the fact that there was still a limitation in terms of the number of footfalls into store, the number of people who could walk in. Once that spike has gone away, the comparatives are started to improve again.

We expect and we are cautiously optimistic in terms of the recovery levels, and we expect those numbers to keep growing from the current levels of 70% to 80% and beyond as we get into the Q4 and beyond into Q1.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Also the theaters and multiplexes which were supposed to open up and the food court to go into full capacity has not happened. And therefore, in the mall, the traffic remains to be muted. And as the multiplexes are getting opened and if it comes back [Phonetic], we expect the recovery to happen. So our focus will be on ensuring getting revenues back and profitability back, okay? And therefore, even at a lower extent of customer footfall and revenue, we should be focusing on profitability for the coming quarter.

Ankit Kedia — PhillipCapital — Analyst

Sir, my second question is on the private label. You said the acceptance of private label online is nearly 20% out there, while offline would be still 12% to 13%. So with Venu sir’s experience, what changes are we doing to get this number to 20% in our offline stores as well and which will be visible to the customer or at the back-end side, be it on the pricing, display, merchandising?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

So I think it would be led by product and first and foremost, offering the latest trends and fashion with clear segmentation for each of the brands. So over what we had been focusing on is to sharpen the definition of each of our brands across men’s wear, women’s wear, both Indian wear and Western wear in women’s and kids wear.

Having that sharpened focus on brands then to have monthly launches and freshness focusing on sell-through, so that would help us to drive not just sales but profitable sales both offline and offline[Phonetic]. And third, within the store having very aspirational visual merchandising with clear space in the stores, which would put our private brands in focus, along with that offering great value, so fashion with clear aspirational visual merchandising and great value with a big proportion of that mix being under the price point of INR999. So that in terms of our customer offer as a hierarchy, there is the national brands and then complementing that would be our own private brands which would offer great fashion at significantly great prices.

Ankit Kedia — PhillipCapital — Analyst

Sir, private label, just a follow-up. What would be our strong point in terms of men’s formals or men’s casuals, women’s ethnic or kids, or beauty, what we have just launched? Sir, if you can just give us some pyramid how — what is stronger for us in terms of customer acceptance?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Sorry. What is…

Ankit Kedia — PhillipCapital — Analyst

Sir, on private label, which product is small — where we are more strong in terms of men’s, women’s, kids or beauty?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

See as a — Shoppers Stop is a house of brands and we offer a good mix of national brands and our own brands. Our own brands come in offering the latest fashion at good prices, combined with the quality that our customer trust us for and that puts us — gives us a good platform for our customers to shop with us. What makes us stand apart is the fact that we would have a clear sharply-defined private label with the newness which would come in every month. Hence every time a customer shops with us, every time she comes to our store, she would have something new to buy from us across each of the categories.

Equally in beauty, and I think that’s another area where we would complement our national brands or brands that we already have along with our own range, Arcelia where we have launched the bath and body range to begin with. Nagesh, would you like to add?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Yeah. So to get to your specific question, I think the biggest opportunity which we are going to be seeing is in the kids and our brand Karrot is going to be the lead in that because of the kind of baby boom that we’re expecting this year as well as the fact that whatever we have launched in the last two quarters have seen significant growth.

In the existing men’s, we have seen a good growth for men’s casual. In fact, men’s casual has done much, much ahead of women’s. And then the next will be ethnic wear. And then within that, if you look at it, there were two large assortments in ranges which were missing and with Venu and the Head of Private Brands, Ajay, joining in the last two quarters, we have seen that being launched. So, one is the Loungewear and second is Athleisure wear. So between these two, we believe there will be a significant growth in our mix and contribution from private brands.

Ankit Kedia — PhillipCapital — Analyst

Sure. And just one last question for Karuna sir. Sir, on the cost cutting exercise, while we are near our target of INR450 crores, getting into next year, given that we are talking of a normal [Indecipherable] — to come from Q2 to Q3 of next year, how much of this cost cutting would continue next year or how much could — with the rentals now being near normal from quarter four onwards, so the other expenses part, if you can just throw how much will — you should model for next year?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Hi, Ankit. Thanks for the question. See, remember the last time we spoke about this. So we — as you said, we planned to save close to INR450 crores, and next year we should be able to sustain almost INR200 crores of these savings, Ankit.

