Spencer's Retail Limited

Spencer's Retail embarked on an efficiency-led EBITDA transformation in FY25, particularly in H2, involving the strategic closure of 47 stores in North and NCR regions. This resulted in a ₹50 crores reduction in consolidated operating costs for the full year. Consequently, consolidated EBITDA for FY25 surged by 400% to ₹60 crores from ₹14 crores in FY24, and PBT losses narrowed by ₹20 crores from ₹266 crores in FY24. For Spencer's specifically, operating expenses were ₹76 crores lower, leading to an EBITDA of ₹53 crores, or 3.1% of sales.

The company launched its remodeled e-commerce proposition, Jiffy, as a 30-minute quick delivery service, primarily in Calcutta. In Q4 FY25, Jiffy demonstrated strong traction with 58% YoY user growth and 47% order growth, reaching 1.8 lakh bills per month with an average order value (AOV) of ₹760. The ambition for FY26 is to double the business scale, targeting 3 lakh orders per month (10,000 orders/day) and an exit rate of around ₹25 crores per month. The strategy involves leveraging existing store infrastructure for fulfillment rather than extensive dark store networks, with 29 out of 42 Calcutta stores equipped for e-commerce operations.

Natures Basket faced headwinds in FY25, with its top line remaining almost flat at ₹294 crores and a 13% sales decline in Q4 FY25 compared to the previous year. This was attributed to supply chain disruption^🌐s affecting imported gourmet product availability and slower-than-expected ramp-up of new stores. Gross margins also saw a 90 basis points depletion in FY25. For FY26, Natures Basket aims to drive turnover to ₹320 crores, achieve 30% gross margins, and target an 8% store EBITDA, focusing on optimizing operating costs and improving product assortment.

The company's net debt stands at around ₹860 crores, which management acknowledges limits its capability for further debt-funded growth. While exploring options for equity raise, current market capitalization is not supportive. The strategy involves relying on available lines of credit from its industrial group and refinancing maturing long-term debt. The primary focus is to achieve operational EBITDA breakeven for both Spencer's and Natures Basket by the end of FY26, which is seen as a crucial step before addressing PBT breakeven and potential capital restructuring.

Spencer's plans a calibrated store expansion in FY26, adding a few more stores in existing geographic clusters like Calcutta (3-4), Lucknow (3-4), Banaras (1), Allahabad (1), and potentially Gorakhpur (1). All new stores are expected to be profitable within the first six months. For Natures Basket, 2 renovated stores will reopen, bringing the total to 34. The company aims to increase the online contribution to overall business mix from the current 13-14% to 20% for both Spencer's and Natures Basket, and specifically for Natures Basket, the out-of-store business share is targeted to grow from 13% to 18% in FY26.