Shoppers Stop Limited (SHOPERSTOP) Q2 2021 Earnings Call Transcript

Shoppers Stop Limited  (NSE : SHOPERSTOP) Q2 2021 earnings call dated Oct. 19, 2020

Corporate Participants:

Rohit Dokania — Vice President – Research at IDFC Securities Limited

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Analysts:

Percy Panthaki — IIFL Securities — Analyst

Nihal Jham — Edelweiss Financial Services Limited — Analyst

Shalini Gupta — Quantum Securities Private Limited — Analyst

Ashit Desai — Emkay Global Financial Services — Analyst

Vikram Kotak — Lansdowne India Equity — Analyst

Gaurav Jogani — Axis Capital Limited — Analyst

Krishnaraya Iyer — New Trends — Analyst

Ankit Kedia — Phillip Capital India Private Limited — Analyst

Resham Jain — DSP Investment Managers — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shoppers Stop Limited Q2 FY ’21 Earnings Conference Call hosted by IDFC Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Rohit Dokania from IDFC Securities. Thank you, and over to you, sir.

Rohit Dokania — Vice President – Research at IDFC Securities Limited

Thank you, Neerav. Good afternoon, everyone, and welcome to the Q2 FY ’21 results conference call of Shoppers Stop Limited. I hope you and your near ones are doing well.

I would like to thank the management for giving IDFC Securities [Technical Issues] Nagesh, Customer Care Associate and Non-Executive Chairman; Mr. Karunakaran Mohanasundaram, Customer Care Associate and CFO; Ms. Asawari Sathaye, Customer Care Associate and Head Communications, Investor Relations and Sustainability; and other Senior Management Personnel.

We will start the call with a commentary from [Technical Issues]. Thank you, everyone. And over to you, Nagesh sir.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Thank you, Rohit. Very, very good afternoon to all of you and welcome. Hope you, your colleagues, your family members, and your dear ones are safe. These are really testing times. Not an easy time for anybody, but I hope all of you are doing well. And thank you very much for joining us at the Shoppers Stop earning call for quarter two. As you’re aware that the quarterly results, the press release, investors presentation are all available on our website, and I hope you had a chance to browse through the highlights of the performance.

Before I go through the details of our performance for quarter two, I think there are several positive news during the quarter, which I thought, I’ll just share. I’m sure all of you are absolutely on top of it, in terms of what’s happening with the COVID in the country. There is a decline and that’s a very big positive for us, not only as individuals or as organization, but as a country.

Also, all of you as investor analysts you know what’s happening in terms of organizational performance. I think the second quarter has been better than the first quarter. And particularly, the month of September, there seems to be green shoots and there are recovery, and I think that’s a positive indication. As we go forward, I’ll try to correlate some of our performance to what’s happened in the market and what’s happening to various other industries.

During most of the part of — past of — part of quarter one, stores were completely shut, and you are aware of it and we had presented that to you. While the trend continued partly in July and August, we’re so happy that stores were fully operational in September, baring a few exceptions.

In the last quarter I had mentioned about the new normal and it continues. Yes, it is truly a new norm. If I talk about the customer behavior, the customer connect we have, our journey to e-commerce and omni, our whole organization’s attempt to transform itself into a digital organization, and of course I’ll also talk about products, people and the four strategic pillars that we have taken up as the way forward for the next two years.

While most of the stores were opened, COVID regulations do continue. We could open stores in Maharashtra from mid-August. There has been intermittent shutdowns in various parts of India, particularly wherever the COVID impact was significant. So therefore, if I look at the number of days last year this quarter versus this year, we’ve had 80% of the days compared to last year.

On the other hand, if I look at the number of hours, I think we’ve been operating at around 80% approximately on the number of hours because many places the stores had to be closed at seven. Of course, now during the last few weeks, some of the state governments have allowed us to open up to 9:00 o’clock. So even the store hours are coming back to normal. Hopefully, this will continue and we will be able to operate across the country on full normal hours.

We’ve also observed during this quarter that some state governments took a call to close stores and shopping malls during weekend. So I would say, we have come very close to the normal behavior, but there have been erratic movements, but not as much as we saw in the first quarter or in the month of July-August.

We had seen some significant changes in the customer behavior. There are many of them, some of them, I thought we can mention. Although footfall improved month-on-month, because we had 95% decline in [Technical Issues] quarter one, 89% in July, 83% in August and 65% in September, which actually means that we’ve got 35% [Phonetic] of our last year’s customers back into our stores in the month of September.

But we have seen this across — this standard across the country. And as in the first quarter, the stores in non-metros have shown higher level of resilience and therefore, our non-metro stores are performing better than the metro stores. The decline has been about 59% versus 72% decline in metros. So definitely there is a positive movement in the non-metros.

Similarly, standalone stores have recorded lower decline versus mall stores by almost 10 percentage points. I believe with government now allowing multiplexes and restaurant, food courts to open this week, the footfalls will start coming back into the malls in a better way because in the absence of food court and multiplexes, okay, the stores that are operating in the malls with less number of footfalls. Now, this will again give us a chance to increase the footfalls as we go forward.

The average ticket size has considerably increased. This clearly shows that the customer is coming with a very clear intent of shopping. The window shoppers, the casual shoppers, the impulse shoppers, the moviegoers, the food eaters, I mean, they were not there in the mall and it’s also visible. Our average ticket value has increased by 20% over last year. Our average bill value has also increased by 6%.

We also see, in terms of families, less women and children. As we said in our Investor deck [Phonetic], there has been a shift and that’s a very positive shift for us knowing that we are a 30 year old brand, the country’s first female department store chain, we have started seeing younger generation coming back to us, and we obviously had 3% positive movement of younger members into our — into our stores. What this tells us is that people are also finding our offerings and the way we are running the business better, plus, also finding us as more trusted and more safer place to come and shop.

We are also seeing that the Personal Shopper is actually becoming a very positive way of interacting with us, and our customers are preferring a combination with online with a Personal Shopper assistance. I mean, this is truly an omni business, but it is just not online. There is a rationale, there is a transactional, and there is an emotional part happening in the transaction itself because people, they are involved even though you are shopping online.

On the categories, Beauty had the least decline followed by home and toys, whereas footwear, luggage, apparel, and a few other categories had a larger decline. I mean, this is something that we will have to actually look at as we go forward because many of these are connected to other industries like [Technical Issues].

