V-Mart Retail Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Strong headline growth, quality underneath: Revenue rose 23% YoY with 9% same-store sales growth, the 11th straight quarter of positive LFL, driven by better merchandise and store execution rather than just new openings.
• Profitability improved despite gross margin pressure: Pre-IndAS EBITDA grew 36% YoY with margin expanding 70 bps to 7.6%, as 150 bps of operating leverage from disciplined cost control more than offset an 80 bps gross margin decline tied to mix and inventory provisioning.
• Unlimited is scaling profitably: The Southern format delivered 33% revenue growth and 40% EBITDA growth, with sales per square foot up 18% YoY; new stores are outperforming legacy ones and margins are converging with core V-Mart.
• LimeRoad losses are shrinking while NMV grows: Marketplace EBITDA loss narrowed 39% YoY even as NMV rose 18%, the first quarter in two years where higher volumes came with lower losses, now at an insignificant level.
• What to watch next quarter: Q2 will be a seasonally small quarter further dented by Durga Puja shifting 19 days into Q3, so the real test is whether festive-to-festive growth in Q3 recovers that timing loss and whether the monsoon deficiency stabilizes.

Growth Quality & Customer Metrics

• Broad-based growth: The 9% SSG was not dependent on any single lever; sustained productivity from existing stores contributed meaningfully alongside new stores, with footfalls up 39% and memo count up 18% YoY.
• ASP growth from mix, not inflation: Apparel ASPs grew 2% YoY, with 2-3% of the 9% LFL SSG coming from ASP increase driven by customers buying more combo products and sets rather than price hikes.
• Conversion rate decline explained: Conversion dropped from mid-40s to 38-39% due to a combination of past footfall counting errors and greater competition causing customers to visit more stores before purchasing; memo count still grew 18%, indicating healthy eventual conversion.
• Inventory productivity improving: Days of inventory reduced 8% YoY to 86 days, and inventory per store decreased 5% to ~INR 1.5 crore; further improvement expected as sales productivity rises on a similar inventory base.

Lalit Agarwal: "We should not be judged from one quarter to other quarter, and that is what we have been always speaking about. But I think our focus will remain on maintaining this consistency rather than chasing short-term growth or driving a headline growth."

Margin Walk & Cost Discipline

• Gross margin compression: The 80 bps decline to 34.5% came from a combination of mix change, as customer preference shifted across product lines, and regular provisioning on aged inventory per a consistent 10-15 year policy; the two factors were not in equal proportion, but not very significantly different.
• Inventory provisioning benefit ahead: Benefits of the provisioning will reflect in upcoming quarters as older inventory liquidates, improving both gross margin and working capital utilization.
• Operating leverage delivered: Total expenses grew only 15% against 23% revenue growth, yielding 150 bps of leverage through continued discipline on rent, manpower, and other costs.
• Employee cost management: Minimum wage hikes impacted the salary bill, with two months of the hike already in Q1; Karnataka's wage hike remains on stay; the focus is on ensuring employee cost as a percentage of sales does not grow, with efficiency and better sales absorbing the pressure.
• Raw material risk managed through compromise: Raw material price instability is being handled by passing some costs on, driving vendor efficiency, and accepting a margin compromise of 0.5-0.75% rather than risking customer alienation through full price pass-through.

Lalit Agarwal: "We saw that in the year 2022-2023, we remember that. Where we had increased the prices, but the customer did not pay us, and then we had massively demotivated the customer in that point of time. We don't want to take a complete call."

Unlimited: The Southern Growth Engine

• Format performance: Unlimited delivered 33% revenue growth and 40% EBITDA growth, with sales per square foot reaching INR 710, up 18% YoY; new stores opened in the last 1-2 years are delivering significantly better SPSF than acquired legacy stores.
• Margin convergence underway: Unlimited delivers better gross margin than core V-Mart due to pricing changes; on the EBITDA line, older ancestor stores carried high cost levels but margins are now approaching similar levels to V-Mart stores.
• Scaling conviction intact: Store openings from the Southern market will accelerate compared to last year, with management confident that new store averages will take over old legacy store numbers over time.

Anand Agarwal: "As we have been speaking about this for the last four years, it is just a matter of time where the new stores averages start to take over the old legacy store numbers, and we should see continued progress coming in from South India and Unlimited."

LimeRoad: Losses Shrinking, Utility Expanding

• Financial improvement: Marketplace EBITDA loss reduced 39% YoY and 7% QoQ despite an 18% increase in NMV; this is the first quarter in eight where healthy NMV growth came alongside a simultaneous reduction in losses, now at a very insignificant and manageable range.
• Strategic role: The platform is not being run to chase revenue; the team is focused on generating higher efficiency and better financial discipline, while using LimeRoad to build online-offline capabilities and understand the omnichannel customer more deeply.

Demand Risks & External Watchpoints

• Monsoon uncertainty: Current rain deficiency is around 30%, down from 35-40% earlier, with some coverage in late July; the outlook remains hazy with El Niño effect concerns, and the non-uniform impact, with some states facing floods and others high deficiency, keeps management watchful.
• Geopolitical and input cost volatility: Raw material and supply chain costs remain unstable due to crude scarcity and geopolitical factors; the key challenge is vendors closing the backward supply chain and delivering to warehouses on time for festivals.
• Q2 timing disruption: Durga Puja shifting by 19 days into Q3 will negatively impact both sales and margins for Q2 versus last year; management views this as purely a timing issue, with recovery expected through good festive-to-festive growth in Q3.
• Competitive discipline: Management acknowledged competitors opening stores more aggressively but reiterated a preference to be correct rather than repent later, staying disciplined on rentals, space productivity, and profitability over store count.

Lalit Agarwal: "The risk over the gross margin may not be very high, but the risk over the supply chain could be little higher. That in the same gross margin, how are you able to generate or better have the consistent supply chain in the system? That is going to be a little higher because the scarcity of crude continues. The pricing remains really unstable."

Strategic Priorities & Operating Philosophy

• Consistency over headlines: Management's stated focus is on improving full-price sales through, reducing dependence on discounts and end-of-season sales, driving a healthier inventory cycle, better throughput, faster fashion, and healthier sell-through rather than chasing short-term growth.
• Technology integration: Data and technology are being deployed across demand forecasting, design, trend identification, assortment planning, replenishment, customer communication, CRM management, and store productivity to make the organization faster, more analytical, and more responsive.
• Leadership transition: Anand Agarwal has taken over as COO in addition to his CFO role; the transition has played out well and remains fully aligned.

Lalit Agarwal: "We definitely are building a long-term business. We continue to learn, correct, and improve because in retail, the work is never complete, and we will continue doing all of that."

Guidance & Commitments

Key Metrics