Ladies and gentlemen, good day, and welcome to the Shoppers Stop Limited Q1 FY 2022 earnings conference call hosted by Axis Capital 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. Should you need assistance during the call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from Axis Capital. Thank you, and over to you, sir. Thank you, Ray. Good morning, everyone. At Axis Capital, it is our pleasure to host the conference call for Shoppers Stop today. From the management, we have with us Mr. Venugopal Nair, Managing Director and CEO. Mr. Karunakaran Mohanasundaram, Chief Financial Officer. Mr. Jaiprakash Maheshwari, Vice President, Finance and Accounts. I would now like to hand over the call to the management for their opening remarks, post which we can take over for the Q&A. Thank you, and over to you, sir. Thank you, Gaurav, and thanks, Ray. Good morning, friends. Thanks for joining us today to discuss the Shoppers Stop financial results for the first quarter of the fiscal year 2022 that ended on June 30th, 2021. Before I talk about performance, please note that 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 our performance. Before we discuss business, I want to talk about the difficult phase that the country went through in the last quarter. As the second wave overwhelmed the country's medical infrastructure, we recognized that vaccination was our best bet for an early return to normalcy. We undertook a pan-India vaccination drive that began in May amongst our colleagues and brand associates, and we not only covered all our employees, but all the associates who work with us. I am happy to say that as of today, 99% of our eligible employees and associates are vaccinated with at least one dose. Needless to say, this has been completely funded by the company. Due to the time interval of the first and second dose mandated by the government, we will have the second dose falling due by the middle of August, for those who have not completed their second dose. We expect to complete the second dose by the end of August. That will complete the entire vaccination program, which we believe is a strong factor in ensuring the safety of our employees and associates. The agenda of today's call will be as follows. Firstly, I'll talk about our performance in Q1. I'll then talk about the performance on our strategic pillars, and finally, the way forward for this current quarter and for the full year of this financial year. Q1 performance. On the Q1 performance, similar to last year, COVID impacted most part of the quarter. Despite this, our sales grew by 306%, and our gross margins improved by circa 1,200 basis points. The stores were operational for merely 28% of the eligible days. As you are aware, the second wave began in April and almost started with Maharashtra, which was completely shut. Progressively as April went on, the number of stores across the country increased in its closures. May was almost completely shut across India, and in June, as the cases started to recede, the stores started opening with state governments relaxing the opening of the stores and also the opening hours itself. However, in June, for most part of July, our stores have been functioning with restricted timings. Maharashtra and Kerala have been mostly shut. In a lot of other markets, weekends closures have been followed. As I speak to you would have all seen the press reports that Maharashtra is now considering opening of malls and cinemas from the August 1st. We're waiting for the detailed notification. Of course, that's very welcome. As the physical stores were shut, we engaged our customers through our omni-channel business. We continued to benefit our customers, our business benefited in that process in the shift to omni-channel. As our customers chose to engage with us both offline and online, including their preferences with the help of our Personal Shopper assistance. Our sales growth of 295% through our digital channels gives us immense confidence in our continuing shift to being a truly omni-channel retailer. Overall, our EBITDA losses were lower by INR 17 crores. We have sufficient liquidity, including an additional credit of INR 100 crores sanctioned during the quarter, which we have not drawn as on date. During the quarter, we invested in marketing and had seven campaigns, and this contributed to INR 31 crores of sales, and it continues to contribute to our top line. While we invested in marketing, particularly in omni-channel, I'll also talk in much more detail about our omni-channel performance in a few minutes. In terms of our KPIs, we saw significant improvement on a few parameters. Our average bill value was considerably increased from FY 2020, a 22.6% increase. Also, the number of items per basket increased by 20.4%. In terms of products, men's casual wear, denim, women's western wear, inner wear, watches, fragrances, and beauty categories outperformed. Even men's formal wear has shown a smart recovery, partially due to the wedding season getting extended. The categories which have been slower are sunglasses and women's underwear. On operational costs, we continue to save versus FY 2020. In Q1, we saved approximately INR 140 crores. Just to remind you, we have opened over 12 stores during that interim period, and hence the cost savings are not directly comparable. The stores were partially open and shut, and because of that, our lease rentals were higher than last year, but still lower by INR 43 crores versus FY 2020. I'll now talk about our strategic pillars. As happened in the last few years, I am pleased to inform that our performance has been consistently good across all our strategic pillars. Our First Citizen strategic pillar is what I'll talk about first. Our loyal customer, our First Citizen customers, and the sales that we generate from them continues to contribute to a majority of our sales. For this quarter, our First Citizen customers contributed to 72% of our sales. We continue to grow this program. Our average bill value of First Citizen customers is 20% higher than that it was in FY20. We are segmenting our campaigns and targeting our loyal customers through various channels. We have also extended our membership points that were lapsing during the quarter to enable our customers to make use of their points over the next two quarters so that they don't lose out because of the stores being shut. For our exclusive First Citizen Black customers, we have