Operator

Sir, sorry to interrupt you. Mr. Nagesh?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yes.

Operator

Sir, sorry. Suddenly your voice is breaking. I request you to repeat once again.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Okay. Please, can you hear me now?

Operator

Sir, one moment please. Participants, please stay connected. Ladies and gentlemen, please stay connected, while we reconnect Mr. Nagesh. Thank you for your patience everyone. Sir you’re connected back to the call.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah. I’m sorry, I’m calling from a remote location, and therefore there may be some disturbances and some issues in terms of the communication. I did mention that on the categories, Beauty had the least decline, followed by home and toys; whereas footwear, luggage, apparel and a few other categories had a larger decline.

Our own response to COVID has been as follows; we have been talking in the last two quarters on the importance of cost reduction during these critical times and maintain liquidity. I think this is one of the most important things for any organization under these circumstances. You need to survive to start thriving and start reviving as you go forward. We are tracking very favorably versus all our internal KPIs. And I must say that, I’m very proud of the team, as they have been able to exceed on all the internal targets on cost reduction.

We have been renegotiating every cost with the service providers. We have successfully renegotiated lease rentals with our landlords. And I must thank the landlords who have been considerate towards us during the last two quarters, I mean, the true sense of partnership.

In my previous meeting also, I had mentioned that we had targeted INR450 crores, $4.5 billion as the savings plan for this year, in spite of the fact that last year we added 11 stores during Q3 and Q4. We saved $1.85 billion in the first quarter and in the second quarter, we have saved $1.3 billion, INR130 crores. Thus the total savings would be in the region of INR315 crores for the first six months.

As we move forward, the festive season is coming. It’s extremely important for us to also gun for it proportionately higher increase in revenues and therefore, although our commitment to the savings target remains, our increased cost savings, we may also want to put it through for some marketing effort, so that we are able to pull through much larger sales during the coming quarter.

There is a continued focus on cash conservation. As a Company, we have cash and bank deposits at about INR85 crores. We have availed term loans of about INR150 crores. As of 30th September, our net debt is at INR215 crores.

I think the good part of our cost savings and equity is the ownership at every level. Like I mentioned, the team has done some wonderful work of being able to cut costs all across, and it is not a one-time effort. I believe this is continuing.

What this may also do, and which is very positive for the organization, is over this period of the year, we will learn to work with less number of people, we will learn to work on lower cost, become a more frugal organization, and therefore, many of these savings may actually get carried forward in the coming years as we go.

As I said at the end of the quarter, we opened all the stores, the store opening and closing have been inconsistent, but fine. They have impacted sales. Being very conservative and wanting to be sure that every employee and every customer is in good shape, I mean we have put up a lot of protocols. Our CHRO along with the operations team, they monitor, on an hourly basis, the COVID situation. I get a report on a daily basis on the employees’ health and well-being under COVID, so that we know as to what’s happening. And I must say things are looking very much in control.

Last time I also spoke about our journey to a world-class omni-retail company. Honestly this is a transformation that we have to go ahead. Do we have choices? No, we don’t have choices. The only thing is, how fast can we do it, how easily we can transform? There will be disruptions, but can we still manage it well?

So a few quarters back, we had started a project, one which is called Trishul and one which is called Everest. The idea was to first stabilize the system, get everything right, and then look at growth. And in this journey, we had actually engaged with an international consulting group to support us over the next 12 to 15 months, so that something that we don’t know, we get to know from people who know it better than us.

We’ve had tech challenges. We’ve had tech related issues, especially because you are aware that we had implemented SAP Hybris. Last year, we went out of JD and implemented SAP HANA. And with this, now we are a fully compliant SAP organization, and with lots of analytics and lots of warehouse management systems in place.

We actually improved our interface on app and website based on optimization, advanced analytics, in order to get into achieving personalization and delivery turnaround time optimization. And our benchmarks are the best-in-class in the country. So we would want us to be compared with the best-in-class in terms of all the KPIs. And to me the best-in-class could be Amazon, could be Myntra or could be anybody else, but we don’t want to lag behind on that.

All the KPIs such as our average daily orders, value of these orders, conversion, more importantly, our First Citizens sales contribution; and every other KPI have significantly improved against last year. And although we are talking about end September, the first two weeks of October has also given us very positive hopes. We have also added 110 new brands on the drop ship model in the shoppersstop.com, and they have already contributed to 5% of e-commerce sales.

Now, I think this is something good for our brick-and-mortar business because sometimes we can’t accommodate all the assortments in all the brands because of the limitation of space. But however, with the drop ship model, shoppersstop.com is also able to provide to our customer’s assortments which otherwise we were not carrying.

For example, we had Indian wear for the women, but we never sold sarees. Now though the drop ship model, we are already started selling sarees across the company. We never sold wedding wear, especially the mid and the higher end, but now we also have wedding wear, which is actually coming from the partner. So therefore, this whole drop shipment is going to be a unique assortment increase for us and this will help us to get better customers. It also help us to increase the share in the wardrobe of our customers.

We had been talking about our partnership with Amazon. It’s been — it’s been quite a struggle for us in the last few quarters, but now, I’m so happy to say that we, as an organization, now are fully connected. As of last week, all our four distribution centers are connected to Amazon, and now we have 50 stores which are connected to Amazon.

In terms of the assortment, we’re slowly opening up the assortments one by one. As of now, we have just opened the private brands and maybe watches and a few other brands. But over the next two to three, four weeks, we will add up and open up the full assortment of what Shoppers Stop has across the country on to Amazon site, and our customers will be able to access not only the product, but they’ll be able to access and get delivery directly from the stores, which I think will really enhance our capability of serving our customers.

Our e-commerce sales has grown by more than 50%, and our share of e-commerce has increased from 2% to 8% in this quarter. The way things are going in the first two weeks, I’m very, very hopeful that we should be hitting a double-digit figure very soon.

If I now come to the last quarter’s performance; like I mentioned, July was better than June, August was better than July, and September has been better than August, so continuously the growth is there. Having said that, we did have store closures, and we did have restaurants and cinema halls closed. But like I said, things are opening up, so we should be positive. However, this has impacted our sales in quarter two. We had sales decline of about 65%. We recorded INR371 crores as sales.

The gross margins were continuing to impact because of the first four months or five months of disturbance and closure, the private brand inventory that we had brought in, we had to clear that off, and there was no way we would want to carry this inventory to the next year. So it is being sold on discounts and markdowns. And not only that, we also adopted a more conservative inventory provision tax [Phonetic] policy. And as on date, we have actually provided INR12 crores for inventory in the quarter.

