W20752

SHOPPERS STOP LIMITED: DEVELOPING SENSE-AND-RESPOND

CAPABILITIES (A)

Pragya Arya, Sanjay Kumar, and Narain Gupta wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

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Copyright © 2020, Ivey Business School Foundation Version: 2020-09-11

On a Monday morning in January 2013, the chief executive officer (CEO) of Shoppers Stop Limited (SSL)
called an urgent meeting of all heads of business and operations departments. The mood at the meeting was
sombre. The CEO explained that the Government of India had issued in-principle clearance to several
applications for investment by major global department store chains to operate businesses in India.1 This
opening to foreign investment was a problem for SSL. It was only a matter of time before these industry
giants would enter the country’s retail markets. The SSL business heads in attendance at the meeting were
Ajay Kapoor from non-apparel, Sunita Thadani from women’s apparel, and Sushil Kothari from men’s
apparel. The operations heads at the meeting were Krishna Jha from supply chain and Harish Verma from
facilities management and information technology (IT).

SSL’s CEO outlined the upcoming scenario, which included fierce competition from global department store
chains with high investment budgets. He wanted to discuss SSL’s strategic plans to manage these challenges.
Specifically, the CEO asked Kapoor, who was a veteran at SSL, to guide the discussion, consolidate the input, and
prepare to deliver a presentation to the board of directors in two weeks. Kapoor knew that global departmental
chains and organized companies in India’s retail industry operated with different work cultures. Therefore, SSL
would need to change to compete against these international retail giants. Kapoor asked all meeting attendees to
prepare ideas and observations to contribute to how SSL should manage the upcoming challenges. He would then
consolidate all input into a plan to present to the company’s CEO and board of directors.

THE MEETING

The meeting started with Thadani highlighting the association between global departmental chains and
major international brands, including those that SSL currently sold in its stores. Unless SSL could provide
a lucrative value proposition to the international brands, they would likely choose to partner with the global
chains, rather than with SSL. Kapoor mentioned that it was necessary to rethink SSL’s value proposition to
the international brands by developing its IT retail applications. A state-of-the-art IT infrastructure, coupled
with an improved ambience in the SSL stores, would help retain the international brands.

1
Amol Sharma and Prasanta Sahu, “India Lifts Some Limits on Foreign Retailers,” Wall Street Journal, January 11, 2012,
accessed December 11, 2013, www.wsj.com/articles/SB10001424052970204257504577152342214405180.

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Kapoor also emphasized that global department store chains were unlikely to enter Tier 2 and Tier 3 cities
at first (probably not for five or six years), which could work in SSL’s favour. SSL had recently expanded
in its number of stores, and the company could grow further by opening more stores in Tier 2 and Tier 3
cities. This expansion would provide SSL’s partner brands with better coverage across India, as well as
greater response and feedback to the launch of new products in all markets, rather than in only Tier 1 cities.
Kothari then noted that even if some international brands were to leave SSL, the company could introduce
new brands to serve its customers, as part of its “Start something new” ongoing initiative.2

All departments heads agreed. Verma was strongly in favour of improving the shopping ambience and
providing a “perfect customer shopping experience.” Increasing SSL’s brand and product offerings would
also raise customer expectations. Jha mentioned that the value proposition they were discussing was largely
dependent on distribution and logistics costs, as well as response time for order replenishment. He reminded
all meeting attendees about the supply chain rationalization report submitted by a global consultant hired
by SSL several months earlier. Consulting that report could help SSL determine how to be competitive on
global benchmark parameters, and possibly identify savings for the company.

Kapoor elaborated on the future of SSL. He raised various concerns, including increasingly demanding
customers, fickle fashion trends, heavily discounted end-of-season inventory, a growing trend for online
shopping, and India’s unsophisticated and unorganized distribution network segment. For SSL to provide
a better value proposition in the future, current activities such as the heavily discounted end-of-season sales
could be seen as contradictory to providing better value to international brands. He emphasized again the
importance of using IT to provide an accurate analysis of customer preferences and access to SSL’s systems
to the international brands, which would allow them to conduct their own sales analysis, especially for new
product launches. With India’s e-commerce industry still at a nascent stage, SSL could reap great benefits
by integrating IT with online sales to create a new business channel. However, Jha reminded the group that
SSL’s competitors could also benefit by using online channels for rapid growth in India.