initiated active engagement programs, which we intend to do on a monthly basis. Our store managers, our unit heads, now directly manage the Black card customers. On Omni-channel, our contribution First Citizen remains at over 40%. Our second strategic pillar is Omni-channel. As we have said in our previous quarters, on Omni-channel and investment thereon has been giving us good results. I am pleased to say that for this quarter, Omni-channel contributed to 18% of our total sales. We had several campaigns during the quarter. Our Share My New Year with Shoppers Stop exclusives during the Bengal New Year was received very well. For Mother's Day, we had Shuffle with Anushka. During the complete closure that happened in May, I had personally messaged to all our members to stay in touch and for any help that they would need, especially to procure essentials, and we were ready to ship them, which we did. Our Add to Heart campaign in May with exciting offers had record sales both across the entire channel and also in beauty. We had a beauty event which was done in June, and again, we recorded highest ever single day sales for both beauty and omni-channel. I do hope that all of you have visited our website, www.shoppersstop.com, and also downloaded our app on your mobile. We have improved the overall customer journey on our app and website, and as we speak, we continue to improve on it. We have engaged a leading international consultant to handhold us for the next phase of this journey. We have made considerable investments in UI/UX, analytics, and personalizations, which are our key focus areas. These developments will lead to smoother discovery, seamless checkout, segregated category focus, clear brand highlights, and a lot more. You will start seeing these changes over the next two to four months. We have also commenced Project Jarvis, a massive data lake and analytics projects. This will significantly improve our overall analytical capabilities. This will enable us to have a significantly better understanding of our customers' behavior, their preferences, and enable us to personalize the offers for them with products as per their preferences. This, combined with the rich data of our First Citizen customers who have been loyal to us for years now, will improve the overall experience that our customers have with us, and also help us to add to our First Citizen loyal base and increase our overall customer base. All of this, we believe, will lead to a higher share of our First Citizen customers, as also enable us to bring in a lot more new customers onto our app, website, and stores. As we scale up, we need to build talent. I am delighted to welcome our new Head of Omni-Channel, Sreekanth Chetlur, who joined us a few weeks back, and also our Head of Retail Operations, Sandeep Narain. Sree has several years of international experience and with the most recent of it being with Matahari in Indonesia, and has worked in leading international chains in India, Middle East, and Southeast Asia. Sandeep, similar to Sree, has also worked in large international chains, with his most recent stint being with Max in Malaysia, from where he has joined us. They are extremely talented individuals with proven track record. I'm confident we will find their experience extremely enriching and add tremendous value to us as an organization and help us to scale up much faster. I'll now move on to our third strategic pillar of private brands. We continue to out-perform in private brands. Private brands contributed to 15% in this quarter. In our online business, our private brand contribution has now increased to 20% plus. As you are aware, Shoppers Stop has both apparel and non-apparel. Specifically, in the apparel category, private brand contributes to 21% of our total sales across the business. Similar to the previous two quarters, we continue to register significant volume growth. In this particular quarter, our volume growth was at 96%. We launched Insense, our highest selling women's western wear brand, and Bandeya, a range of Indian wear for men's. Our new range of products in kids wear have also performed exceptionally well. Our offer on the price value matrix is considerably better and continues to improve. Our products are extremely competitive, great quality, and have significant features on them, specifically on performance. These complement the international and national brands that we offer in our stores and on our app. Very nicely gives a broad choice of brands for our customers to choose from. We have been receiving incredibly positive feedback from our customers on our products and on range. The massive volume growth that we have seen bear testimony of the success that we are having. Our First Citizen customers' contribution also continues to remain strong in private brands. The fourth pillar or our fourth strategic pillar is beauty. I will now talk about that. Our beauty business had the highest contribution ever in this quarter, contributing to 19.2% of our sales. Our online sales for beauty was 20%. Fragrance and makeup led the overall recovery. We launched Kenneth Cole and Vince Camuto, leading international brands in fragrance. In our private brand, Arcelia, we launched a number of new variants across bath and body, hair accessories, and personal care categories. We had the Showstopper Fest for beauty across online and offline, and plan to continue having these beauty fests at regular intervals for the rest of the year. We have enhanced the makeover services, both paid and free, on skincare, fragrance, and consultation. This is a significant point of difference that we offer to our customers. We are planning to launch a number of new brands in the coming quarter with strategic partnerships with global leading beauty companies. Finally, coming to the strategic pillar of Personal Shoppers. This is our unique service to our customers. The Personal Shoppers contribution has been consistent. This quarter, it was at 16%, with the average ticket size being two and a half times higher than the average. During the lockdown, we did extensive calling of our customers, and that generated more than 3% of our total revenue for the quarter. Our endless aisle sales during lockdown also contributed significantly to our omni sales. This has now been embedded as a regular part of our business. We have styling festivals through our Personal Shoppers, both online and offline. Our other services, such