As I said before, with our continued focus on cost, we have saved INR130 crores versus last year. Our EBITDA loss was INR83 crores versus INR133 crores in Q1. And the information on the financials are available with you through our Investor deck. And post our presentation, I’m sure Karuna and the whole team and myself will be able to answer any questions that you have.

Let me comment — share the update on the strategic pillars that we have. First, I’ll start with First Citizen, they’re our first citizens and truly our loyal customers. Our engagement both offline and online continue to exceed customer expectations. We spoke about an e-com, with improved user interface on our app and website, page download optimization, delivery turnaround, we achieved significant improvement in higher First Citizen transaction. As a result, our First Citizen sales mix increased to 25% in e-com, and additionally, we had 22,000 First Citizen member shopping online.

So this is positive for us because if you have about 80%, 83% of business coming from First Citizen, and if 25% of them are shopping offline and online, and just imagine if you are able to reach 50%, 60% of our First Citizen also shopping online, it becomes like a family shopping, we should be able to serve the customers almost 24/7 as and when they want, with a system next to their house, our stores being connected — connected through Amazon, I mean, typically and truly a digital transformation happening as we move forward.

On the offline, we added 130,000 new members, despite this pandemic. Overall sales from First Citizen, like I said, has been a healthy mix of 83%. This is 6% higher than last year. And our average ticket size has also increased by 12%.

Every quarter, we have been talking about our Personal Shoppers scheme that we started. This has been a good initiative and has been a real good saviour for us during this pandemic time. Our Personal Shoppers continue to excel. They have contributed 14% total business with an average transaction [Phonetic] size of 2.8 times of the otherwise average transaction size, so which means whenever the Personal Shopper is interacting with the customers, the transaction goes substantially higher, 2.8 times.

Not only that, they are able to serve our customers through what we call as White Glove Service. Customers at home or office can view the products through a video call and place an order, and payments are made though a link that they receive on their mobile.

We also have real-time Personal Shoppers online interactions through what we call as Yellow Messenger Service. And through Endless Aisle, our Personal Shoppers improved our overall customer experience in our omni channel. And the online pre-booking of Personal Shoppers Appointment Service for customers is available through website and app.

So literally we have gone forward in terms of digitization, okay, but gone back in terms of the Indian ways of serving the customer on a personal basis. So although, we are saying one is going digital, that doesn’t mean that the personal touch has to go away. But this actually creates a unique possibility of customers being served with people and with technology together.

With the success in Personal Shoppers, now we are training every customer care associate to manage Endless Aisle. Last quarter, the Endless Aisle contributed to 2.8% of revenue. This actually shows that probably we were losing these customers because either the assortment or the SKU or the size was not available to the customer. However, when such incident happens, our customer care associates are able to go on our app and through the Endless Aisle serve the customers.

Now, this is very, very important for us, you can imagine what a 2.8% can make a difference. And if we can really move this to 4%, 5% the availability quotient in the Company will really go up very high, and it will serve the customers better. And last quarter we have add — we have actually launched two new campaigns on Personal Shoppers, and this has really increased the awareness of Personal Shoppers. So now customers are asking for Personal Shoppers online, as well as when they — when they come into the store.

The next strategic pillar was our private brands. After a long, long time, we have seen an increase in our private brand share. It’s now gone to 15% this quarter. Our decline in private brand business is much lower than brands, which means private brands have performed better. Customers are actually making a choice, a conscious decision to buy our private brands.

In September, our private brands declined a mere 19% versus 47% on the overall brand. The value buying is evident, and the response to our new merchandise launched at less than INR999 has been very good.

We have added several categories on essential, to the sleepwear, loungewear and innerwear. And I’m sure with our new CEO also joining, with the background and experience of product, we should be able to really look at this strategic pillar and improve substantially to reach our ambition of 20% of the business coming from private brands.

Coming to the next pillar, Beauty. Our Beauty business continues to remain strong, and the Beauty mix sustained at roughly 15%. We have now started working on getting private brands in Beauty, and in Q3, we’ll be launching one segment of private brands for Beauty. And over the next one, two years, we would enhance and complete the whole Beauty private brand business, so that we are able to take care of private brands also through fragrances, skincare and feminine hygiene.

This quarter, we actually launched an event called Eye-Stopper. The whole objective was to reach customers and talk about how they can actually do different makeovers for their eyes, and this has been a very successful event. We had actually run a contest for beauticians, for makeover artists to send videos, and which is actually judged by Malaika and other distinguished guests.

And as I speak, we received 2,500 videos of roughly three minutes, and this was just various star personalities, and we’ll talk about the details of the outcome of this event as we go forward in the next quarter in terms of business.

So these were the four strategic pillars. But before I end, I definitely want to give you some more updates. Last quarter, when I met you all, we spoke about our Managing Director and CEO exiting the Company, and I said, I would stand by the Company in an, although Non-Executive Chairman, but will support the management in the best way possible. I’m so happy to inform you that Mr. Venu Nair is joining us as the Managing Director and [Technical Issues].

Operator

Participants, please stay connected. The line from Mr. Nagesh has dropped. Thank you for your patience everyone. We have line from Mr. Nagesh connected back. Sir, you may go ahead.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah. So I was talking about our new Managing Director and CEO joining us in the first week of November. So I’m so happy that Mr. Venu Nair, who is currently the CEO of Westside, and who has before this worked in Marks & Spencer, and he was the Managing Director and CEO of Marks & Spencer India for many years. And before that has had global experience based out of London. He also worked for Arvind and for Madura.

With an overall 27 years of experience, an engineer, and an MBA from S.P. Jain, I really look forward to Venu joining us, and supporting our journey of taking Shoppers Stop to the next level, and especially in terms of our next move towards private brand and the four strategic pillar that we have talked about. This will really help us in terms of our growth. And I would continue to support Venu and the Company in its next journey, as we go forward.

In the last board meeting, which was held last week, the Board of Directors have approved the rights issue to strengthen the balance sheet. We’ve already appointed the bankers. We plan to start and end the process by next month subject to, of course, approvals of the regulatory authorities. And like we always believed that retail business has a lot of operating leverage, so we don’t want to have too much of financial leverages, and therefore, keep our debt as low as possible. I think that is one of the objectives of what we want to do.