Ankit Kedia — PhillipCapital — Analyst

And this would predominantly be including the employee cost saving as well?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah, including the employee cost, Ankit, that’s right.

Ankit Kedia — PhillipCapital — Analyst

Sure, that’s helpful. Thank you so much, Karuna.

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Thanks, Ankit. Bye.

Operator

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

Gaurav Jogani — Axis Capital — Analyst

Thank you for giving the opportunity, sir. Sir, my first question is with regards to the store closures, the four store closures we have done. So are any further possibilities of the store closure during the year? And also, as you said the store opening guidance, 10 stores to 12 stores, so that would be for — applicable for the next year from Q2 onwards or how should we look at it?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Gaurav, the second point was on store opening, is it?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Yeah.

Gaurav Jogani — Axis Capital — Analyst

Yes. The second point is store opening, yes.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Yeah. So, hi Gaurav. In terms of the store closures, we expect to have between five to seven store closures. Our — and some of them, when we start with obviously renegotiation after and where we can, so that we can make these stores productive and profitable and failing that only we will close. The new store additions, we expect to start from Q1 of next year. So, and most of these stores which we are opening are in malls and the work had stopped during the COVID period which has now restarted, and we expect to have the stores starting to open from April or May of 2021. And in total, we expect to add 10 to 12 new stores during the year.

Gaurav Jogani — Axis Capital — Analyst

Sure. Sir, my one question — I mean the follow-up question to this is, now earlier we had guided that this store opening would be on a partnership model, wherein the landlord or the tenant would also be contributing some part to it. So in this light, what would be the capex per store going ahead and how much capex can you build for the FY ’21?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Gaurav, we are negotiating, Gaurav. I mean in some of the stores, the landlord is almost contributing 80% of the capital costs and we are contributing 20%. And that depends on stores — store to store. In the some of the premium malls, we do have a slightly higher percentage. So yeah, to answer your question, yes, we are negotiating with the landlords for the capex. But it’s a bit difficult to put a percentage to it right now, predominantly it will be from the landlord, Gaurav.

Gaurav Jogani — Axis Capital — Analyst

Sure. Sir, to rephrase it like what could be built as a capex per store going ahead for FY ’21 or maybe the years ahead? A ballpark figure would help.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

I don’t understand your question. What do you mean by that?

Gaurav Jogani — Axis Capital — Analyst

Sir, capex per store, what could be — that we can build in per store basis?

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Capex per store.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Capex per store will be — okay, you are talking about capex cost per store?

Gaurav Jogani — Axis Capital — Analyst

Yes, yes, sir, exactly, that’s it.

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Okay. See, right now, Shoppers Stop have remodeled the store itself, we are planning to open a store between 20,000 to 30,000 square feet. We don’t have a larger foot plates, what we used to have. So, on an average cost of INR2,500, it should be around about INR4 crores, INR5 crores to INR6 crores. Part of that will be funded by the landlord and part of that will be funded by us.

Gaurav Jogani — Axis Capital — Analyst

Sure sir. Got it. And sir, my — one more question with regards to this particular quarter only. And sir, the depreciation this quarter was a bit higher and would it be alluded to these four store closures that we had this quarter because of that?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

No, Gaurav. If you see our last Q4 presentation, we did mention that we are changing the life of the asset, and for every quarter we will have a INR10 crore impact that we said in the last fourth quarter itself. So that is the — there are two reasons. One, because of the change of the life of the asset, we have circa INR10 crores. And compared to last year, we have also added 11 new stores, so that is also contributing to depreciation of around about INR2 crores to INR3 crores. So that’s the reason for the difference of almost INR13 crores versus last year, Gaurav.

Gaurav Jogani — Axis Capital — Analyst

And so, sir, this wouldn’t come in the base from Q4 onwards, right? I mean the INR10 crores and the additional that was due to the change in the life of the asset?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

No, that was coming from the last year Q4. So if you have seen in the last three quarters, we have the additional depreciation of almost INR10 crores because of the addition, change in life of the asset.

Gaurav Jogani — Axis Capital — Analyst

Okay, okay. Sure sir. And sir, one last question from my end is with regards to the omni-channel initiative that we have taken, we are seeing good progress on the same with the sales now been around 6% odd. And once the contribution does go to 15% to 20% as we envisage for the next two to three years, how — can it contribute to the profitability? I mean is there any differential between the margins of what we have at the brick-and-motor store versus the online store?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

So, Nagesh here. See, I think we need to go into a little history and then look at how the way forward is. Historically, all online businesses have been making losses and we did make losses on selling. We were in the 1.5%, the loss was substantial. In the last two quarters, whatever online sales we are doing, it is almost reaching a breakeven stage. In fact at the unit economics, there is a positive contribution.

