Shoppers Stop Falls to 52-Week Low of Rs.443.3 Amidst Continued Downtrend

On the trading day, Shoppers Stop recorded a day change of -1.02%, underperforming the diversified retail sector by 1.62%. The stock has been on a losing streak for the past three consecutive days, cumulatively falling by 3.44% during this period. This decline has brought the share price below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a persistent bearish momentum.

In contrast, the broader market has shown resilience. The Sensex opened flat with a minor decline of 29.24 points but later traded positively, closing at 84,753.71, a 0.1% gain. The index remains close to its 52-week high of 85,290.06, just 0.63% away, supported by mega-cap stocks leading the gains. The Sensex is trading above its 50-day moving average, which itself is positioned above the 200-day moving average, indicating a bullish trend for the benchmark index.

Over the past year, Shoppers Stop’s stock price has declined by 28.59%, a stark contrast to the Sensex’s 9.23% gain over the same period. The stock’s 52-week high was Rs.688, highlighting the extent of the recent price erosion. This performance reflects a consistent underperformance relative to the benchmark and sector peers.

Financially, Shoppers Stop is characterised by a high debt burden, with a debt-to-equity ratio averaging 36.93 times and a long-term debt-to-equity ratio of 11.51 times. The half-yearly debt-to-equity ratio stands at 30.43 times, indicating significant leverage. This elevated debt level contributes to a weak long-term fundamental strength assessment for the company.

The company has reported negative net profits for the last three consecutive quarters. The most recent quarterly profit after tax (PAT) was a loss of Rs.20.11 crore, representing a decline of 549.6% compared to the previous four-quarter average. Additionally, the debtors turnover ratio for the half-year period is at a low 5.44 times, suggesting slower collection efficiency.

Shoppers Stop’s return on capital employed (ROCE) is recorded at 6.6%, which, when combined with an enterprise value to capital employed ratio of 2.3, indicates a valuation that is comparatively attractive relative to its peers. Despite the stock’s price decline and profit contraction of 18.4% over the past year, the valuation metrics suggest the market is pricing in these challenges.

Institutional investors hold a significant stake in Shoppers Stop, accounting for 28.51% of the shareholding. These investors typically possess greater resources and analytical capabilities to assess company fundamentals, which may influence trading patterns and valuation adjustments.

Over the last three years, Shoppers Stop has consistently underperformed the BSE500 index in each annual period. The stock’s cumulative returns over the past year have been negative, reflecting ongoing challenges in the diversified retail sector and company-specific financial pressures. The stock’s current trading levels, below all major moving averages, underscore the subdued market sentiment.

While the Sensex and mega-cap stocks have demonstrated relative strength, Shoppers Stop’s share price trajectory highlights the divergence within the retail sector. The company’s financial metrics, including high leverage and negative profitability trends, continue to weigh on investor sentiment and share price performance.

In summary, Shoppers Stop’s fall to a 52-week low of Rs.443.3 reflects a combination of sustained price declines, elevated debt levels, and consecutive quarterly losses. The stock’s valuation metrics indicate a discount relative to peers, while institutional holdings remain notable. The broader market’s positive trend contrasts with the stock’s performance, emphasising the differentiated outlook within the diversified retail sector.

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