Fashion retailer Shoppers Stop has exited its non-core business with the sale of its subsidiary Crossword Bookstores to Pune-based Agarwal Business House (ABH). The company has sold a 100 percent controlling stake in the bookstore chain, which is valued at Rs 41.6 crore.
Selling off Crossword is part of the company's strategy of focusing on its core business and expanding its strategic pillars, which include its loyalty program First Citizen, its private labels, the beauty segment and most importantly, its Omnichannel business. The company has, in the past year, been increasing its focus on the omnichannel strategy aggressively, which it says has grown more than 3 times in the last year.
Shoppers Stop said in a statement that ABH will take over all the assets and brand as part of the agreement and any liabilities will be adjusted for arriving at the final consideration.
The company’s board approved the transaction at its board meeting on Tuesday. Shoppers Stop will first divest 51 percent stake (expected to be completed within 15 days) and another 39 percent in the next 12 months, subject to receipt of necessary approvals. ABH is a franchisee of Crossword and was operating 26 stores.
"This represents another step in our progress to elevate Shoppers Stop to a customer-focused, omnichannel retailer, to enable us to deliver on the promises we make to our customers and shareholders. Most importantly, we are selling Crossword Bookstores to our franchisee ABH, who has been in this business for more than two decades and are extremely passionate about the book business," Venu Nair, managing director and chief executive officer of the company said.
One of the most popular bookstore chains in the country, Shoppers Stop first bought 'Crossword' a chain of books and music stores in 2,000 from India Book House Ltd (IBHL) by way of a slump sale for Rs 13.75 crore.
As of March 31, Shoppers Stop had 29 Crossword stores across 13 cities, down from 41 stores in FY20. However, the subsidiary was a loss-making entity, posting a net loss of Rs 12.91 crore in FY21, and a net loss of Rs 12.49 crore in the previous year.
"Whilst, Crossword continues to take steps to revamp its operations (including store right-sizing, and brand positioning). The gestation period to achieve the desired level of turnaround is taking longer than previously envisaged. Based on a business valuation, the company has recognised impairment loss of Rs 22.40 crore during the year with respect to its total equity investment and financial assistance of Rs 68.72 crore," the company stated in its annual report.
But it's not just Crossword, the overall retail sector has been severely hit in the past 14-15 months due to the COVID-19 pandemic and subsequent lockdowns, which resulted in losses for several retail majors. Shoppers Stop’s revenues declined 51 percent YoY in FY21 due to the impact of the pandemic, reporting a net loss of Rs 305 crore and EBITDA declining 202 over FY20 to Rs 186.7 crore.
In a bid to repay debt, the company launched a rights issue of Rs 299.2 crore in November 2020, which was fully subscribed. Venu Nair said in the company's annual report that this helped the company repay debts aggregating to Rs 125 crore, and is a debt-free company today.
Shoppers Stop is also not the only retailer looking to exit none core businesses, lower debt and focus on core business. In July, apparel retailer Arvind Lifestyle Brands sold its value-fashion retail chain Unlimited to V-Mart Retail Ltd for Rs 15 crore, and use the capital to focus on its six-core brands: US Polo Assn, Tommy Hilfiger, Arrow, Flying Machine, Calvin Klein and Sephora.