as Yellow Messenger and White Glove, continue to grow our overall sales. I'll now talk about Q2 and the way forward. Even as we speak, our national vaccination program, probably the biggest in the globe, is proceeding well. We are confident that this will help us to get business recovery accelerating, and we will not have a similar experience to what we had in Q1. The COVID Wave 2 has brought into sharp focus the volatility and uncertainty of the times that we live in. I'm extremely happy to say that our employees have responded very well, showing resilience, and have helped in serving our customers during this tough period. We have always said this, and we will continue to reiterate, our biggest asset are our people. Their safety and wellbeing are our topmost priority. They are our frontline warriors and act as catalysts between our loyal customers and management. They continue to give their first-hand feedback on our customers' choices, preferences, purchasing power, et cetera. When I speak to you next time in October, I'm confident that all of our employees would have been vaccinated. This year, the festive period has moved forward by a few days, which will help our business. Omni is a long journey, and we are delighted with the progress that we made. This is an area where we continue to invest, and specifically in technology and marketing. In Q1 versus FY 2021, we had investments of over INR 10 crores, this will continue and increase as we expand the channel. We continue to believe we can grow profitably in the near short term. On operational efficiencies, we genuinely believe that we are in the next stage. We constantly benchmark some of the best companies and continue to course correct where possible. While balancing cost and cash, we will continue to look for growth opportunities and invest in the right ROI model. This will enable us to build a business and strengthen. As I said in May, we expect the COVID impact to start receding as we are seeing it already. Our store expansion program continues to be on track. We have been speaking with our developer partners to ensure that we can open the stores that have been planned on time. As I said last time, we should open 20 stores across all formats, and I reiterate that. We did close two unprofitable stores in the month of July, and we will continue to evaluate the performance of our stores, making corrections where needed. Last but not least, our growth fundamentals, that is our four strategic pillars and omni-channel. Improving the penetration, impactful innovations, designing our omni-channel, and creating the fuel for growth, combined with four clear priorities of people, customer, product, cost, and cash. With the technology muscle that we have built in the last one year, helped us to navigate this crisis, and it will continue to do so. Needless to say, our safety measures for customers, employees, and stakeholders will continue. I will now open up for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nihal Jham from Edelweiss. Please go ahead. Yes, sir. Thank you so much, and good morning to the entire management. Sir, a couple of questions from my side. First, just to understand the recovery better, are we saying that despite our key state of Maharashtra being closed in July, we are still at a 70% overall recovery? Just wanted to understand that better. Comparing like-for-like stores that are open for the operational days, we are at a 70% recovery. This number would be lower because Maharashtra is still not open, and for our existing stores, we are at a 70% recovery. That's correct. That's helpful, sir. Sir, the second question was on our store expansion target of 20 stores that we are giving. Possible just to split it in terms of the department stores and some of the other formats, if there is a ballpark figure that you may have internally lined out? Yeah. 10-12 of the 20 is department stores, the large Shoppers Stop department stores, and the rest would be beauty stores. That's helpful. Last question from my side, sir. When you say that we are looking at getting into tier 2 and 3 cities again, are we looking at making the department store sizes more efficient and even in terms of collection, maybe a higher share of private label? Just your thought as we enter these cities about what is it that could change, and would beauty also be a part of the expansion into tier 2 and 3 cities? I'll take that one at a time. Firstly, as we go into smaller towns. We would have the store sizes appropriate for those markets. Typically, we are looking at 20,000 sq ft-30,000 sq ft stores for the smaller towns as we go in there. This gives us much better productivity and efficiency, as you can imagine. All our department stores carry our entire range of categories that we have, including beauty. Beauty is a fundamental part of our department stores, and they will definitely be present in all the department stores that we open. Sure. That's helpful, sir. I will come back in the queue with any other questions. Thank you so much. Thank you. Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from the line of Shalini Gupta from Ashika Securities. Please go ahead. Yes, sir. I wanted to congratulate you on so many initiatives and efforts that Shoppers Stop is making. At my end, it will be very helpful if you could just help me with few numbers going forward. What is the expectation? Is it fair to say that gross margins will be at around 3%? Sorry to interrupt, Shalini, but your voice is breaking. We can't hear you very clearly. Okay. If you want to ask me the question, please answer. Sir, can you hear me now? Shalini, Karuna here. Go ahead. Yeah, it's better. Okay. Sir, I just wanted to ask, is it fair to say that gross margins will be the same as they were in financial year 2021? No, Shalini. We expect the gross margins to improve because FY 2021, the scale was probably less than 50% of FY 2020. As Venu just now said that, as the situation improves. We expect Q2, Q3, and Q4 to be better. We also have a higher mix of private brand. We expect the gross margin to be better than FY 2021. Okay. Sir, my second question is that sir, we have cut a lot of costs. I think about INR 400 crore, INR 450 crore of cost were cut in FY 2021. Is it fair to say that our costs now will be at around INR 350 crore for FY 2022, other expenses? Shalini, if you observe, that INR 433 crores what we saved in FY 2021 includes lease rental and other expenses