We believe that the COVID impact will continue for the next two quarters, although with every quarter, it will keep coming down. There have been second waves in many parts of the world. We are hoping that the second wave in India does not come through because of the various things that are happening.

We will continue to focus on our cost controls and maintain liquidity. Like I mentioned, we have commenced our digital journey, and we expect our e-com business, whether it is shoppersstop.com or amazon.com or amazon.in to which we are connected, will actually be a large share of our total business in the future.

Our safety measures for customers, employees and stakeholders will continue and I’m sure that all of you will be safe and keep your family safe. Enjoy the rest of the discussion. We’ll be opening up the question-and-answer. Some of the questions I would answer, and some I’ll have to redirect it to Karuna and team, who are sitting in a different location.

Thank you, once again, and thank you very much for attending the call.

Operator

Should we open the floor for questions?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yes, please. Go ahead.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Percy Panthaki from IIFL Securities, please go ahead.

Percy Panthaki — IIFL Securities — Analyst

Hi, good afternoon team. This is Percy Panthaki here.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Good afternoon.

Percy Panthaki — IIFL Securities — Analyst

Sir, my first question is on the cost saving targets that you have put, I believe about INR450 crore, which very roughly translates to about 10% of your revenue. So, just wanted to understand if you could give some more granularity on this INR450 crore? And also whether once the business is back in full swing, let’s say a year down the line or whenever, how much of this INR450 crore will be permanent?

And the second part to this question is, I’m assuming that rental renegotiation is a material part of this INR450 crore. So when you renegotiate your rental, is it renegotiated with some clause which says that a year down the line or a couple of years down the line, there will be an automatic X percent escalation since — on the lower base or something of that sort. So yeah — so that’s my first question, sir.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So, since you’ve asked the question in two part, let me answer it. The first question answer, let me give you on the real estate part of it. See most of the rental breaks that we have got are breaks that we have got for quarter-by-quarter, and now the rental breaks that we have got is up to third quarter.

And because these rental breaks are substantial, ranging from 25% to 50% to 75% to pure revenue share, so this will keep getting re-adjusted quarter-on-quarter. Will this rental breaks be permanent? I don’t think so. Wherever we have moved from a fixed rental to a revenue share, yes that will remain permanent. So that’s one part of it.

If you look at the total savings, out of the INR333 crores saving that we have received in the first half, a large amount of saving has come from other expenses, and rental is just one part of it. And I believe, and I’ll leave it to Karuna to answer, if you want a little more granular, I believe that many of the savings, say let’s out of INR450 crore, a wild guess, INR200 crore plus savings, should be able to continue even in the next financial year after things had actually come back to normal.

Karuna, you have anything to add?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. So Nagesh — thanks Nagesh. In fact you’ve covered everything. Just to give the overall numbers. Yeah, lease rental will be around about 40% of the savings, the other costs would be around about 60% of the total savings. As Nagesh rightly said, next year out of this INR450 crores, we should be able to — what you call, sustain almost INR200 crores on this, you’re right Nagesh. I have nothing more to add.

Percy Panthaki — IIFL Securities — Analyst

So, how do we look at your EBITDA margins once COVID impact is totally gone and business is fully restored to normal, how do we look at your savings? How do we look at your EBITDA margins because INR200 crores, as a percentage of sales, is a very material number. So do you think that your EBITDA margin can go up like 400 basis points or something like that versus the pre-COVID levels?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Well, I think — Percy, you have asked a question and you have answered it yourself. So 4,000 — 4,000-odd-crores, 4,500-odd-crores was the last year’s turnover, okay, and the EBITDA margin was 5%. And if everything goes right, and if — we believe the INR200 crores can be carried forward that should be the kind of returns that we should see, as far as EBITDA is concerned, okay.

And therefore, as we move forward, the most important thing is ensuring that the revenue reaches that kind of a sale, which means that how fast can we actually go back to the ’19, ’20 numbers in the years ’21, ’22. I think that’s what all of us are working or attempting to. But we are very clear that about 200 [Phonetic], okay, will not get repeated and will not be covered back. This will be a saving, which will be more or less a permanent savings in the business.

Percy Panthaki — IIFL Securities — Analyst

So if I could just get a better understanding of this INR200 crore number, which is approximately, let’s say 4%, 5% of your sales, if you could very roughly break it up into different heads as to this 4% to 5%, where is it coming from. I understand travel is one, but obviously that cannot be the majority of this INR200 crore. So, what are the other line items from which you’re generating the savings?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Over to you, Karuna.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah, thanks, Nagesh. See probably one — slightly more than 1% should come from the employment cost and other 1% should come from the overall operating expenses. I mean, these are the two large savings, okay. And as you rightly said, I mean, there is a smaller amount in electricity, there is a smaller amount in probably what you call advertisement and marketing and so on and so forth. So — but if you ask me the two largest, it will be employment and store operating expenses.

Percy Panthaki — IIFL Securities — Analyst

Right. But isn’t that mainly because your number of hours has — of operating has gone down and these sort of will expand once you have normal operating hours?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

We have factored that. After that only we’re talking about INR200 crore savings.

Percy Panthaki — IIFL Securities — Analyst

Okay. Okay. Understood. Secondly, just wanted to understand what you are looking at from the terms of a near-term trajectory of recovery. Your EBITDA loss from about some INR130 crore, INR140 crore has come down to INR85 crore this quarter, is there any chance that you’ll be EBITDA breakeven in Q3?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Karuna?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. We normally don’t give guidance during these critical times. See the Q3 — like our EBITDA breakeven, largely depends on the sales what we have, yeah. So it depends on how the sales is going to happen during the festive season. I’m sure, you’re aware, it’s highly variable on the sales numbers. So right now, we are optimistic, and we believe because both Dussehra and Diwali has come in the same quarter, plus we also have the Christmas at the end of December, end of season sale. So things look brighter, optimistic, but we don’t want to give any guidance right now about the EBITDA margin.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Percy, I can only tell you that the first two weeks of Dussehra in the Eastern region is showing us minus 25% compared to last year.

Operator

Thank you very much.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah.

Operator

Sorry to interrupt you Mr. Panthaki. I request you to come back in the question queue for a follow-up question.

[Operator Instructions] Next participant is Nihal Jham from Edelweiss Financial Services. Please go ahead.