If I look at the gross margin, after supply chain, it will be almost 4% to 5% lower because of the supply chain cost of 5%. And if you try to anticipate the 6% contributions of this year going to 15% to 20% in the next two to three years time, I think the contribution should become very positive even at EBITDA level. So we are not seeing the omni business to be a loss-making business like you see in the online business and the various ventures that you have in the country and internationally where they keep losing money. We don’t see losing money in the online business anymore.

Operator

Thank you. We would request the current participant to please come back in the question queue for any follow-up questions as we have several participants waiting for their turn. In order to ensure the management is able to address all the questions in queue, we request you to please limit your questions to one per participant. The next question is from the line of Binoy Jariwala from Sunidhi Securities. Please go ahead.

Binoy Jariwala — Sunidhi Securities — Analyst

Yes, sir. Thank you for the opportunity. Just a quick one on — is there any one-time write-offs relating to inventory provisioning or anything captured under depreciation in this particular quarter?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

So we have already said, Binoy, we have provided INR16 crores as of date. And probably even if I take, divide it by three and then I add INR3 crores to INR4 crores, it will be there in the Q4 also. I mean I would expect that further inventory provisioning for the next quarter also. On the asset, I have just mentioned to you, the increase in depreciation is because of two reasons. One, because of the change in life of the asset and additionally 11 new stores what we have opened.

Binoy Jariwala — Sunidhi Securities — Analyst

Fair enough. That’s fine. But there is no one-time checking in depreciation right, one-time write-offs or anything of that sort?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

No, in addition to that, if you see in our balance sheet, our inventory level is also significantly lower compared to last year. If you see our own stocks, they are numbered from INR484 crores to almost around INR282 crores, I mean almost INR170 crores to INR180 crore reduction in the inventory levels right now.

Operator

Thank you. Mr. Jariwala, we would request you to please come back in the question queue for any follow-up questions. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.

Percy Panthaki — IIFL Securities — Analyst

Hi. Good morning, team. My questions are on the e-commerce business. So, out of the total e-commerce sales you’ve done, could you give me a split of how much of it is on your own website or app versus aggregators like Amazon etc.?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

So I think — Percy, Nagesh here. I mean if you look at it the way forward for businesses that even the online and offline business will not want to segregate, there is lot of mix happening across. If you just want an indicative how an 80% came from our own shoppersstop.com and the balance 20% came from Amazon and M.A.C. But going forward, because there is — it kept happening, there is a curbside pickup, there is a home delivery happening, there is a cross merchandise happening. So we will not want to segregate because eventually the future is all about digital commerce and it will be totally omni. But as of today, like I said, we’ve got 20% from Amazon and M.A.C and 80% from the shoppersstop.com.

Percy Panthaki — IIFL Securities — Analyst

Okay. And related question and pardon me if this is a bit naive, but why on Amazon do we need to onboard each store separately, why can we not have sort of Shoppers Stop as a entity on Amazon and then you decide from which store to fulfill the order?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

This is for customer convenience because you — I’m sure when you shop, you actually realize there is sometimes some inventory, you do not get or after you bought your life, the delivery time goes up. But if you look at it here, suppose if you’re staying in Basoa and nearest store is Andheri, the moment you come in, what you’re seeing is first the system picks up what is available in Andheri store, okay? It also brings down the delivery cost, the logistics cost and the ease of delivering you faster.

Second is if you look at the future, the future will be able to tell you that this is kept aside, or you may say I would like to pick it up. Rather than waiting for two days delivery, you may say I want to pick up on my way to office from your Andheri store. So the system picks up the nearest store. And this is what the hub-and-spoke is. And if you look at it, this is what the online players are trying to do. Amazon buying the Whole Foods or anybody in India wanted to buy an offline channel, is basically because they want to physically reach and be closer to the customer. We are doing the reverse because we already have a physical chain and we are closer to the customer, we are trying to see how we can actually — through technology and logistics and digitally connect our customers.