on a reduced scale of operation. There was a question at the beginning of the year. For a full scale of operation, on a like-to-like basis, we will continue to save INR 200 crores. Okay. This year, again, we are not having a full scale of operation. We are having a reduced scale of operation in Q1. Depending upon the scale of operation, our savings will also be there. We expect this year, I don't want to give a number, this year also the savings should be relatively better, the savings will be versus FY 2020, not versus FY 2021. Okay. Sir, in the presentation you have mentioned that your rental expenses were about INR 50 crores for the quarter, INR 54 crores I think. Going forward also now, we are expecting that obviously once the recovery starts Q2, Q3 or whenever that really happens, the rental expenses for the year will be at around INR 650 crores-INR 700 crores or so? Shalini, I think probably you got juxtaposed on the numbers. Okay. In the first quarter, our lease rental expense is INR 77.7, which is INR 78 crores. Okay? Our normal lease rental expenses are in the range of INR 450-INR 500 crores in a year. Because the malls were shut in the first quarter, and some of the malls were shut in the second quarter, we will expect some savings in the lease rental. As I said, it all depends on how the malls are opening in Q2, Q3, and Q4. Depends on that, we will negotiate the lease rental with the landlords. Okay. Yeah. Those would be my questions. Thank you. Thank you. Thank you. The next question is from the line of Priyanka Trivedi from Antique Stock Broking. Please go ahead. Thank you for the opportunity. Sir, my question is basically, this time we understand that the recovery has been very sharp in comparison to the first wave. During the first wave, despite the things opening up, consumers were still skeptical of getting out of their homes, and it took us almost one and a half to two months for the recovery to pick up. However, this time the recovery has been better. What, according to you, has led to this sharp recovery? Basically on the consumer mindset and the sentiment side. Morning, Priyanka. Thanks for that question. I would like to believe that it is the fantastic range of products that we offer, which obviously leads and helps that recovery. Apart from that, I think some of the other factors which are driving that growth, I think first and foremost is the fact that vaccination drive is happening, as I mentioned in my speech. That definitely is helping, giving customers the confidence to get out of their homes and come out to stores and malls. What we are also finding this time is that unlike the last time, where it was much more mission based shopping, this time when the customers do come in, they are spending a longer period, and the overall footfalls into the stores and eyeballs onto the app have been higher than what we saw the last year. Okay. Finally, I also believe, we see that buying related to marriages have also happened much more than what we saw last quarter, because the marriage season itself got extended, that's led to buying happening for those occasions. This is specifically telling when we look at categories like men's formal wear, which has had a much better performance than what it was last year. In terms of specifically to products, last year, we had observed a sharp increase in items which were specifically COVID essentials like masks, home products, T-shirts, shorts. This year, the recovery has been much more wider across a larger number of categories. I hope that answers your question. Yes, most of it. Sir, my second question would be on your online business. Our sales were at around INR 44 crores during the quarter. How much of this has come from our own website, and how much has come from the third-party websites? Also, if you could give some sense in regards to the key parameters with regards to the online business like the conversions of the online traffic, the average basket size on our online platform, the average selling size. On those parameters, basically. Okay. Out of the INR 44 crores of net sales that we had from online, the majority of it came from our own website, which is shoppersstop.com, which was roughly 75% of our sales came from shoppersstop.com, and the rest was a combination of other websites that our products are presented, including Amazon, and also the beauty standalone apps of mac.in, esteelauder.in, et cetera, which we manage. Got it. Thank you. We move to the next question. The next question is from the line of Trilok from Aditya Birla Sun Life Insurance. Please go ahead. Yeah. Hi, good morning, sir. Thanks for the opportunity. I just wanted to understand this rental concession point. How should we build that going ahead? One of the statement on item six also speaks about there is some concession on period after June 30th, 2021. Trilok, in terms of rental concession, it is directly related to the store's opening operational number of hours, and it varies from mall to mall, store to store. There is no one fixed number one can give, but what we are seeing and what we have had in the first quarter, we're working with our developer partners. We have worked out models which benefit us as well as be fair with our developer partners. Overall, because the number of stores that were shut was very high in Q1, which is why the overall reduction in rentals was very high. We expect that to continue to have rental concessions in Q2 as well because of the fact that it is restricted number of hours and also some store closures continue to be there. Okay. If you can just help me on what is the percentage? I'm sure a lot of stores must be shifted to revenue sharing as well. What is the mix between revenue sharing and rental? If you can just give some sense on that? Yeah, Trilok. I'll tell you what. We have agreements which are exclusively revenue share, and we have something called a minimum guarantee, and above minimum guarantee we pay the revenue share, and there are minimum guarantees. Okay. Okay. We have three type of stores. If you see our non-GAAP income statement, again, we have reported around about ₹17 crores of it, and we have significant savings in the first quarter. For the second quarter, we continue to negotiate with the landlords. I think just Venu said that. It also depends on how many stores were open and how many hours they were open. It's bit early in the month of July to say what will be the savings