Spencer's Retail Limited

Spencer's Retail reported a modest 1% QoQ consolidated top-line growth in Q1 FY26. Despite this, the company achieved a significant 119 basis point improvement in its consolidated EBITDA, reaching INR5 crores. However, the company still recorded a consolidated PBT loss of INR62 crores, a slight improvement from INR68 crores loss in the previous quarter. Management characterized the quarter as a 'mixed bag' with moderate growth but strong margin recovery across both Spencer's and Nature's Basket formats.

The Spencer's offline business in continuing regions experienced flat sales, primarily due to supply chain issues and deflationary pricing in staples. Despite this, Spencer's EBITDA for the quarter significantly improved to INR15 crores, up from INR10 crores in Q4 and INR8 crores in Q1 FY25. Operating expenses were tightly managed, reducing to INR60 crores from INR62 crores QoQ, contributing to a strong gross margin of 19.1%. The company's sales mix shows 65-70% coming from West Bengal, with the balance from East UP.

The Jiffy online business demonstrated robust growth, with almost 20% sales increase YoY in Q1 FY26. This growth was supported by an 80% YoY increase in monthly average users, now exceeding 100,000. Order numbers grew by 41%, averaging 6,500 orders per day, with an Average Order Value (AOV) of 700+, outperforming quick commerce peers. Operational efficiency improved, achieving 90%+ infill rates and 80%+ on-time delivery, with an average delivery time of 31 minutes, aligning with the company's target of under 30 minutes.

Nature's Basket showed a sequential revenue increase to INR69 crores in Q1 from INR61 crores in the previous quarter, though it was slightly lower than INR72 crores in Q1 FY25. Margins recovered strongly to 28.2% in Q1, up from 25% in Q4, resulting in a nominal EBITDA of INR1 crore compared to a loss of INR5 crores in Q4. The company re-launched two stores and its app with an express delivery proposition, while also closing two high loss-making stores to optimize its footprint.

Having completed efficiency and cost optimization initiatives, management is now shifting its strategic focus from efficiency-led to top-line growth-led EBITDA improvement. Q2 is anticipated to be a critical quarter, with festive tailwinds from Rakhi, Independence Day, and Durga Puja (in September for West Bengal) expected to drive momentum. The company aims to capitalize on these factors to accelerate growth across both Spencer's and Nature's Basket, in both offline and online channels.

Spencer's plans to add 8-10 new stores in its existing clusters (West Bengal and UP) during FY26, with one store already added in Q1 and 2-3 more expected in Q2. The total capex for these new stores and investments in the online tech stack is estimated to be between INR10-12 crores for the fiscal year. Nature's Basket will primarily focus on strengthening its presence in existing clusters like Bombay and Bangalore, with no major new store additions planned for the year.

Spencer's launched a new membership program in July, which has already attracted over 22,000 members. This program is designed to enhance customer retention, increase shopping frequency, and boost average monthly spend by offering tiered discounts (3% for INR3,300, 4% for INR5,000, and 6% for INR10,000 monthly spend). The initiative also aims to enrich customer data for more targeted CRM efforts, fostering loyalty and repeat purchases.

The company's consolidated net debt stood at INR950 crores as of June 30. Spencer's Retail plans to repay INR140 crores of debt during FY26, with a target of reducing net debt to around INR800 crores by March '26. However, management indicated that they would likely need to borrow to achieve this, suggesting that the net debt level might remain relatively stable despite the planned repayments.