Spencer's Retail Limited

Spencer's Retail reported a 'very solid performance' in Q3 FY26, with consolidated revenue growing 13% QoQ. Despite this, the company experienced a marginal 2.7% YoY degrowth, primarily attributed to the festive season being split between Q2 and Q3, and an accounting adjustment for membership cashback. Consolidated EBITDA (post INDAS) significantly improved to INR8 crores, up from 0 crores in the previous quarter, though it was lower than INR15 crores in Q3 FY25. Operating expenses were slightly higher due to a one-time^📎 provision for new Labour Code requirements.

The Spencer's standalone business demonstrated strong momentum with approximately 12% QoQ growth. Its EBITDA (post INDAS) reached INR15 crores in Q3 FY26, an increase from INR13 crores in Q2 FY26. Gross margins for Spencer's were robust at 20%, showing an improvement of 40 basis points QoQ and 30 basis points YoY. Management expressed confidence in achieving operational EBITDA breakeven for Spencer's within the next two quarters, targeting Q1 FY27.

The online platform, Jiffy, was a key growth driver, with sales increasing 27% YoY to INR54 crores in Q3 FY26. Notably, Jiffy achieved positive unit economics for the first time, generating INR6 per order after accounting for RGM (INR100+) and fulfillment costs (INR94). The platform processed around 235,000 orders per month with an average order value (AOV) of INR775. The company aims to increase monthly orders to 300,000 without compromising unit economics and expects online EBITDA losses for FY27 to be lower, primarily for strategic investments.

Spencer's membership program, launched in July 2025, has rapidly gained traction, enrolling over 70,000 members by the end of Q3 FY26, representing 10-11% of the active customer base. These members exhibit significantly higher engagement, with an 80%+ N+1 retention rate, an average monthly spend exceeding INR7,500 (3x non-members), and a shopping frequency of over 4 times a month (2x non-members). The company targets 100,000 members by Q4 FY26 end and plans to double this count in FY27.

Nature's Basket saw a QoQ revenue improvement to INR81 crores from INR68 crores, though it experienced a YoY drop partly due to the gifting studio being hived off last year. The segment's gross margins faced a 300 basis point reduction YoY, which management attributes to internal factors and supplier negotiations, expressing confidence in restoring them to the 29-30% range. Nature's Basket recorded a financial EBITDA of INR1 crore for the quarter, and its app was upgraded using Jiffy's robust tech backbone to enhance online capabilities.

Spencer's is committed to an omnichannel strategy, targeting an online/out-of-store sales mix of 20% by Q1 FY27, up from the current 16-17%. The company differentiates itself through a wide assortment, high-quality fresh produce, and a strong value perception reinforced by its membership program offering up to 6% cashback. Management emphasized focusing on driving absolute rupee gross margin (RGM) through sales growth and improving Sales Per Square Foot (SPSF) to a target of INR2,500, rather than solely optimizing for percentage margins.

Management acknowledged the impact of online growth on both modern trade and kiranas but clarified that Spencer's is not competing with large quick commerce players on scale or aggressive burn. The company's model leverages its existing store footprint for fulfillment and targets loyal customers. Risks highlighted included a significant YoY decline in other income from INR65 crores to INR11.7 crores and the ongoing challenge of 'irrational competition' in the quick commerce space, which management believes will eventually lead to more pragmatic business models.