India's Shoppers Stop drops 5% as profit tumbles on investments

BENGALURU/CHENNAI, July 25 (Reuters) - Shares of Shoppers Stop (SHOP.NS) fell as much as 5% on Tuesday, a day after the Indian departmental store operator reported a more than 34% slump in first-quarter profit as investments to beef up its business and discounts weighed.

Standalone net profit fell to 149.4 million rupees ($1.83 million) for the quarter ended June 30.

The decline in earnings could be attributed to discounting and Shoppers Stops move to invest in its beauty, footwear and affordable apparel businesses, CEO Venu Nair told Reuters.

Total expenses rose 5.8% for Shoppers Stop, which sells products ranging from Vero Moda apparel to Michael Kors watches at its stores.

Revenue from operations still climbed 4.2% to 9.82 billion rupees, with brokerage ICICI Securities attributing a bulk of it to its move to raise product prices by 5%.

Higher costs, including that of raw materials, labour and utility, have forced several companies to raise the prices of products and pass the burden of inflation onto customers.

Shoppers Stop said the demand for apparel, which had been muted after the festive season of Diwali, saw a partial revival since mid-June.

\“This slowness in the apparel segment, we very strongly believe, is temporary,\” Nair said.

Shares closed up nearly 2%, taking their gains to over 9% this year.

Rated \“buy\” on average by 11 analysts covering Shopper Stop, the stock has a median price target of 850 rupees, according to Refinitiv data.

($1 = 81.6980 Indian rupees)