V-Mart Retail Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Demand recovery taking shape, led by the base of the pyramid: V-Mart grew 12% with flat ASPs as a deliberate 5% price cut brought back entry-level customers, while Unlimited’s 13% like-to-like growth followed a 20%+ ASP reduction over 18 months.
• Store cleanup accelerated sharply: 25 stores closed in FY24, 19 of them in Q4 alone, as management drew a hard line on cash-draining locations; the drag lifts from April onward.
• Gross margin dipped on transitory provisioning, not structural pressure: Margins fell 20 bps to 31.7% on higher old-inventory liquidation and tighter provisioning norms, not a discounting strategy; inventory health and summer sell-throughs are strong.
• Limeroad losses are being halved, not eliminated: Revenues rose 29% while expenses fell 18%; management targets FY25 losses at 40–50% of FY24 levels, with breakeven by Q4 looking difficult.
• What to watch next quarter: Whether the Uttar Pradesh/Bihar Tier-3 recovery sustains into the monsoon, the pace of the 40–50 planned store openings, and any further ASP mix shift as consumers stay at lower price points.

Demand & Consumer Environment

• Rural sentiment improving: Mobility and confidence are returning, helped by controlled inflation, muted food prices, a good expected rabi crop, and a normal monsoon forecast after two difficult years in UP and Bihar.
• Spending is back, but at lower price points: Customers are coming out to spend, yet they are choosing lower-ticket items over the premium and branded products they used to buy; exclusives and brand businesses remain muted.
• Geography-wise triggers turning positive: Uttar Pradesh, muted for a year, showed betterment in March and April; Madhya Pradesh and Rajasthan, under pressure for six to eight months, also improved. In the South, base-of-pyramid consumers are returning with better footfall, though high-ticket items are still soft.
• Tier-2 and Tier-3 towns leading the recovery: Improvement is starting, largely from UP and Bihar where most Tier-3 towns are located; these towns had been underperforming due to competition and market conditions but showed growth in the last quarter and the months after quarter-end.

Lalit Agarwal: "people are spending, people are coming out to spend but they are still spending on little lower price point products compared to the higher price point products that they used to."

V-Mart & Unlimited: The Turnaround Mechanics

• V-Mart’s deliberate ASP cut worked: Apparel ASPs were reduced by nearly 5% to make pricing more attractive for the lower-end entry-point customer; the strategy has started showing results, with prices now stable and no further correction planned.
• Volume-led growth with flat ASPs: V-Mart grew 12% entirely on a 12% volume increase; improved footfalls in smaller towns are helping rebuild sales per square foot, and traditionally strong markets of UP and East India led growth.
• Unlimited’s deep price reset is converting to value growth: After cutting ASPs by more than 20% over the last 1–1.5 years, volumes are now growing and reflecting in a strong 13% like-to-like; new South India stores under the Unlimited brand are outperforming legacy stores.
• South strategy corrected: Management initially gave South customers premium product, which failed; the pivot to entry price points, promotional products, a GenZ collection, and unlabeled inventory aligned with the V-Mart thought process has clicked and brought customers back.
• Footfall and conversion nuance: Recorded footfall increases partly reflect corrected manual recording errors; larger families shopping together mean one bill for four people, and more research-oriented customers visit to see and buy later, all of which optically depress conversion rates.

Lalit Agarwal: "We are not acting on any of such thought processes of reducing the gross margins, working on trying to just give more value by reducing the gross margin. So, those are not the things that are sustainable."

Store Rationalization: The Cleanup Quarter

• 19 stores closed in Q4 alone: 10 V-Mart and 9 Unlimited stores were shut, most in March, so the P&L benefit accrues from April onward; 12 were underperforming stores in the South, 13 were non-performing stores in the rest of India.
• Closure criteria now codified: Stores were closed for higher rentals that never delivered expected sales per square foot, Unlimited stores acquired already performing low, stores opened just before COVID that never matured, seasonal and merchandise mismatches, and team management challenges; learnings have been captured as changes in SOPs, processes, and checklists.
• Competitor impact was minimal and self-correcting: National fast-fashion retailers had no impact in northern India; in the South, 3–4 stores were affected where competitors opened, but that impact has nullified as those competitors are now cannibalizing their own stores.
• FY25 closures to be surgical: Management expects not more than 5 to 7 closures in FY25; no specific stores identified yet, but anything not meeting threshold norms must start performing or be exited.

Lalit Agarwal: "anything which is leading and anything which is causing a damage to the cash flow in the organization has to be either repaired immediately, improved, or they get the brunt of closing it down."

Margins & Cost Control

• Gross margin dip is transitory: Total gross margin at 31.7% was 20 bps lower, driven by higher old-inventory liquidation and marginally higher provisioning due to more stringent norms; a delayed winter forced higher discounting in January. Inventory is in good shape, and summer sell-throughs testify to its health.
• Provisioning will reverse: The higher provisioning versus last year reflects lower inventory levels during COVID; it is transitory and comes back once stocks are liquidated; inventory freshness and sell-throughs are good, as reflected in same-store sales growth.
• Expenses tightly controlled: Revenues grew 13% while expenses grew only 4%. Offline, revenues rose 12% with expenses up 8%, largely on higher power costs in the South. Limeroad revenues rose 29% while expenses fell 18% through increased synergies and customer acquisition via the omni model through V-Mart offline stores.
• Gross margin percentage will not be the target: Management explicitly stated it will not target a higher gross margin percentage; the strategy is to drive higher volume and more rupee gross margin from the same store, with overheads catered by volume and store expansion rather than margin expansion.

Lalit Agarwal: "We have never been in this side of the game where we have tried to surpass our overheads through our gross margin. Our overhead should be catered by our volume and our expansion or our rate of growth, or our number of stores that result into more profitability."

Limeroad & Omni-Channel

• Limeroad losses narrowing fast: EBITDA losses have come down by almost double digits for three consecutive quarters; revenues grew 29% while expenses fell 18%.
• FY25 loss target: Management guided that Limeroad’s loss should not go beyond 40% to 50% of the FY24 loss, meaning it should be relatively half or less than half; breakeven by Q4 is the vision but looks a little difficult.
• One-third revenue from V-Mart is the goal: Management wants at least one-third of Limeroad’s revenue to come from V-Mart, but because V-Mart’s ASP is low, driving profitability from that ASP is difficult, so the mix must be consciously balanced.
• Omni-channel tool gaining traction: A one-click tool developed by the Limeroad team in six months has been rolled out across 100% of V-Mart stores; more than 1,200–1,500 orders are generated every day from stores, driving better customer satisfaction at both V-Mart and Unlimited.
• Online focus is omni, not marketplace: The company will focus on omni-channel business in the online space rather than acquiring marketplace or social-media orders through performance marketing.

Guidance & Commitments

Key Metrics