or what will be the revenue share. It's a bit difficult right now to estimate that. No, I was just. Okay, fair enough. The last question is, as of today, how much would be the operational store, which is at 27% in the Q1 where it was? Sorry, Trilok, last thing there, operational? Operating stores. Operating stores. Yeah. Today we have close to 70 stores operational or I would say, 70 of our 85 stores are operational today. Places which are shut is obviously Maharashtra, as you know, Bhubaneswar and Calcutta. Yeah. Weekends, Uttar Pradesh and Ranchi are also shut. Effectively, although it's 80% of the total store, but the hours wise, it could be 50%. Is that correct to assume? Circa. It varies so much. Yeah, I understand. Yeah, just a ballpark level of thinking. So on and so forth. Of course, I think, for everyone, worth calling out that while the impact of stores operation not operating is there, we have migrated and moved to being a true omni-channel retailer, effectively we are available and all our stores are available 24/7. No, I really appreciate on that. Benefit of that as we go forward. Certainly. Yeah. We have seen that significant traction on that particular front. Thank you. Thanks, Trilok. Thank you. Thank you. A reminder to participants that you may press star and one to join the question queue. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Yeah. Thank you very much, sir. My question is little on the medium term perspective. Let's say from the two to three-year perspective, once we are through with the pandemic, how do you see that, in terms of past peak, in terms of revenue, scaling up? Any kind of thought process on those lines would be helpful. Yeah, Deepak. Thanks for that question. If I look at the medium term perspective, we are extremely confident about the economy in the country and the growth of retail in there. To give you some broad perspectives, today, 29% of total retail in the country is organized retail, which is obviously the category that we play. This is something which has been growing year on year over the last 10 years, and we expect this to continue to grow. Even when you look at some of the developed economies, and I'm not even looking at the fully Western countries of Europe and U.S., even in places like Southeast Asia, organized retail is 50% or thereabout. Just that headroom for organized retail to grow is very high, and that is the first reason for our optimism of retail. The second is, as a country, people like to socialize and going out to malls, movies, food courts is a very important activity that we do as a family, with friends, et cetera. That will continue to remain. That's the other reason that the shopping will continue to grow. The shift that we have made to being a truly omni-channel retailer will also stand us in good stead because it gives the customers the convenience and the option of shopping, and engaging with us online at any point, as also having the physical experience of trialing a garment, experiencing makeovers in beauty and so on and so forth that we offer across our stores. The whole opportunity to engage with us physically through our stores and online gives us an added edge in terms of our ability to service our customers. Finally, the third factor is, of course, the growth of the economy per se, and also the improving infrastructure, especially in the tier 2 and tier 3 cities, where we've just touched the surface, if I may use that phrase at the moment. That's an area of expansion that we have identified for ourselves, and we will keep growing. Add to that our growth in the beauty segment, which again, as an industry is in its nascency, and that will again stand us in very good stead. If I look at just those four reasons alone, we are extremely confident about the future in the next three to five years. Yeah. That's quite helpful. In terms of specifics, do we aspire to regain the INR 3,500 crores type of top line with 15%-16% of EBITDA margin that we had done in the recent past once we are through with the current situation? We would expect to do much better than that. That, in my view, would be just a bare minimum, and we would be doing far better than that. Understood. That's it from my side. All the very best. Thank you very much. Thank you. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead. Hi. Thanks for taking my question. Sir, my question is related to categories which saw slightly weaker recovery, like you mentioned, categories like Indian women wear. What, according to you, are the reasons for weaker recovery for these categories, and what are the potential drivers that shall lead to a pickup in these categories? I think specifically on Indian wear, part of the reason is because the number of occasions other than weddings have not been happening, with people being at home and not venturing out. Specifically wedding wear in ethnic wear is not something which we play in massively at this point in time. The opposite of that, which is lounging clothes, sleepwear, has seen spectacular increases, I think that is what people have chosen to buy in the short term while they were stuck at home. As that moves out and people start socializing, these categories will come back, it's just a temporary blip in our view. Okay. This, according to you, is a mobility driven thing and there is nothing structural that should propel people to wear more Western wear and move away from Indian ethnic wear? Absolutely. I think Indian wear is a fundamental part of our customers' wardrobe and will continue to grow if anything, because Indian wear has got multi-occasion use. It is comfortable, and it's something that our customers genuinely appreciate and like. As we improve our offering, and specifically within our private brand portfolio, this is a category which we are strengthening, and you will see some significant improvements over the next quarters across our brands of Kashish, Stop, and Haute Curry. As we do that, we expect this category to be a very significant and important part of our overall portfolio. Lastly, sir, these new labels that we are entering into, or we are developing more into these labels, what is the segment among value, premium, and luxury? Where are they going to play? Each brand has a specific lifestyle use and has got very sharp brand definitions. The overall brands that we have are quite large, so I wouldn't go into each of them. What I would say is that each brand has a clear target customer, has a clear lifestyle segment that it caters to, and the range that we offer brings in the latest trend, the latest colors for the month, and we are moving into monthly launches so that every time a customer walks into the store, there is something new that she and he can see and buy from. Okay. That's quite helpful, sir. Thanks for taking my questions. That's it from my end. Thanks. Thank you very much. