V-Mart Retail Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Election disruption, but green shoots visible: An average of 3–3.5 days of disturbance per town from elections curtailed movement, yet management noted betterment in rural consumption, employment, and consumer confidence, with spending by political machinery providing some inertia.
• Footfall surged 36% without advertising: The jump was organic, driven by improved store facades, digital content, and better service, not paid campaigns; marketing spend was slashed 59% overall.
• LimeRoad loss narrowed 60%, physical store pilot launched: A new LimeRoad-branded concept store opened in Hubli, with 4–5 more planned this year, while the digital platform’s EBITDA loss reduction is on track for a further 20–30% quarterly decline.
• Margin recovery path tied to same-store growth: Management needs two consecutive years of ~10% like-to-like growth to reclaim pre-COVID EBITDA margins of ~8.5%, targeting an exit by end of FY26.
• What to watch next quarter: Whether the 50-odd store opening runway accelerates into the festive window, if ASPs stabilize as guided, and if LimeRoad’s quarterly loss reduction stays on the 20–30% trajectory.

Demand & Consumption Environment

• Election quarter disruption: Stores across towns faced 3 to 3.5 days of disturbance on average, with law-and-order situations in smaller districts and towns curtailing customer movement.
• Rural and mass-market green shoots: Basic staple inflation, especially in oil prices, is low, leaving more disposable income for households earning INR 20,000–35,000. Employment status at the ground level looks better, and the consumer confidence index is improving.
• Tier 2/3/4 towns lead growth: Higher sales growth was visible in Tier 2, Tier 3, and Tier 4 towns, which form the biggest base for V-Mart’s customer profile. UP, Bihar, Uttarakhand, Rajasthan, West Bengal, and Karnataka saw relatively better traction in footfall and sales.
• Competitive pain is uneven: Some national players’ value formats are seeing sluggishness; not everyone is getting growth, and market pain exists. V-Mart is focused on market share acquisition while premium and upper-middle segment retailers also face pressure.
• Footfall growth was organic, not ad-driven: The 36% footfall growth came without any advertisements in Q1; advertising expense was largely from LimeRoad and store branding. Renovation of store front views and organic digital content attracted new consumers.

Lalit Agarwal: "So, there were, on an average, almost three to three and a half days of disturbance that we had across our towns, wherever we operate stores in the country."

Margin Structure & Efficiency Levers

• Gross margin outlook flat for the year: On a full-year basis, gross margins from the offline business would remain at similar levels to last year. Margin expansion will come from lower discounting and improved like-to-like growth through efficiencies.
• Manpower cost rose 17%: Driven by annual increments, higher ESOP expenditure, and increased incentive payouts in line with sales growth. Management declined to call the increase one-time, describing it as sustainable and largely variable.
• Other expenses declined 5% YoY: Store lease renewals moved from rental expense to interest and depreciation under IndAS 116, and LimeRoad logistics costs were reduced.
• Inventory reduced by INR 144 crores QoQ: The reduction improved working capital and increased freshness ahead of the festive season. The freshness index bettered by ~10% due to liquidating old inventory at a discount, with steep provisioning policies on inventory.
• Efficiency is a 150–200 screw exercise: A consultant hired 1.5–2 years back proposed changes now being implemented, covering product, design, assortment, and pricing. A new warehouse with automation has stabilized, and supply chain forecasting and allocation rules have improved. Management says efforts are only about 50% rolled out.
• New stores deliver higher margins from month two: Contrary to the typical ramp-up assumption, new stores are designed to reach targeted EBITDA margin from the second month of operation, and deliver higher margins in their first year.
• Pre-COVID margin recovery needs two years of strong SSG: To reach the pre-COVID EBITDA margin level of ~8.5%, management needs two consecutive years of ~10% or high single-digit same-store growth. The company is actively on track and expects to exit by the end of next year (FY26). Q2 is typically a loss-making quarter, so no margin improvement is expected until Q3.

Anand Agarwal: "Definitely, next year is something by the end of which we should exit."

LimeRoad Turnaround & Omni-Channel

• EBITDA loss reduced 60%: The reduction came from healthy like-to-like growth and the positive impact of closing loss-making stores last year. Further quarter-on-quarter reduction of 20–30% is expected, though management calls it an uphill task after already cutting significantly.
• Full-year loss to be less than half of last year: Management declined to give a specific number but committed to bringing losses down to almost negligible levels, while stopping short of guaranteeing full-year profitability by next year.
• Physical store pilot launched under LimeRoad brand: One concept store opened in Hubli, Karnataka (a Tier 3 town), with more elevated fashion, lighter inventory density, a premium look, and prices at the same or lower level. Response has been encouraging and better than an Unlimited store would have been. A separate backend team handles design, procurement, and buying, while the rest of the team is common.
• 4–5 more LimeRoad stores planned this year: The experiment will expand in the current year, with budget allocation for next year still under discussion.
• LimeRoad employee cost down 14% YoY: A sequential QoQ jump was an apparent one due to ESOP structure adjustments; actual employee cost was marginally down. Management that left LimeRoad had ESOP costs not accounted for because performance did not vest.
• LimeRoad is a strategic digital extension: Without LimeRoad, the company would still incur similar costs through other marketplaces or its own website. The platform is important for years to come as an extension of what the company wants to provide customers in digital format.

Anand Agarwal: "It's a strong work after already cutting in a lot, already improving the efficiency significantly in the last one year. So it's going to be uphill task, but that is what the team is committed to deliver."

Store Network & Regional Dynamics

• 7 new stores opened, 3 Unlimited stores closed: Five new stores opened in the North, two in the South under the Unlimited brand. Most unprofitable store closures are now completed; only 3–4 regular closures may happen in the usual course.
• 50-odd store runway maintained for the year: A large part of openings will happen between Q2 and Q3, with a strategy to open more just before festivals. Stores opened during the festival period give better outcomes throughout the year.
• Unlimited South performance bifurcated: New stores in the South under the Unlimited brand delivered higher sales and profitability versus legacy stores in the South.
• ASP declined 3% due to mix, not price cuts: In the North, apparel ASP degrew because of product mix changes from zero weddings. In the South, a strategic shift to sharper, more value-driven pricing was executed. The price correction exercise initiated last year is over, and ASPs should stabilize barring weather or festive calendar shifts. V-Mart did not cut prices this year.
• Conversion rate below 50% is normal by design: Shoppers come in groups of 2–3 but buy as 1–2. More retail options mean customers visit multiple stores before buying. The company has reduced its “convincing attitude” and pressurizing of customers, and better service quality has brought in new customers who browse first.

Lalit Agarwal: "normally, the conversion rate should not be greater than 50%. This is what my internal belief is."

Competitive Positioning & Customer Engagement

• Price advantage over mom-and-pop stores: Management claims that most of the time, V-Mart’s selling price is the cost price for mom-and-pop competitors, so they are unable to convert even at that level.
• Marketing spend slashed 59% overall: Offline marketing spend reduced 44%. Despite lower spend, customer connect improved, with NPS above 60 and over 5 lakh Google reviews at a 4.4+ rating. The company focused more on organic digital content this year.
• No point-based loyalty program: The company has a database of over 4 crore customers with mobile numbers and uses analytics to drive customized offers instead.
• Quality and Gen Z focus gaining traction: Special focus on quality over the last 2–3 quarters and a Gen Z collection are being recognized and appreciated by customers. The fashion business is becoming more agile-driven, with fabric and pattern changes.

Lalit Agarwal: "most of the time our selling price is their cost price. So they're not able to convert that also."

Guidance & Commitments

Key Metrics