The CEO had carefully listened to the concerns and suggestions of the various business and operations
department heads. As he called the meeting to an end, he asked Kapoor to prepare an action plan and discuss the
details with him over the next week, before the presentation to the board of directors. He also asked Kapoor to
come up with an appropriate theme or business model that the employees could relate to and support.

With his long experience in India’s retail sector, Kapoor knew how difficult it was to forecast trends and
sales volumes in the fashion industry. The tastes of Indian customers varied greatly across regions, which
made it difficult for retailers to order the next season’s stock. He was well aware of retailers’ despair in
watching fashion trends change midway through a season, leaving considerable amounts of stock unsold.
He wondered how IT could help improve trend analysis and make product procurement more dynamic and
effective. Could SSL leverage the use of radio-frequency identification (RFID) or similar technologies to
help the organization use higher intelligence response to changes in customer demand? Could IT help
customers find the right clothing style, colour, and size in the retailer’s available inventory?

SSL needed to learn how to sense customer demand and be able to respond promptly, thereby fulfilling the
consumer’s pre-empted demand. Kapoor decided that this capability, which he had already identified as the
“sense-and-respond” business model, could serve as his integrated theme to pull together the various
components from his associates into a full-fledged company strategy.

2
The SSL CEO had launched an initiative with the slogan “Start something new” to address the needs of customers in new
segments. The initiative, which was well received by SSL employees, helped the company acquire new customer segments
and increase its offerings to current customers.

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THE INDIAN RETAIL INDUSTRY

The Indian retail sector was a generally unorganized market. Organized companies such as SSL and Lifestyle
International Pvt. Ltd., accounted for only 8 per cent of the market. Total retail industry sales were projected to
grow to US$1.2 trillion3 by 2021 from $518 billion in 2012.4 Despite a recent economic slump,5 this sector was
booming with the advent of popular shopping and entertainment areas. Many factors such as a strong economic
forecast, population growth, and socio-cultural and demographic changes led to such favourable projections. A
large young working population6 and increasing consumer wealth led to changes in lifestyle and created bright
prospects for organized modern retail. The mushrooming of new retail formats such as shopping malls and the
entry of international brands in the country increased opportunity for India’s department stores.7

The organized sector, however, was still at a nascent stage. Its performance was dependent on the development
of a retail infrastructure, as well as modern and efficient retail distribution channels for the smooth supply and
distribution of products. The Indian government’s proposed opening of India’s market to 100 per cent foreign
direct investment for single-brand retail and 51 per cent for multi-brand retail8 was expected to drastically
increase competition for domestic retailers, with an influx of global companies entering the market.

SHOPPERS STOP LIMITED

SSL was founded on October 27, 1991, by the K. Raheja Corporation group of companies. Headed by B.
S. Nagesh as customer care associate and non-executive vice-chairman, SSL had grown from a single-brand
shop to a multi-brand fashion and retail store for the entire family. It was the largest department store chain
in India. Its vision was to be a global retailer in India and maintain its number one position in India’s
department store market. To achieve this vision, SSL provided an unparalleled assortment of national and
international brands in the country across a variety of categories such as apparel, accessories, cosmetics,
home supplies, and kitchenware. The company also offered a wide range of merchandise under its own in-
house brands (also known as private labels).

Operating in 22 cities across the country, SSL recorded an annual growth rate of over 17 per cent. It was
considered a pioneer in organized Indian retail and received many awards for its achievements. It was the only
Indian member of the Intercontinental Group of Department Stores. SSL placed strategic emphasis on cost
rationalization, streamlining processes, and ensuring customer satisfaction, with equal emphasis on cautious
planning. Sensing market changes, SSL redesigned its logo and introduced the slogan “Start something new.”
Repositioning itself as a “bridge to luxury” brand, SSL aimed to tap the youthful mindset of consumers of all
ages. In addition to maintaining its own department stores across the country, SSL formed three associate
companies—Nuance Group, Hypercity, and Time Zone—and established a brand partnership with the
renowned brands Homestop, Crossword, Mothercare, Estèe Lauder, MAC, and Clinique.