Nihal Jham — Edelweiss Financial Services Limited — Analyst

Thank you so much, and good afternoon to the entire management. Sir three questions from my side. The first one, you gave a sense of the recovery in festive season especially with East, where it has started out, and I think it was down 25%, as you mentioned.

I just wanted a sense from you that do you expect that this is what the trend will be for the entire festive season, after assuming Dussehra and Diwali is through or you expect that this would improve by the time the festivities are over?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

In the past, we have always looked at the quarters — festive quarter performance based on how Onam kicks up in South, okay. And this year, because during the Onam time, the lockdown was quiet heavy. I think this is the first indication of improvement in the moods of the festive season by the customers. And I think this is an indication that things will improve. And this definitely is an indication that things will improve substantially over quarter two, how much, because there are too many ifs and buts both in terms of second wave, closures, government decision. So therefore, it is difficult to comment, but the indications are very positive.

Nihal Jham — Edelweiss Financial Services Limited — Analyst

That’s helpful. Sir, the second question was on the appointment of Mr. Nair. Congratulations on that. I just wanted a sense of that from the Board’s perspective, what are the key priorities that would be put in front of him. As I understand his background, is it right to say that private labels will be the priority given he is coming from Westside? And the other related question to that is that, is it that Beauty could take a backseat in the new scheme of things, just your comments on that?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I just want to go back that Venu is joining fully aligned to the strategy that was created by us and approved by the Board early January. And in that, the four strategic pillars that we had are fully, fully aligned, as far as he is concerned. And in the strategic pillar, other than we saying we’ll do Personal Shopper, First Citizen, digital transformation, private brands and Beauty, okay, for us the whole bet is on women, okay, because we believe that the women percentage of shoppers is high, and if we can actually serve them better, it will work well. And when women start coming, the children will be coming much more.

So if you look at Venu’s background, the fact that he has been in Marks & Spencer and Westside are almost all the areas of running a retail business, of running a private brand, of addressing women and children, is fully covered. And this experience will help us. And be rest assured, the alignment of the new Managing Director, CEO to our business and the Board is 100%, and therefore, these four strategic pillars will not be missed under any circumstances. Some may perform higher and better, but nothing will go into the backseat.

And therefore to the investors, in every call, we have said irrespective of what happens, we’ll share with you our four strategic pillars every quarter, so you know what happened. It’s not that we’ll share with you only when things are going up, if things are going down in these four, we’ll also share with you.

Nihal Jham — Edelweiss Financial Services Limited — Analyst

Sir, that’s helpful. And last question from my side, specifically on the digital and e-commerce, a lot of initiatives have been taken both on the back end in terms of new software implementation and even in the front end, when it comes to our tie-up with Amazon and the focus on cost reduction and on the website and the app.

I just wanted to understand, once this entire exercise is complete, what is the kind of interface that we’re looking to provide to our customers? And also a related question to that is that in the future, are we only looking at Amazon or we may look at other marketplaces also to host our collection?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So we have, I think, quite a few things on our task, okay. For us, shoppersstop.com is going to be the major and Amazon will be the one, which will start giving us the booster dose. So therefore, I think we will concentrate on these two over the next few years for us to get the full potential of this partnership, as well as the full potential of our shoppers who’s doing — I mean, I think we have to appreciate that if shoppers goes back to reach INR4,000 crore, and we are already at 8% if we are able to maintain 10%, we’re talking of going INR400 crores on online, and let’s not forget the last year, we were at INR75 crores. So to me this simple exercise itself will make us very digital.

And with the combination of click and collect, with the combination of alterations that we can do, I mean, just opens up a full gamut of service that we can do to the customers. Our Yellow Messenger service, our White Glove service, our associates going to customers’ home and delivering when it is next to store. See the possibilities can be as immense as that if you’re shopping [Technical Issues].

Operator

Participants, please stay connected. Line from Mr. Nagesh has dropped. Ladies and gentlemen, please stay connected while we re-join Mr. Nagesh back to the call.

Participants, thank you for your patience, and we have Mr. Nagesh connected back. Sir, you may go ahead.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah. So just imagine the possibility that if you’re shopping from Andheri, and your requirement is there in Andheri store because that’s the way we’re linking it, we could give you an option to collect it in the next half an hour from our Andheri store, okay, on the curbside or we can even deliver to you in maybe half an hour or one hour.

See, with what we’re doing the possibilities are immense both on click and collect, alteration, ship from stores, so that was the possibilities. I think we’re journeying very well. I would also say that this is a huge technology shift, not only in terms of technology, but also human capabilities. Let’s not forget, we were a brick-and-mortar organization just a year back or a few years back, and from there we are turning, so there is also cultural shift.

I think in the last quarter we had mentioned that the whole leadership has gone through a digital dexterity program, which means they have actually gone through what happens when the organization when its [Phonetic] digitized.

The same digital dexterity is now being put across the organization, which means that by the end of March, 100% of our organization would have gone through a program as to how we have to transform ourselves digitally in order to serve the customer digitally. So I think that’s the journey that we’re taking.

Nihal Jham — Edelweiss Financial Services Limited — Analyst

That’s helpful, sir. I’ll come back in queue for follow-up questions. Thank you so much.

Operator

Thank you very much. Next question is from the line of Shalini Gupta from Quantum Securities Private Limited. Please go ahead.

Shalini Gupta — Quantum Securities Private Limited — Analyst

Hello sir, I just wanted a couple of — two, three — two, three data points. One is the footfall decline would be how much, sir? Be around upwards of 70%?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yes. I think we mentioned that it was 95% — minus 95% in the first quarter went to 85%, 80%, 75%. It’s hovering in the region of 65% to 70%, 75%.

Shalini Gupta — Quantum Securities Private Limited — Analyst

Okay, sir. And sir, like — see in the — in the first quarter, you had said that you’ll be opening five new department stores, is there any change in that?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

See we — we’re are still saying that those stores are there, but depending on what happens to COVID, we’ll evaluate it again, okay, and then open it. We have opened one store in Lucknow, which is the Phoenix Market City. We have opened other smaller stores, I think, three or four stores, but we’re also closing stores because that is part of our journey [Phonetic].

Shalini Gupta — Quantum Securities Private Limited — Analyst

Yes, sir. And sir lastly, like if you could just give a sense of how much — you said that you know, lot of the rentals you’ve gone into a situation where you have a — you’re sharing — you’re in a revenue share — shared with the landlords, but that will change — that is not permanent, that is going to change probably next year. Sir if you could just give a sense of how much the rentals are and recovering [Speech Overlap].

