Vishal Mega Mart Limited

Vishal Mega Mart reported a strong Q1 FY26, with business growing by 21% and adjusted same-store sales growth at 11.4%. The company saw improvements across profitability metrics, with gross margin increasing from 28.2% to 28.4%, EBITDA margin from 14.1% to 14.6%, and adjusted PAT from 6% to 6.9%. This robust performance was largely driven by an increase in transactions and new store additions.

The company continued its aggressive expansion, opening 23 new stores during the quarter, bringing the total count to 717 stores across 472 cities. The QuickCommerce business expanded significantly, now servicing 670 stores in 445 cities and registering approximately 10 million customers. Management noted that QuickCommerce contribution to store revenue ranges from 2-3% in new towns to 6-8% in older, less competitive towns, and 20% of QuickCommerce consumers are new to Vishal.

Gross margins improved slightly from 28.2% to 28.4%, with management stating a goal to keep them constant, reinvesting any further improvements into growth. EBITDA margin improved from 14.1% to 14.6% and is expected to continue improving through operating leverage. The company anticipates typical annual rental inflation of 5% and wage inflation in the range of 5% to 7%.

Management believes consumer demand will improve following income tax changes and notes an uptick in rural demand. The strong 11.4% adjusted same-store sales growth, primarily driven by increased footfall and transactions, suggests the company is gaining market share. They track consumer sentiment through footfall, average bill value, and item upgrades/downgrades to understand market dynamics.

The contribution of private brands improved to 75.8% (up 170 basis points year-over-year), primarily driven by FMCG and general merchandise. While apparel is already 100% private label, the company aims to continue increasing private brand share in other categories. However, growth in smaller or highly emotional categories is expected to be at a slower pace due to supply chain complexities and the absence of mass media advertising.

Vishal Mega Mart successfully piloted new stores in Gujarat and Maharashtra, with one store opened in Gujarat in Q1 and another in July. Early signs are 'very encouraging,' prompting the company to seek more properties in these states. Additionally, six smaller format stores are operational in Uttar Pradesh and Haryana, performing as per target, with plans to accelerate their rollout in coming quarters to reach deeper into India.

Following a 'horrible and deeply distressing' fire incident at the Karol Bagh store, the company has engaged top fire management companies to review and upgrade its systems. A pilot program is underway to implement the latest technologies, and a major training campaign for employees has been launched, alongside rigorous daily monitoring of SOP compliance to prevent recurrence.

Productivity levels in South India, specifically revenue per square foot, are currently 15% lower than the company average. This is attributed to the region being a newer expansion market and having larger average store sizes (20,000 sq ft in Karnataka vs. national average of 17,000 sq ft). Management is actively working on 'right-sizing' stores in Karnataka to improve efficiency and align with company-wide productivity.