V-Mart Retail

V-Mart Retail delivered a robust Q4 FY26, achieving a 24% total sales growth and marking its 10th consecutive quarter of sustained like-to-like (LTL) growth. LTL for V-Mart stood at 12% and for Unlimited at 9%. The company opened 29 new stores in Q4, contributing to a total of 92 new stores for FY26. EBITDA for Q4 grew by 56% YoY to INR106 crores, with margins expanding 220 basis points to 10.9%, while full-year adjusted PAT reached INR124 crores, a 6x increase, with a PAT percentage of 3.3%.

Management highlighted improved inventory health, with inventory days reducing by 3 days and per-store inventory decreasing by 13% YoY, driven by fresher merchandise and lower discounting. The LimeRoad strategy proved fruitful, cutting losses by 70% YoY and contributing to the growing omni-channel customer base. The Unlimited format in the South market continued strong momentum, delivering 28% revenue growth and 63% EBITDA increase, reinforcing confidence in its scaling potential. The company is also focusing on AI and large language models to enhance scalability and efficiency.

Despite positive macro indicators like controlled inflation and better per capita income, the company noted mixed weather patterns and geopolitical challenges impacting consumer sentiment. Apparel Average Selling Prices (ASPs) grew 5% in Q4, attributed to a better festive mix and lower discounting. Management observed that consumers are seeking better value and quality, leading to a 'balancing mode' in ASPs, and are strategically adjusting product mix to meet this demand, focusing on attracting newer generation consumers.

V-Mart's capital expenditure for FY26 was INR159 crores, with INR37 crores in Q4, primarily allocated to new store additions, refurbishments, and technology-led investments. For FY27, capex is estimated at INR170-180 crores, with a significant portion directed towards tech-led interventions. The company plans for 13-15% area addition annually, net of 1-2% closures, and maintains a per-store capex of INR1.3-1.4 crores, with store refurbishments occurring every 4-6 years, funded through internal accruals.

The company faces inflationary pressures from crude oil price rises, leading to 10-15% increases in yarn prices and 1.5-2% in overall apparel costs. Management is mitigating this by blocking orders in advance, utilizing existing inventories, and negotiating with vendors. While some costs are absorbed, a portion is passed on to consumers in a controlled manner. They also noted broader basket inflation impacting consumers, but anticipate some relief from potential increases in minimum wages.

V-Mart aims for a medium-term Return on Capital (ROC) of 18%, eventually targeting 20%+, up from the current 14.5%, after past investments in warehouses and LimeRoad. The company is also striving to reach pre-COVID PAT margin levels of 4-4.5%. Management is focused on internal efficiencies, product innovation, and strengthening business verticals through AI and technological interventions to achieve these long-term profitability goals, while also targeting rent expense as a percentage of sales to be between 6-7.5%.