3
All currency amounts are in US$ unless otherwise specified.
4
“Growth of Retail Industry—Infographic,” India Brand Equity Foundation, accessed January 4, 2013,
www.ibef.org/industry/retail-india/infographic.
5
Shopper’s Stop Limited, “Chairman’s Statement,” Annual Report 2012–2013, accessed May 25, 2020,
https://corporate.shoppersstop.com/uploaded_files/89827ab-9eaf.pdf.
6
India occupied position number 6 in the 2012 retail talent index developed by management consulting firm AT Kearney; AT
Kearney, 2012 Global Retail Development Index, June 2012, accessed April 1, 2020, www.jatrgovac.com/usdocs/2012-
grdimediadeck.pdf.
7
Department stores in India generally sold a wide range of products on approximately 20,000 to 50,000 square feet (1,800 to
4,600 square metres), organized into several different departments.
8
Sharma and Sahu, op. cit.

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SSL had foot traffic of 36.7 million across its stores with a conversion ratio of 23 per cent, which reflected
the rate of transactions compared with total number of customers entering the stores. SSL’s First Citizen
customer loyalty program was a great success, contributing 72 per cent of sales. The retailer’s loyal
customer base was growing by an average of 48,000 per year. In a 2011 survey of its customers, SSL
recorded a high customer satisfaction rating of 79 per cent.

SSL’s main product line was part of the highly volatile fashion and lifestyle segment. SSL had carefully built
an organization structure that facilitated quick response to the market’s needs. With a strong focus on systems
and processes, SSL enabled faster decision-making by employees. Most functions at SSL were centralized,
and standard operating procedures were available on the company’s intranet for reference by all employees.
Store managers and their teams delivered superior customer service and maintained high employee morale at
the store level. Each employee operated within the broader context of SSL’s value system, which emphasized
important aspects such as respect for customers, openness, and trust. All SSL employees were customer care
associates first, before their specific position, which motivated them to provide customers a great shopping
experience and project a culture of consistent customer focus.

ORDERING PROBLEM IN COSMETICS

Kapoor, who served as SSL’s head of non-apparels as well as cosmetics, was grappling with an ordering
issue in the cosmetics department. A series of phone calls from members of First Citizen’s highest
membership category (known as Golden Glow) complained that some standard shades and categories of
cosmetics were not available at the stores. Kapoor had tried to appease those customers, but later received
calls from customer account managers of various brands complaining that SSL was ordering some slow-
moving items, rather than more popular items. After some research, Kapoor uncovered an ordering issue at
the stores, especially in the cosmetics category.

SSL merchandisers were tasked with closely monitoring the latest fashion and lifestyle trends and using
point-of-sale data analysis to track customer preferences. Vendors were able to review SSL’s inventory and
purchase order status at any time. Cosmetic products were supplied to SSL stores directly by the vendors.
These measures ensured efficient product ordering. However, data analysis and stock reviews using the
company’s enterprise resource planning (ERP) system revealed that both manual and ERP sales reports
differed from the individual products’ stock-keeping unit (SKU) figures. To confirm his findings, Kapoor
checked a newly opened store in Delhi, which provided similar results. He also checked with another
account manager of a popular cosmetics brand, whose report also confirmed that SSL seemed to be placing
orders for slow-moving items, rather than popular products.

Kapoor contacted Verma, the head of facilities management and IT, and asked for an exact SKU order
replenishment report for cosmetics at two stores. The report found a low fill rate of cosmetic products, at
only 40–45 per cent. After checking with SSL’s accounts department, Kapoor found that many vendor
invoices were pending payment. Information from the receiving bay at the stores reflected an inventory
delay and long waiting times to replenish items at many stores, despite the distributors being local.

Kapoor met with the relevant vendors and found that the workers employed by the distributors lacked basic
training and education requirements for their jobs. Workers were given bundled price tags for similar
cosmetics products, and the untrained staff would then label the different products at random, within a
similar price category. The workers were unable to differentiate between SKUs and cosmetics product
shades (i.e., subtle colour differences). Therefore, the point-of-sale system recorded the correct value, but

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for the incorrect shade and SKU. International cosmetic brand manufacturers used a GS1-compliant9 bar
code for each SKU, which identified the product’s SKU but did not include a price. Therefore, careful
adherence to the bar code addressed only half the problem that Kapoor had discovered.