Operator

Thank you. Mr. Panthaki, we would request you to please come back in the question queue for any follow-up questions. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

Sir, my question is on the inventory. In Q1, we had return of around INR12 crores of inventory. In Q2 call, it was INR5.5 crores. So you said in nine months, around INR16 crores, INR17 crores, we have written off. So I assume this quarter, there would be no inventory provisioning. So why is the gross margin down? Is it due to the increasing online contribution or something else also to do with it?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Hey, Ankit, let me give you the numbers. In Q1, we provided INR5.5 crores, in Q2 we provided INR6 crores, and Q3 we provided around about INR3.5 crores — INR3 crores to INR3.25 crores, that comes to around about INR16 crores for the last three quarters, okay? That’s one. Second, as you rightly said, any inventory provisioning will impact the gross margin. Third, our gross margin is also impacted by the private brands because of the inventory we were selling at — with offers. So that is also impacting the overall gross margin. Our omni, even though it’s only 6%, though I agree omni on the gross margin is lower, but that will not impact the overall gross margin.

Ankit Kedia — PhillipCapital — Analyst

So from a private brand’s perspective, are we still deep discounting and liquidating the inventory, so if that…

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah, we do. We do. Some of the stocks of autumn-winter ’19 and spring-summer ’20, we do deep discounting and we are selling it off, because it’s better to sell at a discount rather than to write-off a [Indecipherable].

Operator

Thank you. Mr. Kedia, we would request you to please come back in the question queue for any follow-up questions. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.

Tejas Shah — Spark Capital — Analyst

Hi, thanks for the opportunity. Just couple of questions. So what number of stores will be housed in the mall with multiplex as of today?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

We have — among 84 stores, 11 stores are standalone and the balance are in shopping malls.

Tejas Shah — Spark Capital — Analyst

Sure. So, sir, in a hypothetical scenario of multiplex taking much longer time to recover or perhaps in worse scenario, structural shift, against multiplex altogether, how do we see our demand being independent of the trend going forward?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

So if you look at it, the infrastructure by the mall operators for a multiplex is almost 20% of the mall. We do not see a scenario of the multiplexes not opening at all. That, I’m totally ruling it out because it’s a very large industry and Indians love entertainment. In terms of opening up in phases, yes, it will happen. And our dependency is — we contribute to 25% to 26% of the customer entry of a mall. So if the mall entry is dropped to that extent, we get impacted, but don’t forget that 83% of last quarter sales came from our First Citizens. So irrespective of the multiplexes opening and not opening will continue to be serving our First Citizens, but with multiplexes opening, this will will actually enhance. So if we can maintain profitability at 75% of our business with our First Citizens, the jump in the business and profitability with multiplexes opening will be substantially higher compared to earlier years because of the cost reduction as well as the average ticket sales going up.

The third important thing is personal shoppers are contributing to 12,000 average transaction value compared to a 3,000-plus for a non-personal shopper or regular customer. So to me, I am seeing this as a very positive change and the productivity improvement has happened in the Company in the last three quarters. And I see more and more positivity coming out of it, and maybe Venu also has an answer to this. Yeah, Venu.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

So thanks, Nagesh. And just to add to what Nagesh just clarified on multiplexes, I mean, sorry on malls and multiplexes, the second factor also to consider is the other big footfall driver into malls is our food courts. And as Nagesh said, for the Indian consumer, entertainment and visiting malls is a big part of that. Food courts have progressively opened faster than the multiplexes itself, and that’s something which we are seeing contributing to footfalls coming up and even over the last two weekends, one — when I have been visiting malls. So one thing which you find is that the footfalls into food courts are significantly higher. So that again helps driving footfall into stores and into the malls.

The other aspect which also I must flag is that with our mall partners and developers, we have had — we worked together and we have negotiated on these costs and we see our occupancy cost going down which again helps on profitability. So that’s something which we continue to do in line with the level of footfalls that we see.

Tejas Shah — Spark Capital — Analyst

Sure. Sir, this was helpful, but just last one on this. In our guidance of recovery which we expect by mid-year — mid-calendar year, we have taken an assumption of the mall — multiplexes opening by then?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Yeah. But multiplex is opening, but not at the 100%, okay? We believe that they will gradually open. So our coming back is probably not 100% dependent on multiplexes.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

And that’s where the omni-channel because what we are seeing increasingly is that customers are choosing to shop using our Personal Shopper and White Glove service. They do shop even when they are not coming to malls and hence the recovery being ahead of the footfall growth itself.