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

I would — I would suggest for your working, I think we should take that as rental savings will probably not come back in the next financial year, but all other savings will continue to come back. I think that’s the fair way of working, if you all are actually working on the projection for the coming year.

Shalini Gupta — Quantum Securities Private Limited — Analyst

Okay. But sir, then you’ll have to give me a sense of how much the rentals are this year?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

No, we actually — Karuna did mentioned to you that out of the INR450 crore saving, one-third is coming from rental, okay, which is approximately about one-third. Balance two-third, he also mentioned that the maximum saving is going to come from employment and admin and some of the other operating cost. And if the savings is much more than what we have thought, we’re going to put it back into marketing. So roughly INR111 crores of rental and about INR300 crores — out of INR333 crores, so one-third.

Shalini Gupta — Quantum Securities Private Limited — Analyst

Okay. And, sir lastly [Technical Issues].

Operator

Sorry to interrupt, Ms. Shalini.

Shalini Gupta — Quantum Securities Private Limited — Analyst

[Speech Overlap] Yes. Just last question. How much was it in financial year ’20 last year?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Shalini, we lost your question, Shalini, can you please repeat the question?

Shalini Gupta — Quantum Securities Private Limited — Analyst

Sir like e-commerce now, as you’ve said, it’s about 8% of sales. So how much would it be in financial year ’20?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

It’s around about 1.5% to 2%, Shalini. You’re talking about last year, isn’t it? Yeah, yeah, yeah.

Shalini Gupta — Quantum Securities Private Limited — Analyst

Yes, it is. Okay, sir. Thank you so much. Bye.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Bye.

Operator

Thank you very much. Next question is from the line of Ashit Desai from Emkay Global Financial Service. Please go ahead.

Ashit Desai — Emkay Global Financial Services — Analyst

Yeah, hi. Thanks for taking my question. My question is on gross margin. I think you highlighted about some inventory provisions this quarter, if you could repeat that figure. And I mean, how do you see gross margins going forward? Also, if you can comment on the discounting level in the market today?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I will comment on the second part. The first part, I think, Karuna, you can talk about it. There has been a depression of about 560 basis points on the gross margin. But if you look at it, one is partly the provision that we have taken because of the conservativeness, which was, as I mentioned, about INR12 crores.

As far as the overall drop in margin is that you’re aware that we started off the year having private brands, and private brands unlike the other part of our business, which is either on concession or SOR and what we call as returnables, is the inventory that is outside bought by us. And therefore, it was important for us to convert this into cash, and also ensure that we don’t carry too much of stuff, otherwise we’ll not be able to bring in fresh inventory.

And therefore, we took a call to discount it heavily, and the depression in margin is basically because of the private brand, where we actually had a depressed margin of about 2.6% compared to the earlier year. I believe that all the margins should come back to the earlier years in the coming years once we clear up these stocks, which will happen in the next one or two quarters.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Nagesh, I have nothing more to add Nagesh. You have answered all the questions. Thank you.

Ashit Desai — Emkay Global Financial Services — Analyst

Okay. And second question is on — if you can share any target of store closures and openings going ahead?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So honestly if you ask me, generally, we look at between 5% to 10% of store closures. Because of the COVID, this may remain in the same region of 5% to 10%. But because a lot of landlords have given us concession and made it as pure revenue share, we would like to take even those calls once the market goes back to almost, let’s say between 75% to 100%. And I think that’s the way we look at it. However, we will continue to look at Tier 2 and Tier 3 for new openings, okay.

As far as closures are concerned, I think we already have identified store closures, and they will be mostly in metros. But roughly, you can say 5%. So 5% on, let’s say 90 department stores will be built in [Indecipherable] stores. But most of these decisions will be taken up and executed in the last quarter.

Ashit Desai — Emkay Global Financial Services — Analyst

Okay. Okay. Yeah, thanks for that. I’ll come back in the queue.

Operator

Thank you very much. Next participant is Vikram Kotak from Lansdowne India Equity [Phonetic]. Please go ahead.

Vikram Kotak — Lansdowne India Equity — Analyst

Yeah, hi. Thank you. My question — one question is answered. My second point was, see very impressed with slide number nine, which is on digital footprint. Can you throw some light on the — what are the conversion ratio in the [Technical Issues].

Operator

Sir, sorry to interrupt you, but your voice is breaking.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Vikram, we can’t hear you clearly, Vikram. Can you please repeat the question?

Vikram Kotak — Lansdowne India Equity — Analyst

Okay. My question is that can you — can you talk little bit about conversion ratio on the digital footprint both in terms of the [Indecipherable] customer, as well as the other customers. What kind of conversion you do for the digital? Kind of, I see a lot of visits on your site, but what kind of conversion of volume [Phonetic] through the conversion? Thanks.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So Vikram you have — you have seen the growth that we’ve seen on the online, okay. And out of the total number of customers that we have got from the conversion starting at less than 1%, now I think we’ve reached almost a conversion of between 1.5 plus, minus. And I think we’re targeting to go to 2% plus as we move forward. And as we go, I think the benchmark in the country should be in the region of between 2% to 2.5%.

Vikram Kotak — Lansdowne India Equity — Analyst

Okay. Okay. And this should be over a what, next 15 to 20 months, you can achieve that?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Oh, yes. Yes, yes, yes. And we have added — we have added 20,000 additional First Citizen customers. And the best thing is that even online, for us, the average transaction value is very healthy. So it is not that online, we’re selling it at a much, much lower value. So many of these KPIs are actually adding up to the way, probably the future will get picked up. But lot of things will also depend on how we execute, and what the market will be like.

Vikram Kotak — Lansdowne India Equity — Analyst

Sure. And Nagesh, any value addition more from Amazon in terms of — they are strategic holder — shareholder also and also your partner [Speech Overlap].

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

You know what today I want is to start doing INR100 crores a month on Amazon. As of now, we’re not wanting anything else. I mean the whole — the whole possibility was to see how we can learn from the best in the world, and how we can make things happen.

So ask me, personally, I would want the team to learn. And even if we replicates 5% of what the guys do, I think we’ll be a much, much larger omnichannel company. And Shoppers Stop, like I said, is firing. The last two weeks has been fabulous, but we’ll tell you once we come for the next quarter.

Vikram Kotak — Lansdowne India Equity — Analyst

Absolutely. All the best. Congratulations. Thanks.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Thank you. Thank you.