Shikhar Damle, who managed most IT issues on a day-to-day basis, reported to Verma. Damle explained
that proper SKU identification allowed SSL’s ERP software to record the correct price in the system.
Therefore, with most international brands using GS1-compliant bar codes, the SKU and price were correctly
recorded. However, local manufacturers, franchisees, and dealers did not use the GS1 bar code system.
Also, SSL required distributors to attach bar code tags or stickers at the source, which meant that incorrect
pricing was still an issue. Therefore, three potential solutions were suggested at the meeting.

The first solution required creating a dedicated group of distributors solely for organized retailers such as
SSL and training them on the proper use of bar codes and pricing stickers. The international brands would
need to reorganize their distributor network into two channels: one channel supplying organized retailers
such as SSL and another channel for all other retailers. SSL and the international brands could then prepare
a two- to three-month training plan for their distributors and monitor their performance. Another solution
required implementing a new standardized international bar code system similar to the GS1, but compatible
with both the original bar codes of the brands and the SSL system. This compatibility would allow the
manufacturer bar codes to be read by the SSL system, but it did not solve the sticker price issue. The third
solution required using RFID-based tracking systems, which allowed customers to read the cosmetics
product price by simply placing the reader over the product, and incorporating the product information in
the GS1 codes received from the manufacturer. Kapoor decided to discuss all three potential solutions with
Verma, the head of SSL’s facilities management and IT department.

THE MERCHANDISING PROCESS

Merchandisers were the most important link in the value chain. They integrated back-end operations with
ever-changing customer demand and had direct control on inventory costs. They analyzed point-of-sale data,
developed forecasts, kept up-to-date information on various brand offerings, and communicated relevant
details to vendors for efficient product replenishment. Merchandiser activities needed to be well-coordinated
to effectively reflect the company’s motto of “the right product, in the right place, at the right time.”

Merchandisers were responsible for learning or sensing dynamic customer preferences and new fashion
trends, and then quickly responding to customer needs with appropriate product offerings. This practice
reflected Kapoor’s objective in making SSL as a sense-and-respond organization. Technical training on the
use of forecast models was provided to merchandisers, who were also required to visit international markets
and fashion shows, and to meet with global designers to ensure they remained abreast of the latest
developments. SSL invested in technology to ensure authentic data capture and suitable plans for a range of
offerings in each category. To be effective, merchandisers needed to consider numerous factors related to
products, consumer preferences, economics, suppliers, and other operational aspects such as store size, space
allocation, seasonality, and inventory. For example, merchandisers needed to consider which new suppliers
to select based on the level of business completed with the existing suppliers during the previous season.

9
GS1 India, “About Us,” accessed April 1, 2020, www.gs1india.org/content/who-we-are.

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STORE OPERATIONS

Each store was managed by an SSL store manager, referred to as a unit head. The main responsibility of
each unit head was to ensure a memorable shopping experience for each customer. Stores were designed to
make each SSL store a fun place for the family. Each store’s unit head managed metrics such as customer
foot traffic, conversion rate, average bill size, and various details related to the SSL First Citizen loyalty
program, including starting new accounts and retaining current members.

Responsibility for buying and stocking products was centralized at the SSL head office in Mumbai, rather
than at each region or store. However, with the number of stores and regional preferences increasing,
Kapoor wondered whether moving to a structure of decentralized merchandising and buying would enhance
SSL’s ability to respond to local demand. Under a decentralized merchandising and buying system, the unit
heads and store merchandisers would be able to determine which products should be stocked and displayed
in each store. They would also be able to procure stock locally, although brands that launched a new
initiative or promotion would probably expect access and support at every store, which could be difficult
without a centralized purchasing and replenishment system. Therefore, brands would probably insist on a
centralized purchasing and replenishment system.

Each SSL store had a “vision” merchandiser responsible for maintaining the look and feel of the store, and
making the best use of available display space. The vision merchandiser used personal knowledge to choose
store colours and display patterns, proper lighting, and the display of promotional offers in window displays
and in other appropriate areas to attract customers and invite them to further explore the store’s products.