Tejas Shah — Spark Capital — Analyst

Sure. And last, one bookkeeping question. I missed, perhaps if you gave this earlier. What will be category mix in our omni sales?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

We said that know, private brand is 20% and the brands are at about 80%.

Tejas Shah — Spark Capital — Analyst

No, and within that, apparel and cosmetic, if you can give breakup?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

It’s broadly the same as an offline, 60% is apparel, 40% is non-apparel.

Tejas Shah — Spark Capital — Analyst

Okay. And cosmetic, in particular, if you have number?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

I…

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Very similar.

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yes, more or less similar. And if it is something different, I will definitely come back to you. I will come back to you personally on that.

Operator

Thank you. Mr. Shah, we would request you to please come back in the question queue for any follow-up questions. The next question is from the line of Binoy Jariwala from Sunidhi Securities. Please go ahead.

Binoy Jariwala — Sunidhi Securities — Analyst

Yeah. Thank you for the follow-up opportunity. Just wanted to understand the — in Shoppers Stop, what is the typical refurbishment cycle and what is the typical refurbishment capex? And likewise for the beauty store, how does the economy work? What is the typical store size, sales per square foot, breakeven period on EBITDA and capex per square foot?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

So as far as the refurbishment cycle is concerned, in the earlier period, we have taken it as five years to seven years. Going forward, to me, it will in the region of three years to five years. So five years is the right point to look at it from a refurbishment cycle of any Shoppers Stop store.

Binoy Jariwala — Sunidhi Securities — Analyst

Okay. And sir on the beauty stores?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

The beauty stores, I think the average has been about 2,500 square feet to 3,000 square feet. And the first two stores have — before the COVID shown a path to breakeven. And in terms of the gross margin return on closed space or the gross margin return on square feet, they are almost towards the other brands. So we are clearly ahead of — on all the KPIs and the beauty stores.

Binoy Jariwala — Sunidhi Securities — Analyst

Okay. Would it be possible to quantify what could be the gross margin percentage and likewise capex and working capital per square foot on the beauty stores?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Normally, we don’t disclose the gross margins category wise and you’re aware of that, I mean that they are strictly confidential. Yeah, all I can tell you is the beauty margins are higher than our normal apparel brand margins.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

And within that, our own private brand is even higher.

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah. That’s right. Even within that, our own private brand is higher.

Binoy Jariwala — Sunidhi Securities — Analyst

Sure, sure. Thank you for — thank you so much.

Operator

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

Sameer Gupta — IIFL Securities — Analyst

Hello, sir. Thanks for taking my question. Just one actually. Just looking at the store metrics in a more granular fashion, so can you just explain on a sustainable basis, what kind of a cost per square feet number are we looking at, and this is including your corporate overheads and excludes the cost of goods?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah. See, that again depends on store-to-store, Sameer. See, if you take our income statement, you can see that we have a margin of between 32% to 34%, and EBITDA margin in an ideal circumstance would be between 6% and 7%, so you’ll get — leave the gap of, say, on the 26%, leave aside our head office cost of 3% to 4%. So that’s the overall broad number I can give you, but obviously this cost will be lower in a non-metro city and it will be higher in a metro city. So again, the store-to-store, like for example, if you take a store in a premium within Bombay, that will be higher. I can’t give a broad number, it depends on store to store, Sameer.

Sameer Gupta — IIFL Securities — Analyst

Agree it sir. But I’m asking on a sustainable basis, is it supposed to be similar to what it is today or there are some structural changes that can happen and over a period of time, this difference of 26% that can come down gradually is the basic thought process here?

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah. The basic thought process is we have…

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Yeah. And honestly, if you look at it, the biggest structural change that is happening is that we have redesigned our format for a lower area coverage. So against an average of 35,000 square feet to 40,000 square feet historically, today we are working on a 20,000 square feet to 25,000 square feet. So the two stores which have been opened, their productivity on a sales per square foot is almost 40% to 50% higher, okay? So the moment you look at these stores, automatically the throughput for these stores will be much higher. All the new stores that are opening that Venu spoke about, between 10 stores to 12 stores, are in the region of 25,000 square foot.