Operator

Thank you very much. [Operator Instructions] Next participant is Gaurav Jogani from Axis Capital. Please go ahead.

Gaurav Jogani — Axis Capital Limited — Analyst

Thank you for the opportunity, sir. Sir, my first question is with regards to the investments in your digital assets. I mean, given the increasing scale, do we need to further incur any more investments in the same?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I would first answer little more qualitatively and leave Karuna to answer in terms of numbers. I think all the investments that you’re seeing as rectifying now are the ones that we made last year. But however, in the digital journey, I think these investments never stop, okay. So I believe that there will be investment happening because of the tie-up that we have done with the leading consulting company, who are going to support us over the next 12 months to 15 months’ time in the next phase of growth. And like I mentioned that may lead us to 4 times to 5 times growth in the online business.

So, other than that, I don’t see any major investment as of now because as upgrade has happened, S4 HANA has just been implemented, and these are already planned in the earlier year. So the same capex which has to be done for these two projects will continue, but there is no — nothing new will happen on that.

And I think we also mentioned to you all that, we also did some analytic investments and also did investments to get a one view of the customer. Now, as of now, we have started seeing this. So we’re able to see a view of the customers’ online, offline, in-stores, outside the store, and we’re starting to get analytics on their behavior. So I think these are early days. I think we’ll be a much better informed organization in about future six months.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

So again, Nagesh, I have nothing more to add, Nagesh. I mean, the only thing I want to add is our operating leverage has considerably improved versus last year because the volumes have increased. That’s it.

Gaurav Jogani — Axis Capital Limited — Analyst

Okay. And sir the next question is, again with regards to digital, how is the cost of doing the business online? I mean, has it moved less or [Indecipherable] picks up, how do you see the costs here?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I had just mentioned in the last quarter call that compared to huge losses in the online business, last quarter itself we had seen in smaller numbers, we were very close to breakeven. So looks like that in this journey, we should be able to see a breakeven in the online business. And if we’re able to achieve that in the coming years, then after that it’ll be all accretive.

Gaurav Jogani — Axis Capital Limited — Analyst

Sure, sir. Thank you, sir. That’s all from my side.

Operator

Thank you very much. Next question is from the line of Krishnaraya Iyer [Phonetic] from New Trends [Phonetic]. Please go ahead.

Krishnaraya Iyer — New Trends — Analyst

Hello Nagesh and Karuna, very good afternoon. Can you hear me?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Good afternoon. Yes, we can hear you.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

We can hear you.

Krishnaraya Iyer — New Trends — Analyst

Yeah. So I wanted to get your perspective on the overall retail sector now especially after the Reliance deal, how do you see it disrupting. And post-COVID, what are the kind of impacts on your online business.

And the second question would be about the number of shops that you have overall through the country and how many you’re opening and closing maybe part of it you’ve already answered.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I’ll just take up, Krishna, the first question. To me, everybody is talking about the Reliance Jio coming and disrupting. To me actually they are — they are going to open up the market in a very big way. I mean, let’s not forget that when 25 years, 30 years back, when Shoppers Stop came in, it opened the whole lifestyle retailing. 25 years back, 20 years back when Big Bazaar came up, it opened up the whole value retailing. And I believe that with Amazon and Myntra and Reliance coming in, there is a huge opening up of shopping online.

Also, I think the digital infrastructure in terms of payments was already opened up and the digital infrastructure in terms of highways was already opened up by Jio last year. So I actually see this as very, very positive. And let’s also not forget the modern retail overall is still not 15%. The online is still not 5%. So if the market expands, each one of us, we’re able to compete to hold on to the customer, we’ll be able to see very, very good growth. And yes, there will be a wave of discounting that will again come in, in order to compete between the three big players, but I see this as opening up, and I’m actually seeing it now.

I mean, honestly a lot of our First Citizen shopping is not happening on discounted products, it’s happening on fresh and full value products, okay. It’s not that we don’t have discounts happening in the market. So at the end of the day, customer is also wanting to go through an experience and customer also wants to deal with trusted companies.

So I think we will fall into that bracket. And therefore to me, it’s an opportunity over the next two, three years’ time. Yes, if you’re not able to compete and not able to capitalize on this big opportunity of the whole country going through a digitization, then we’ll be the sufferers three to four years down the line.

And same is the case with the industry. I talk to a lot of industry players, and most of them tell me that their online business is going up, most of them are building their company to take on online business. So I see it as very, very positive. It’s a very [Technical Issues].

Operator

Ladies and gentlemen, please stay connected, while we re-join Mr. Nagesh back to the call. Participants, please stay connected, while we re-join Mr. Nagesh back to the call. Thank you for your patience everyone. We have line from Mr. Nagesh connected back.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah. So I think that’s the way I see. As far as we’re concerned, we’re going to leverage our offline network. I mean, today, we’re the largest chain of department stores in the country. We have the best of brands in the country. We have the First Citizens, who are contributing 83%. We have a first-party database of First Citizens, and we have been working on retention marketing.

So even in tough times, our First Citizens have come in and out of relationship, we have still survived with the help of them. So I would say, we’ll capitalize on these current strength and the opening up of market by Reliance and other players will help us to become more digital.

Operator

Mr. Krishnan, are you there?

Krishnaraya Iyer — New Trends — Analyst

Yeah. That’s it. I think he has answered. Thank you.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Thank you.

Operator

Thank you very much. Next question is from Ankit Kedia from Phillip Capital. Please go ahead.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

So, just wanted to know what is the current inventory on the books on private label? And was the discounting in private label ahead of some of the national brands, which we have. And while they are not discounting so heavily, what we hear from others, what forced us to discount so heavily given that this was the first season of our private label we had from our new center, which we had.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So Karuna, will you please tell him about the inventory of the private brands, then I’ll talk to him about the discounting part.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Okay. Hey, Ankit, we have around about INR95 crores on the private brand, Ankit. That’s the inventory we have, and we’re reasonably confident of liquidating. There will be some what you call provisioning in the next three and four, but that will be relatively insignificant. As of now, we have around about INR95 crores.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

And this INR95 crores also includes the inventory that we have actually bought in for quarter three and quarter four, which are fresh inventories, Karuna, am I right?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. You’re right, Nagesh. You’re absolutely right.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah. So in terms of discounting, I think Ankit the market has some discounting. I mean, today, you can see products being discounted all across between 50%, 60%, 70%. And the fact is that the industry goes between four to six month stock, and for four and a half months literally, there was no store opening.