From his role as customer care associate (as well as head of facilities management and IT), Verma suggested
installing large touch-screen computer displays for customers to view and scroll through items, instead of
waiting for a salesperson to suggest and display items from behind the counter. However, this function
would require standardized store designs and training for unit heads. For example, an SSL store with a new
unit head, who was hired from outside SSL and lacked proper training, had an inconsistent store layout and
design, which led to declining foot traffic, poor sales, and low employee morale. After losing an initial
amount of goodwill from the mistake, and to prevent a repetition of that experience, SSL instilled a new
training schedule for all unit heads.

Because First Citizen members contributed 72 per cent of SSL sales in 2011–12, various special services
were afforded to them, after they presented their membership cards. For example, their requested products
could be taken directly from the vendor’s warehouse. Verma suggested that SSL relationship managers
could be added at the store level to greet members by name, cater to their specific tastes, and provide
preferred products, which could result in higher-value sales for the stores.

IT AND TECHNOLOGY ADOPTION

Both Damle and Verma advocated for much greater use of ERP data through trend analysis and business
intelligence queries to greatly improve the decision-making process for managers. SSL invested regularly in
the upgrade of front-end and back-end systems. In 1999, SSL implemented a comprehensive ERP system by
the supply chain consultant company JDA Software. The new ERP system helped track all SKUs and served
as both a warehousing and a merchandising management system. The outputs from the two systems were used
for analysis and planning. SSL also used Oracle software packages to enhance the performance of its financial
process. Each SSL store had its own computer server that provided daily point-of-sale data to the back-end
office at each store, which then forwarded the data to the central team. All SSL stores were connected through

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the JDA Software system to provide merchandise visibility. Each store could initiate interbranch transfers for
up to 10 units, but bulk orders had to be completed by the merchandiser at the central office.

Backward integration with vendors was enabled through a business-to-business website where registered
vendors could view their stock, sales accounts, ledgers, and purchase order status. An annual vendor
meeting (called the Partnership for Progress) allowed top retail brands and vendors to strengthen their
association and explore new business possibilities. SSL’s inventory management was centralized and relied
on the company’s merchandiser. When each SKU stock reached the reorder level, a purchase order was
generated for the vendor through the company’s business-to-business website. Vendors could thus plan
accordingly and adhere to the agreed-on delivery specifications.

SSL was a pioneer in the use of latest technology for its systems, except for the use of RFID technology.
Despite its proven benefits, and speculations that an SSL competitor was planning to implement it, SSL
had resisted adopting RFID technology. According to Damle, RFID technology was costly and its tags
could not be reused after being removed from an SKU at the point of sale, requiring a new investment in
RFID tags each year. With expanding SSL operations, the RFID cost burden would increase, and
implementation would require consultants, further adding to the technology’s expenditures.

However, Kapoor was skeptical about the decision. He felt that using RFID technology would provide
benefits to consumers, who would be able to scan each product for detailed information, and could increase
sales of cosmetics. His research found that writable RFID tags were, in fact, available—although, at a
slightly higher price. According to the account manager at JDA Software, RFID technology could ensure
up to 99 per cent inventory accuracy for each item, reduce out-of-stock situations by 50 per cent, improve
sales by 2–7 per cent, reduce item counting time by 96 per cent, reduce stock shrinkage and loss prevention
by 70 per cent, reduce restocking time by 50 per cent, reduce replenishment time for out-of-stock items by
15–20 per cent, lower overall labour costs, and ensure 100 per cent inbound and outbound shipping
accuracy.10 The JDA Software account manager also suggested that SSL could choose passive RFID tags,
which were cheaper than active tags. Kapoor also suggested using information kiosks in SSL stores to
Damle, who welcomed the idea and agreed that it would be a captivating proposition for SSL customers.

CUSTOMER FOCUS: ENHANCING REACH AND RETENTION

Apart from the traditional store format, SSL created multiple customer touchpoints to capture customer
preferences and present targeted offers. The information kiosks would create another interesting touchpoint.
Traditional business sales were dominated by First Citizen loyalty members. The First Citizen program was
one of the most successful relationship building and customer loyalty programs in the Indian retail sector.
It was started by SSL in 1994 and had a membership of 2.5 million loyal customers. In stores such as the
Andheri location in Mumbai, the entire day’s sales during the end-of-season sale were generated fully from
loyalty program members. SSL analyzed the proprietary First Citizen member data using the data
warehousing and mining system Drishti. SSL’s First Citizen Facebook page attracted two million followers,
who could view their points, manage their membership, and read the exclusive First Update magazine. An
exclusive mobile application that was available on mobile platforms was developed for all three categories
of First Citizen members—Classic Moments, Silver Edge, and Golden Glow.