Sameer Gupta — IIFL Securities — Analyst

Got it, sir. That’s very helpful. So we are basically looking at lower store sizes which will — basically absolute basis might be the same sales, the cost per square feet may also be the same, but the size itself will be lower. So that will be…

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Also the other structural change that is happening is that private brand has moved from 11% to 13.5% and is on a growth trajectory. Private brands’ gross margin is almost 35% to 40% higher than the others, okay? And their contribution on a per square foot again would substantially go up. So these are things which are — had a traction in the last two quarters and the coming quarters are looking positive and there will be some structural changes to Shopper Stop.

Sameer Gupta — IIFL Securities — Analyst

Got it, sir. That’s very helpful. Thank you, sir. That’s all from me.

Operator

Thank you. The last question is from the line of Binoy Jariwala. Please go ahead.

Binoy Jariwala — Sunidhi Securities — Analyst

Hey, thank you once again. Karuna, could you help me with the breakup in the rental and non-rental savings of the INR390 crores? And there is an increase in loans and advances in the nine-month FY ’21. Could you just help me understand why was that? And last one is on the inventory. We’ve reduced inventory by about INR225 crores in this nine months. Are we comfortable with the current inventory level? Would it require a bit of more discounting or any write-offs, anything you can highlight on that? Thank you.

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Okay. Hey, let me go on the reverse order. I think the first question you asked is about the inventory. If you see our balance sheet in the investor presentation, we have clearly mentioned what is our inventory and what is ROR inventory. And ROR inventory is where we can return back the goods to the supplier. If you see our own inventory, it’s around about INR292 crores. The INR292 crores includes beauty, OR products as well as private brands. Almost roughly one-third is private brands, the rest two-thirds are non-private brands.

I think Ankit asked that question. As far as the provisioning is concerned, we have included whatever that has to be provided for the OR, that is our own inventory, that we have already considered in the Q4 — I mean we will consider in Q4, as and when it happens. We have included in the forecast.

What is the next question you said, about the lease rental and non-lease rental, right? I don’t want to mention the breakup, but all I can tell you is the lease rental would be one-third of the total or slightly more than one-third of the total savings, say 40%, and the non-lease rentals would be around about 60% of the total savings. Sorry, I missed you — the third question. What was the third question?

Binoy Jariwala — Sunidhi Securities — Analyst

There is increase in the loans and advances and…

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah. The increases in loans and advances is primarily because of the GST input credit. What we have taken on the goods, where we have purchased, we are unable to trace it because of the lower sales and because of the ROR purchases, what we have did. They will definitely get it placed as we go back. See, one of the rules GST has is, if you don’t pay the suppliers within six months of buying the stock, then we have to reverse the input credit because they are on the ROR basis, so that input credit will be availed only when we sell the goods.

Binoy Jariwala — Sunidhi Securities — Analyst

Okay. Just a bit on the inventory part. You just missed the comment whether are we comfortable with the current level of inventory? I’m especially talking about our inventory, not the SOR. Are we comfortable or…

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Yeah. We are comfortable and we are still working on — if that is possible to reduce it further, we are working on that.

Operator

Thank you. As that was the last question, I would now like to hand the conference over to the management for closing comments.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Thank you. And I think just to summarize again, in terms of where we are, I think as a business, we are very pleased with the way Q3 has performed and we continue to see the progress. We should — the COVID impact as it starts to get even lower, our businesses will keep growing. In terms of expansion, we talked about the opening 10 to 12 department stores, mostly Tier 2, and we’ll be adding 2,50,000 square feet over the next financial year, apart from three to five Arcelia stores which also we will be adding.

Our omni-channel business will continue to grow and grow exponentially contributing to a larger sale. Our focus on cost controls and maintaining liquidity continues and our safety measures for customers, employees and stakeholders also continue. Once again, thank you for attending this call and please do stay safe. Nagesh, would you like to add?

B. S. Nagesh — Customer Care Associate, Chairman and Non-Executive Director

Yeah. I just want to thank all the investors, and like I started off in opening remarks, I’m so happy to have Venu who has settled down in the Company in the last nine weeks and continue to work with the team and lead the team towards various objectives that we have set up. And my support to Venu continues and slowly and slowly Venu is taking over full charge to run the business. Thank you once again and wishing you all a wonderful season going ahead and all you and your family members are safe. Thank you very much.

Karunakaran Mohanasundaram — Customer Care Associate and Chief Financial Officer

Thank you.

Venugopal G. Nair — Customer Care Associate, Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. [Operator Closing Remarks]