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you. Sir, my first question is with regards to the CapEx program for this particular year, given that we are planning to open 10-12 departmental stores and duty stores. If you can give the breakup of the CapEx in terms of store opening and also on the omnichannel initiative. Hey, Rahul. Thanks for the question. See, unlike last year or the previous years, this time the landlords themselves are investing in our overall CapEx program. Though we are going to open 10-12 stores, large stores, and 8-10 smaller stores, we expect our CapEx to be anywhere between INR 80-100 crores this year, and we should be able to fund that. Sure, sir. Thanks. Sir, my next question is with regards to, given the fact that the COVID again came in during this month of April, May, which is where generally most of the people put in the new collections and everything, and we believe there will be some inventory implication across. How do you see the discounting going ahead? Do you see the level of discounting increasing, decreasing? Any trends that you can help with? As I had mentioned a few minutes back, we have moved to monthly launches and shorter buys, and this is something which we have been working on and have moved to over the last 12 months. What that has done is to help us having a very, I would say, optimum level of inventory, and a large chunk of our inventory is very fresh because of the fact that we are buying for shorter lead times and buying much closer to the season. Because of that, we are very comfortable with the level of inventory that we currently have. As you know, we have both private brands and national and international brands with whom we partner. A number of the discounts that are offered by the brands are also funded by the brands itself. To that extent, the discounting is completely based on what our brand partners want to do. On our own brands, the ones that we design and retail, we have moved into monthly launches, shorter lead times, and because of that, having fresh inventory all the time. Just to add, compared to last year, our inventory is exactly, say, June 2022, June 2021, we have reduced more than INR 170 crore on inventory. That excess inventory is not an issue anymore, Gaurav. Sure. My question actually was more in terms of the industry trend. Thank you. As you rightly mentioned that the other brands that you have would also be looking for, so was looking more on industry perspective, let's say, rather than yours. I get your message. Sir just last question with regards to the omni-channel initiative. We have seen a really good progress over the last seven and a half years that you have been doing this, and now it's contributing to 18% of sales. While I agree the percentage seems to be a bit higher because of the lower level of sales from the stores, but what is a steady state or a percentage of contribution that you expect within the next one year or one to two years when the things get normalized? What kind of contribution are you expecting from this channel? Thanks for that question, and I really appreciate the recognition of the work that we have done on Omni-Channel and the results that we are seeing. As I have mentioned, we have made significant progress in our Omni-Channel journey, and it is now an established form of our business. In terms of our current numbers, you are right because the stores were closed and hence the 18% is slightly inflated. If you look at two years back, it was about 1% of our sales. In fact, not even to 18 months back, it was less than 2% of our sales. It moved up to around 6% of our sales last year as we closed the financial year 2021. This year, and going forward into FY 2023 and FY 2024, we expect it to end up being around 20%-25% of our total sales. As I think it's also important to recognize and appreciate that the sales that generate and end up being bought through the digital channels is not a complete reflection of the actual contribution. Because increasingly, as a true omni-channel retailer, there will be a lot of business which probably will happen in the store, but would have started off through the app or through the website, and vice versa as well, where it would have probably been something that the customer would have seen physically in the store and end up buying online. As a pure number, we expect it to be around 20%-25% of our total. Sure, sir. Thanks. Good luck. Thank you. Thank you. The next question is from the line of Rahul Jain from PhillipCapital. Please go ahead. Hello. Thank you for taking my question. My question is basically on the beauty segment. How are the customers responding to our private labels products launched in the last six months, and how are the price points of these products, and how does this affect our relationship with Estée Lauder Group? I presume the question is on Arcelia, that you are asking, Rahul, which is our private label brand in beauty. On Arcelia, we launched in November last year, and we have launched with bath and body. Every single month, we have seen a month-on-month increase, and it's growing very nicely. It is still a small part of our overall offer that we have. In this quarter, we'll be launching perfumes and deos, followed with cosmetics across eyes, face, lips, and nails. Subsequent to that, in Q4, we also will be launching skincare and haircare on Arcelia. Overall, Arcelia is a beginning of the journey, has had a very good start, a very good launch, and expect that to continue to grow as we go forward. Overall, beauty, of course, had its best quarter at 19.2% contribution to our overall business, which was 200 basis point increase over the previous year, and the online mix itself was 20%, as I had mentioned. In terms of the impact of this on our business with Estée Lauder, it does not really have any. In fact, it's just an additional business because the Estée Lauder standalone stores that we operate are only for Estée Lauder. Obviously, there it's only the Estée Lauder products that are