Everybody has to sell, okay. I think each one of us is seeing only things which are happening where we’re concerned. But in the market, there is huge discounting or huge clearance happening, and the inventory will carry on for the next one or two quarters in the market across the fashion brands.

So I won’t agree to saying that brands are not discounting. And as private brands is our responsibility, so we have to take a call. And currently, if you ask me strategically I’ll prefer to have cash than have margin, okay. And that’s the call we have taken to see that we convert into cash even at a loss of margin, which we’ll recover as the fresh stocks come in with a full margin.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

And sir, did I hear right that 260 bps was the impact on gross margins because of you know [Indecipherable] private label.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yes, yes, yes. Yes, please.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

Sir my second question is regarding the fund raise. So end of the year, can we be a debt free company again if full INR300 crores is used for debt repayment?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Karuna?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. Ankit, well, yeah, INR300 crores is coming right now. You’re aware, our net borrowings is around about INR215 crores. Our endeavor is to have — debt free by the end of the year. If it doesn’t happen by the end of the year, by mid next year, it should definitely be there, Ankit.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

Okay. And sir my last question is on the Personal Shopper. If I look at the contribution of Personal Shopper, it has actually declined year-on-year. Last year same quarter it was 16.5%, now it’s at 14%. And even sequentially, while it’s a wrong way to look at it, but it still declined. While we’re putting emphasis on Personal Shopper, the contribution of Personal Shoppers is actually coming down. So what is the reason for that or is it just a revenue base which is impacting?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

No, no, it is — one is the revenue base. The second is that as far as Personal Shopper is concerned, he is also moving it to online. So there is lot of online also is happening. And overall, we’ll actually get the whole organization changed towards end of file in Personal Shopper business. So we see the contribution going up to between 17.5% to 20% in the next two quarters.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

Sure. And sir, Beauty also, while you said that the Beauty is growing, but contribution of Beauty has also come down actually, if you see, from last year to the current quarter? And…

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

It’s purely, purely because of — because of the mix changing and depending on what the consumers is buying. So it’s just that currently people are not going out. So therefore, they are not buying. And the skin — the fragrance is what is growing very well. Skincare is doing very well. And I think, rest of the makeup, the lipsticks have not done. So I think they will all catch up once normalcy returns.

So I would say it is more to do with customers buying essentials in the last quarter. Now as we move into this quarter, we’ll see how they buy for the festive. But that — honestly, that mix change is not bothering me because those are all outcome ratios, if something else does well, the mix comes down. But they are lead indicators that the Beauty is doing well, as we go forward.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

So sir, so volume wise, we’re not seeing an impact, if we’re seeing the impact on the value wise, is that the way actually to read it?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah, yeah, yeah. I don’t see an impact as we go forward.

Ankit Kedia — Phillip Capital India Private Limited — Analyst

Thank you so much and all the best sir.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Thank you.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Can we have this question as the last question, if you don’t mind? We have already exceeded the time.

Operator

Yes, sir. The last question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yeah. Thank you, sir. Am I audible clearly?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah Resham, go ahead.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah, you’re audible.

Resham Jain — DSP Investment Managers — Analyst

Yeah. So just two questions. One is on, if we just look at quarter three, it’s seasonally the strongest quarter and we have managed our cash flows quite well from Q1 to Q2, and with Q3, with lower — slightly lower discounting than what we did in Q2 and a much better season — should the cash losses is — because you have reduced your costs substantially will be in a very low level than what we’re seeing currently, is that a fair expectation?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Well…

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Nagesh, can I take this?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

Yeah, yeah, please go ahead, Karuna.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. You know we just answered this. I think someone asked probably at the beginning of the thing. Yeah, we do expect the losses to significantly come down because it’s a most important quarter. Other than that, we don’t give normally any guidance. To answer your question, yes, the — either the loss or the profit it should be — the loss should be significantly down versus the first two quarters.

Resham Jain — DSP Investment Managers — Analyst

Okay. Okay. And sir, my second question is, earlier we used to mention that our margins are getting impacted by 100 basis points to 150 basis points because of technology cost, is that still there or that is not the part of this cost or the losses which we’re incurring currently?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

I’m not…

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

I don’t think we’ve said anything about technology costs here.

Resham Jain — DSP Investment Managers — Analyst

The technology, the omnichannel implementation and other things which you have built a team, you used to mention that 18 months back. So just wanted to just kind of check on that?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So — so what will happen is that if online business was contributing to 2% or was losing money, I’m sure that had an impact on the overall margin. If online business now actually adds up and contributes to 8%, 10%, whatever it is, and does not lose margin, okay, then it will not add accretively to the margins, but will let you stop the bleed because of which the margin was coming down. So as you go forward, I’m not seeing the online or e-com business actually creating a lot of — a drag on the margins because we’re seeing that it will become either breakeven or it will actually be positive.

Resham Jain — DSP Investment Managers — Analyst

Understood. Yeah, that’s helpful. And sir, future retail shares, what have we done with that?

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

I think fully sold off. Everything is sold.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. Absolutely. Absolutely.

Resham Jain — DSP Investment Managers — Analyst

Okay. Thank you, sir. Best of luck. Thank you.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I, yeah — Rohit, can I close the call?

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Yeah. Nagesh, please close the call. That’s it.

Rohit Dokania — Vice President – Research at IDFC Securities Limited

Yeah, please.

B. S. Nagesh — Customer Care Associate & Non-Executive Chairman

So I would like to first of all thank you, once again, all of you for participating and asking the questions because every question of yours triggers a thought in our mind, and also tells us as to how we can do better and better. So thank you very much once again.

I wish each one of you and your family a wonderful festive seasons. Please shop at Shoppers Stop. Please shop at shoppersstop.com. And next time when we connect before there, send us a feedback as to how your journey has been. Some of you may have more questions or some of the others who did not get a chance to ask the questions, please do write back to Karunakaran, all of you have his connect, and we’ll either call you back or we’ll answer all your questions.

Once again, thank you very much for attending the call. Be safe. Have a wonderful festive season ahead. Thank you.

Operator

Thank you very much.

Rohit Dokania — Vice President – Research at IDFC Securities Limited

Thank you.

Karunakaran Mohanasundaram — Customer Care Associate & Chief Financial Officer

Thanks. Bye.

Operator

[Operator Closing Remarks]