V-Mart Retail Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Festive quarter muddied by calendar shifts and rain: Like-to-like sales grew ~11%, but this was inflated by an early Durga Puja pulling sales forward from Q3, while unseasonal rains and a GST rate cut disrupted the peak Pujo week. Management flagged that Q3 will see muted or low single-digit sales growth as a result.
• Store expansion accelerated to a record: The company added its highest-ever quarterly new store count and raised full-year guidance to 75 new stores, while continuing to selectively close underperformers.
• Gross margin held flat despite Limeroad drag: Offline gross margins improved 0.6% YoY excluding Limeroad, helped by better end-of-season realizations and a lower mix of FMCG. Total gross margin was flat at 33.6% as Limeroad commission revenue fell 37%.
• Full-year EBITDA seen improving marginally: Management expects a marginal EBITDA improvement over last year even with mid-single-digit same-store sales growth, with operating leverage kicking in if sales growth surprises higher.
• What to watch next quarter: Whether the winter season delivers the promised footfall and margin retention, how Q3 SSSG holds up after the festive pull-forward, and any progress on the cosmetics and artificial jewelry pilots now in 20-25% of stores.

Same-Store Sales & the Festive Quarter

• ~11% like-to-like growth was not clean: Early Durga Puja shifted sales from Q3 into Q2, especially in eastern and southern belts. Management expects Q3 SSSG to be mid-single digit, similar to the first half, not low single digit, because the festival shift already happened.
• Diwali was positive but underwhelming: The earliest possible Diwali date meant summer and basic products sold more, reducing average selling price. Management felt they could have done 4-5% better.
• Unseasonal rains hit the peak Pujo week: Cyclonic activity in coastal, southern, and eastern markets disrupted overall festival retail sales, especially during the most important week.
• GST rate cut created transitory friction: Announced in early September and implemented around September 20, the reduction in FMCG, higher-priced apparel, and footwear caused some wait-and-watch behavior. Benefits are expected to flow through later.
• First-half SSSG was 5%: Management maintains full-year guidance of mid to high single-digit SSSG, implying the second half must deliver at least 5%. A lot depends on the winter season and the next two months.
• Marriage season tailwind: Early Diwali leaves more marriage days before December 15, which should benefit the retail industry.

Lalit Agarwal: "Overall, Diwali was good, not great as per our expectation. We still feel that we could have done 4-5% better. But yes, it was a positive Diwali for us. There was growth, but not a great growth."

Store Expansion & Regional Dynamics

• Record store additions and raised guidance: Q2 delivered the highest-ever quarterly new store count. Full-year guidance was raised to 75 new stores, with 16 added in October and the last 10 days of November. Net store tally stands at 549.
• Unlimited is the southern growth engine: The format has delivered strong growth for several quarters. Tamil Nadu shows real potential and is a clear path for further penetration, while Telangana and Andhra Pradesh continue to struggle.
• Tier 4 towns are catching up: Growth in tier 4 was driven by a lower base and better rural spending response. Management believes it should continue for a period but is uncertain about sustainability.
• Tier 1 weakness has multiple causes: Competition, disturbances in certain areas, Bangladesh tensions keeping Bangladeshi consumers away from eastern India tier 1 stores, and underperformance in some Andhra Pradesh locations all contributed.
• Competitive pressure is store-specific: Impact is felt in 30-35% of stores where a competitor opens, with one or two months of disturbance in growth rates. The southern territory looks less competitive. North is very tough for most competitors, where V-Mart is better positioned.
• Unlimited expansion will be selective: Property prices are not attractive, so management does not want to expand "left, right and center." The focus is on selecting locations that will become very profitable.

Lalit Agarwal: "We do find some kind of impact coming in maybe 30-35% of the stores where competitor opens up. And there is some month or two-month disturbance which also gets created in terms of certain growth rate getting neutralized or certain growth getting picked in particular stores."

Margins & Profitability

• Offline gross margin improved 0.6% YoY excluding Limeroad: Better-than-planned liquidation and better realizations on end-of-season sales drove the improvement. A lower share of lower-margin FMCG also helped.
• Total gross margin was flat at 33.6%: Limeroad commission revenue fell 37%, dragging the consolidated number. On a full-year basis, offline gross margins should remain similar to last year, while Limeroad's reduced contribution will optically reduce total gross margin.
• Total expenses rose 11%: The increase was largely led by a planned significant drop in Limeroad expenses and lower offline marketing spend, as management drives loyalty-based traffic through digital interventions.
• Full-year EBITDA seen improving marginally: Even with mid-single-digit SSSG, management expects marginal EBITDA improvement over last year. If sales growth is much higher, operating leverage will provide additional uplift.
• Winter inventory margin outlook is favorable: Based on weather forecasts, management believes they can retain good margins even on leftover winter inventory if the season continues as projected.
• Management declined to commit to a pre-India EBITDA margin target: When an analyst suggested it should be close to 6%, management called it "slightly premature to give a number" and said "I cannot commit any number right now."

Anand Agarwal: "I think it is slightly premature to give a number, but what I can definitely say is on a full year basis, we should be looking at marginal improvement over last year, even with mid-single-digit same store sales growth."

Inventory & Supply Chain

• Inventory freshness improved materially: Inventory at stores is much fresher compared to last year, driven by focus on inventory management, relevancy, inter-store transfers, and right planning. Density reduction remains a focus area.
• Design-to-shelf calendar shortened but not enough: The calendar reduced from ~80 days to ~70-75 days. Management is "not at all happy" and believes they have not reached even 10% of where they want to be.
• Vendor network is under pressure: Higher store openings by value retailers chasing similar vendors have created stress. Fabric developers are slow for large pieces, though in-house knitting units enable fast repeat product lines.
• Design differentiation is subtle: A common pool of designs exists across Max, Zudio, and V-Mart. Differentiation comes from consumer persona, buyer perception, and integration, with some competitors having more advanced design philosophy.

Lalit Agarwal: "Still, we are not at all happy. We have not reached to even 10 percent to where we want to reach."

New Initiatives & Experiments

• Cosmetics and artificial jewelry pilots are live in 20-25% of stores: In successful stores, these categories have recorded up to 1.5-2% of sales. Supply chain issues persist. Management aims to launch in 50% of stores by year-end but acknowledges beauty is unfamiliar territory.
• Limeroad loss reduction continues: The focus on reducing losses has yielded some benefit. Store-led omni orders were shifted to prepaid, reducing return rates and customer cancellations.
• Digital marketing is working: Heavy focus on digital advertising through micro and regional influencer-led marketing is delivering benefits despite lower marketing reach.
• AI and technology building blocks are on the radar: Management is looking at AI introduction to enhance productivity, efficiency, and accuracy in personalization and merchandise relevance, but no timeline was given.

Lalit Agarwal: "Beauty is not something that we ever did and we don't know. So, we need to really understand that well."

Guidance & Commitments

Key Metrics