V-Mart Retail

V-Mart Retail reported a strong Q1 FY26 with overall revenue growth of 13% year-on-year, driven by V-Mart growing at 14% and Unlimited at 12%. Gross margins, excluding LimeRoad, improved by 60 basis points to 34.8%, while total gross margins marginally improved by 10 basis points to 35.3%. EBITDA margin (excluding LimeRoad) was 14.9%, up 80 basis points year-on-year, and total EBITDA grew by 27%, with the margin improving by 170 basis points to 14.3%. The company generated INR109 crores in free cash flow this quarter.

Management observed a positive, though not overly bullish, customer sentiment in the Bharat market, with expectations for growth during the upcoming festival season. They noted a shift in consumption patterns, with more occasions being celebrated, leading to increased buying. However, normalized same-store sales growth (SSG) moderated to 5% in Q1, partly impacted by the Indo-Pak conflict in select North India areas and the early onset of monsoon in June. The company also noted a significant impact in eastern India due to the cessation of consumption from Bangladesh.

V-Mart added 15 new stores and closed 2 in Q1 FY26, maintaining its guidance of 65 net new store additions for the full year, targeting a 13-14% increase in additional square feet area. Store selection in Tier 2, 3, and 4 cities follows a detailed playbook considering population density, demographics, and proximity to existing stores. While rental costs have seen a temporary rise, V-Mart remains cautious, growing within its IRR mechanism and not over-expanding, with 7-10 store closures anticipated going forward^⏳.

The company is focusing on a dynamic and agile product strategy, integrating with mills and fabric manufacturers to ensure differentiated fashion and cost efficiency. Inventory management showed significant improvement, with inventory days reducing by 5% year-on-year to 93 days and aged inventory provision decreasing from 1.7% to 0.7%. The company aims for higher rupee gross margins and better full-price sell-throughs, with a conscious decline of 3% in Unlimited's ASP to focus on value-led offerings.

V-Mart achieved a 160 basis point reduction in operating expenses year-on-year, primarily due to significantly lower online marketing spends on LimeRoad and structural efficiency measures. While manpower costs rose by 13% due to new store openings, other expenses declined by 2.6%. Management is actively working to further reduce advertising and marketing expenses, targeting a reduction from historical 2-2.5% of sales, aiming for efficiency rather than just margin expansion.

The company is integrating its online digital business with its omni-channel strategy, focusing on cost reduction and efficiency generation. V-Mart is leveraging technology, AI, and analytical knowledge to drive overall business growth and become more data-driven. This approach aims to enhance the consumer experience and product offerings, adapting to the evolving demands of newer age consumer segments like Gen Z.

V-Mart is positive about future growth, expecting mid-to-high single-digit same-store sales growth for the full year, driven by upcoming festivals and improved macroeconomic conditions. The company anticipates continued growth in organized retail and believes its focus on value proposition, product innovation, and efficient operations will enable it to capitalize on the Indian consumer market. With INR109 crores in free cash flow and no long-term debt, V-Mart is well-positioned to fund future growth through internal accruals.