Pantaloon’s same store sales (SSS) growth for its lifestyle retail segment increased by 12.7%, the strongest SSS growth in the last six quarters. Photo: Ramesh Pathania/Mint
Live Mint :Pallavi Pengonda : Tue, Feb 26 2013. 10 13 AM IST
Pantaloon’s sequential growth proves consumer sentiment is back,
but sustainability remains to be seen
The financial results of Shoppers Stop Ltd and Titan Industries Ltdfor the December quarter (including the festival season) proved that consumer sentiment has improved during the quarter. The latest to confirm that trend is Pantaloon Retail (India) Ltd, which announced its December quarter results after market hours on Monday.
The company had maintained in its September quarter investors’ update that in 2012 the full impact of the festive season sales will be captured in the December quarter. Pantaloon’s core retail business sales numbers reflect the positive seasonality impact. Here’s the icing on the cake: the company’s same store sales (SSS) growth for its lifestyle retail segment increased by 12.7%, the strongest SSS growth in the last six quarters.
SSS growth measures growth based on stores open for at least a year. This variable becomes important because investors are aware that retail companies have been battling weak SSS growth for a while now. In the December quarter, Titan too saw an improvement in its jewellery business volumes and evenShoppers Stop saw an increase in its like-to-like sales volumes. Even as the home segment SSS growth continues to languish, what’s heartening in Pantaloon’s case is that the value retail segment performed well. SSS value growth increased by 5.1%, again the best in the last six quarters.
While that gives confidence, it remains to be seen whether the good cheer has continued beyond the festive season. That’s why the current quarter becomes all the more significant to judge whether the improvement in consumer sentiment is a sustained one.
On an overall basis, Pantaloon’s core business total operating revenue increased by about 10% on a year-on-year basis to Rs.3,178 crore. In comparison, September quarter revenue growth stood at 5%. However, profitability remained weak on a year-on-year basis. For instance, its profit before tax fell to Rs.7 crore from Rs.19 crore from the same period last year. Of course, sequentially the company performed well but then as mentioned earlier, the December quarter had the positive impact of the festival season. Additionally, interest costs were sequentially lower and flattish on a year-on-year basis, boosting overall profitability.
In the last one year, the Pantaloon stock has outperformed the BSE 200 index of the Bombay Stock Exchange, mainly because of the foreign direct investment news flow. Going forward, the sustainability of the SSS growth momentum is what will matter most for the stock
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