sold. Where it is a department store, we are at liberty to have as many brands as we would like, giving each brand the necessary importance and space. In that, towards that, what we have done is to move to a beauty hub concept, which you will see in our new stores, which is much more space efficient and also highlights each brand very nicely. The newer stores, each of the newer stores that we are opening are using the beauty hub. This is something that we will continue to roll out as we go forward, apart from our own Shoppers Stop beauty stores, which we also talked about. Rahul, just to add, we don't have an exclusive arrangement with Elca. That has nothing to do, I think Venu already reiterated that. Yeah, where it is Estée Lauder, the stores we operate for Estée Lauder, they are standalone for Estée Lauder. The MAC stores will have only MAC products, Estée Lauder will have only Estée Lauder, Clinique will have only Clinique. We won't have Arcelia in those stores. Okay, got it. Sir, a follow-up question on the beauty private labels. What is our moat when it comes to Arcelia, apart from our physical store presence, and do multiple DTC brands are investing millions in marketing to gain traction, how are we expecting to stand out from the crowd at the moment? The moat that we have on Arcelia, and I think it is the uniqueness of the product that we offer, the product innovation that we bring in. When I talk of product innovation, it is the infused ingredients that we have in skincare and the 100% natural products that we have. It gives us the ability to bring to customers product which they like. It also, by having our own private brand, it gives us the ability to react to what customers are looking for and bring them products based on what they like. Of course, apart from that, it also enables us to give them the full offering of 100% natural products across bath and body accessories. What's coming up soon, i.e., fragrances, deodorants, makeup across eyes, lips, nails, face, skincare, and haircare. Sir, regarding the marketing, how do we plan to market this brand going forward? Each brand needs the investment to improve its awareness and to move it from being a label to a brand. That is something that we are doing, and we will grow that as we increase the number of products that we are offering. Our primary channel of marketing has been digital, and that is what we would continue to do. We engage with influencers, and going forward, also with celebrities to be able to ramp up and amplify the awareness of each of our private labels, including Arcelia. Got it. Thank you. Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from the line of Binoy Jariwala from Sunidhi Securities & Finance Limited. Please go ahead. Yes, hi. Good morning, and thank you for the opportunity. My first question is on the private label business, and the pricing philosophy. In the past, you've spoken that we are sharpening prices on the private labels. I understand that this could come from the philosophy of first price being the right price. Now, if you could just share your thoughts on that. Is my understanding correct? Secondly, this philosophy of pricing, can it be applied to the branded label business as well? Binoy, thanks for that question. Good afternoon. The philosophy on pricing is having the price right and it not being the primary factor that would lead to a customer buying. I think what is important is to have the latest fashion curated. Our job as retailers is to offer a curated range to our customers, so that whether when they are looking at our brand on the app, website, or in the store, it is a selection which we offer them, which helps them to buy for their wardrobe. It is not one unit. We are not trying to compete at being the cheapest. That's not the game at all that we are in. It is about offering great value. Value is about what you offer at the price that you offer. Price is a secondary factor, and it is a delight when you offer fantastic product at prices that are surprise. That's the philosophy that we have applied, and that's the philosophy that we have been consistently following. It is also about each brand stands for itself. It has a clear definition, a lifestyle that it caters to. What we design, range, and put into our stores and on our websites is a culmination of a lot of effort to bring in a very sharp offering for our customers. In terms of branded label, I think, again, I would not like to speak for other brands because each brand has its own philosophy, and it would vary depending on the target customer that they are trying to reach. In terms of our own brands, and as we grow our brands and make these established brands in their own right, our philosophy will always be about offering the latest trends, the latest fashion for the target customer, curated and offering absolutely fantastic value in terms of quality, performance, at prices that are a surprise. Understood. Related to this and on the private label business, could you talk about how much of the retail area in the new stores is being allocated to the private labels? How much of the shelf space is being allocated to the private labels? Binoy, it would depend on the store, it would depend on the catchment. There could be, if it is a market which lends itself to more casual wear, then you would have more space for casual versus if it is an area which sells more premium. I wouldn't put a very specific number for that. It would be highly dependent on a number of factors. What I would say is that we will ensure that we do justice to all our brand partners as well as to our own brands. Finally, it is about ensuring that we offer the best mix to our customers as also ensuring that we have high productivity. Okay. Venu, let me put it differently. What I'm trying to understand is that, is the sales turn on the private label, the inventory turns on the private label, is it much faster than branded labels? Secondly, is the private labels getting more and more shelf space in the retail area of a store? To your first question, yes. The answer is yes. The turns are good and will continue to be so because we have moved to monthly drops and having regular newness in the store. On the second question, in terms of is the space higher, I think as private labels increase, the productivity itself improves, and because the turns are higher, even with the existing space, we would be able to achieve a much higher proportion