10
“RFID System Hardware, Supplies, & Equipment,” Bar Codes Inc., accessed April 1, 2013,
www.barcodesinc.com/cats/rfid.htm; Will Roche, “4 Clear Business Benefits of RFID,” Retail Info Systems, June 30, 2014,
accessed April 1, 2013, https://risnews.com/4-clear-business-benefits-rfid; John Edwards, “View from the Top: 5 CIOs Speak
Out on RFID,” RDF Journal, February 1, 2008, accessed April 1, 2013, www.rfidjournal.com/articles/view?2602/2; Joel
Goodson, “6 Benefits of RFID in Retail,” Detego, September 9, 2019, accessed April 1, 2013,
www.detego.com/retail_insights_en/retail-en/6-benefits-of-rfid-in-retail.

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SSL’s own in-house brands had contributed 15.9 per cent to overall sales in financial year (FY) 2010–11,
compared with 17.4 per cent in FY 2009–10, although sales had grown by 9 per cent. Kapoor met with
Thadani from women’s apparel and Kothari from men’s apparel to discuss the matter. Both representatives
agreed that SSL’s in-house brands needed more attention. Currently, more emphasis was being given to
international brands business, while in-house brands were the profit churners and gap fillers. The apparel
category had many in-house brands and supported Kapoor in formulating a suitable positioning strategy for
better management, while ensuring they were not seen as competing with international brands. They
discussed the possibility of creating a separate chain of stores that sold only SSL’s exclusive in-house
brands, or maybe pricing them appropriately if sold together with international brands.

Kothari, however, suggested more online promotion of the in-house brands to counter competition from private
brands in stores and to avoid the costs associated with creating separate stores for them. Kapoor was concerned
about the effectiveness of the strategy, due to SSL’s comparatively small number of online sales. Customers
preferred to buy established brands online, whereas in-house brands were chosen after customers personally
touched the fabric, assessed the quality, and judged the overall style of the product. Kapoor explained that he
would discuss the launch of a dedicated online space with Jha and Damle in more detail, as the worldwide share
of online business reached 5 per cent of SSL’s total financial turnover. When SSL reached that level of online
sales, a dedicated back-end support infrastructure would be required. Kiosks could also be linked to interbranch
transfers so that customers could order from the nationwide inventory of SSL products.

Kapoor asked Kothari and Thadani to communicate these ideas to the international brands, assess their
interest in these initiatives, and provide their feedback. Thadani suggested leveraging social media beyond
Facebook and Twitter, with the help of Damle. SSL had a total of 4.2 million followers on Facebook. The
company constructively engaged with them to sense their satisfaction or dissatisfaction and identify areas
for improvement. SSL also had a dedicated channel on YouTube that regularly showcased SSL in-store
events and promotions. SSL was the first large-format retailer to adopt QR (quick response) and AR
(augmented reality) codes to digitally enliven all marketing communication during end-of-season sales.

Kapoor asked Verma, Damle, Thadani, and Kothari for help to quickly implement the ideas discussed for
their respective businesses. He also asked them to contact their respective vendors to enable merchandisers
to buy during multiple phases of each season, based on trend analysis and data results.

FUTURE COURSE OF ACTION

On the Saturday afternoon after the meeting with the CEO and department heads, Kapoor sat down to
prepare an action plan for making SSL a sense-and-respond organization. However, he became a little
anxious when he could not contact Jha to discuss SSL’s distribution and logistics function, and how the
specific recommendations by the consultant could help SSL in the future. He needed Jha’s advice on this
matter, so he decided to wait for Jha to return to work on Monday and discuss the issue then. His discussion
with Jha would compare a centralized distribution and logistics system (with one mother warehouse) versus
a decentralized option (with four regional distribution centres). Would it be helpful to build the required
back-end infrastructure if the online space was launched in full swing?

Kapoor was sure that the sense-and-respond business model would help SSL compete successfully and
create a unique space in the minds of customers and brand partners. What key elements of this model did
SSL already currently possess? How could these capabilities be enhanced in the future for SSL to fully
become a sense-and-respond organization?

Pragya Arya and Narain Gupta are affiliated with Management Development Institute Gurgaon.