of our overall sales from private brands. Of course, then it is about overall the return that you get out of your space, and based on that, it would lend itself to increase or decrease as the case may be. Understood. My last question, this is on the CapEx, and on the balance sheet together. We have a CapEx plan of roughly about INR 80 crores -INR 100 crores for this year to open roughly about 20 odd stores. Simultaneously, we've seen operating loss of roughly about INR 100-115 crores in the quarter one. Would we be able to fund this CapEx plan from the internal cash flow, or would you need to raise additional debt or maybe equities? Binoy, I think Venu spoke at the beginning of the conversation. Though the Q1 was quite muted, the recovery what we saw in Q2 has been quite encouraging in the month of July, and we are confident that August and September would also be good. To answer your question, this INR 80 crore-INR 100 crore as of now, considering the recovery what we have been seeing, we should able to fund through an additional line of credit what we have. We also have investments if you see in our balance sheet, and plus we have significantly utilized our cash credit also. We have number of options wherein we can use the line, and then we can fund this capital. Fair enough. If I may just ask a small clarification. In the presentation, we've mentioned that we plan to open about 30 stores over the next 24 months. These 30 stores, are we essentially talking of only Shoppers Stop stores or mix across Shoppers Stop and Beauty? It will be majority of Shoppers Stop, but it does include a few Beauty stores as well, specifically the Estée Lauder stores that we manage and operate. Is it possible to break up? I would say every year, and I have stated that earlier as well, we intend to open between 10 - 12 Shoppers Stop department stores as a bare minimum. Apart from our own Beauty stores, which would be Shoppers Stop Beauty or Arcelia as they are currently labeled as and branded as. That's the broad split. Of course, based on the opportunity and if spaces are available, we would be quite aggressive in terms of our store openings, and we may go beyond the 10 - 12 as well if the opportunity exists and space is available. Fair enough. An additional question, if I may. We've closed two stores in FY to date July. Do we plan to close any further stores during the year? Binoy, we continue to evaluate each and every store based on the sales, based on the profitability. If something is not working, we will definitely close it. At this point, just to add to what Karuna said, for this financial year, based on the current rate, I don't expect us to be closing any further stores. Thank you so much, Venu and Karuna. That's all from my side. Thanks a lot, Binoy. Thank you so much. Thank you. We have one last question in queue. We take the last question from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead. Kaustubh, you may go ahead with the question. Yeah. Thanks for giving me the opportunity. Most of my questions have been answered, and good to see the faster recovery in July. Just one question, taking on to Binoy's question on private label. Considering your strategies behind the private label and your efforts, where do you see the private label contribution going from current level of around 14%, 15% over the next two to three years? Thank you, Kaustubh. That's a very good question, and helps me answer one that I wanted to answer, I mean, wanted to speak about. Private label is one of our strategic pillars, as you know, and we are putting a lot of focus on this. We expect our private label contribution to be between 25%-30% of our business in the next two to three years. Okay. That will definitely add on to your gross margins because private labels have better gross margins. We have seen in the industry that the companies having higher private label brands in their revenues have better margins. From margin perspective also, it will help you to see better margins ahead. Is it the right understanding? Yeah, absolutely. I think the margin is a derived benefit. The real reason of offering a private label is to be able to offer our customers products for specific lifestyles and give them a reason to come to Shoppers Stop exclusively, because these would be brands which would be available only in our stores and on our app. As we grow as an omni-channel retailer, it gives one more reason, apart from the great customer service and the range of brands that we have, also a set of exclusive brands which they would be able to shop from Shoppers Stop. As we do that, of course, the fact that we design, manufacture, and retail these brands, it also gives us the ability to have higher margins, which help us. Right, sir. Sir, just one clarification in trade really, and as you mentioned that In Western market, we have seen recovery of around 70%, and in Northern and Western together, it is around 50%. Is it right, or Eastern is much better than Western, and then it is North? It is for the stores that were open, Kaustubh. It does not reflect the region as a whole. In the West, Gujarat has been open, and the performance from the stores in Q1 was better than the rest of the country. Oh, okay. For the stores which were open. Oh, okay. Thank you, sir. Okay. Yeah. Thank you very much. That was the last question in queue. Thank you, Gaurav. I just want to close the session by firstly thanking everyone for spending their time and listening to us. Thank you for your time, and thank you for your attention. I would just like to close by restating the progress that we have made across each of our strategic pillars, and the response that we have seen is something that gives us a lot of confidence for the rest of the year across each of our strategic pillars of our First Citizen customers who continue to bless us with their business, our omni-channel, and our transformation to being a true omni-channel retailer. Growth of private brands, as we said, we expect that to be between 25%-30% of our business over the next two to three years. Beauty, again, a very important strategic pillar of ours, and again, this is something we expect to continue to grow and expect that to get to around 25% of our overall business. Thank you once again, and stay safe, and hope to see you all in our stores and website. Thank you very much. On behalf of Axis Capital Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines. Yeah.