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EXHIBIT 1: SHOPPERS STOP LIMITED FINANCIAL HIGHLIGHTS AND KEY RATIOS, 2007–08 TO
2011–12 (IN ₹00,000)

Profitability Statement 2007–08 2008–09 2009–10 2010–11 2011–12

Number of Stores 73 72 93 97 91
Income
Gross Retail Sales 11,901 141,298 159,845 187,344 218,919
Less: Value Added Tax 555 6,438 6,857 8,960 10,557
Gross Retail Sales (Net of taxes) 11,346 134,860 152,988 178,384 208,362
Other Operating and Miscellaneous Income 257 2,555 2,435 2,412 2,884
11,602 137,415 155,423 180,796 211,246
Expenditures
Cost of Goods Sold 7,535 90,034 102,376 116,554 136,721
Employee Costs 783 8,588 8,759 9,898 12,764
Operating and Administrative Expenses 2,634 33,868 32,938 39,132 47,371
10,952 132,490 144,073 165,584 196,856
EBIDTA 650 4,924 11,351 15,211 14,391
Interest and Finance Charges 112 2,560 1,869 734 838
Depreciation 393 6,313 3,103 3,100 3,772
Profit Before Exceptional Items and Tax — (3,949) 6,379 11,377 9,781
Exceptional Items — 2,486 (188) (5) —
Profit before Tax 145 (6,436) 6,567 11,383 9,781
Profit after Tax 70 (6,372) 5,023 7,518 6,426
Balance Sheet Items
Share Capital 349 3,487 3,491 4,108 4,128
Optionally Convertible Warrants — — 3,072 — —
Reserve and Surplus 2,618 19,822 24,326 55,702 61,722
Loan Funds 1,729 20,776 19,935 14,549 25,907
Deferred Tax (Liability)/Assets — — 455 325 (23)
Capital Employed 4,713 44,085 50,824 74,359 91,780
Fixed Assets 2,404 25,873 29,867 34,561 44,659
Net Working Capital 1,502 8,467 8,534 15,754 18,700
Profit and Loss Ratios
Sales (Chain Level Growth) 34.2% 15.9% 10.0% 23.0% 19.0%
Sales (Like-to-Like Growth) 14.0% 1.2% 3.7% 16.7% 6.5%
Gross Profit Margin 32.0% 31.7% 31.7% 33.0% 32.7%
Operating Expenses Ratio 28.7% 30.0% 26.1% 26.2% 27.5%
Operating Margin (EBIDTA before Exceptional 5.5% 3.5% 7.1% 8.1% 6.6%
Items)
PBT Margin before Exceptional Items 1.2% (2.8%) 4.0% 6.1% 4.5%
PAT Margin 0.6% (4.6%) 3.1% 4.0% 2.9%
Interest Coverage 5.3 0.98 4.72 8.85 5.23
Balance Sheet Ratios
Debtors Number of Days 2 3 3 3 3
Creditors Number of Days 42 94 93 86 81
Stock Turnover Ratio 3.3 4.0 3.5 3.7 2.7
Current Ratio 2.0 1.5 1.3 1.4 1.5
Assets Turnover Ratio 2.7 3.1 3.4 3.0 2.7
Debt Equity Ratio 0.6 0.9 0.6 0.2 0.4
Return to Investors
Return on Net Worth 2.4% (5.2%) 30.4% 26.7% 16.9%
Return on Capital Employed 2.0% (3.0%) 17.4% 19.3% 12.8%
Book Value per Share (in ₹) 85.14 66.85 88.58 75.71 79.89
Basic 2.00 (18.3) 9.5 9.5 7.8
Diluted 2.00 (18.3) 9.4 9.4 7.8
Cash EPS 13.27 (0.17) 23.30 13.44 12.37
Dividend per Share 1.50 — 1.50 0.75 0.75

Note: ₹ = INR = Indian rupee; ₹1 = US$0.0182 on January 1, 2013; EBITDA = earnings before interest, taxes, depreciation,
and amortization; PBT = profit before tax; PAT = profit after tax; EPS = earnings per share
Source: Company documents.

This document is authorized for use only in Prof. Mohua Banerjee's RMT5 22 at International Management Institute - Kolkata from Sep 2022 to Dec 2022.