Vishal Mega Mart Q1 FY27 earnings call

Vishal Mega Mart Limited reported strong financial results for Q1 FY27, with revenue from operations growing 18.7% year-over-year to ₹3,727 crores. This growth was underpinned by a robust 10% same-store sales growth. Operating EBITDA increased by 19.3% to ₹387 crores, leading to a 10 basis points improvement in the operating EBITDA margin to 10.4%. Profit after tax (PAT) saw a significant 25.6% increase to ₹259 crores, with the PAT margin expanding from 6.6% to 6.9% compared to the previous year.

The company continued its aggressive store expansion, adding 27 new stores during the quarter, bringing the total store count to 819 as of June 2026. This expansion has extended the company's presence to 559 cities across India. Notably, 10 of the new stores were opened in South India, a market where the company observes strong momentum. The total trading area now stands at 13.8 million square feet, supporting the company's growth trajectory.

Private brands remain a cornerstone of the business, contributing 75.2% to the revenue growth in Q1 FY27. The quick commerce initiative has also seen significant expansion, now covering 767 stores across 520 cities and serving 1.4 crore registered consumers. This channel is proving to be a meaningful contributor, with quick commerce sales currently accounting for 2% to 9% of store revenue, and achieving the 5% target in most locations, with some reaching 9% to 10%.

The demand environment in Q1 FY27 was influenced by elevated inflation, which management expects to taper down in subsequent quarters. Despite these challenges, the company maintained double-digit same-store sales growth. The pricing strategy involved minimal price increases, primarily targeting higher price points and avoiding price-sensitive categories like children's clothing and staple foods. This approach aimed to protect customers from inflation while sustaining sales momentum.

Gross margin improved from 28.4% in the previous year to 28.7% this quarter. This improvement was primarily attributed to lower promotional expenditure. Management emphasized that their focus on maintaining competitive prices and strong same-store sales growth allowed for reduced promotional intensity. The company expressed confidence in sustaining these gross margins in coming quarters, assuming the current cost structure remains stable.

Vishal Mega Mart is actively rolling out RFID technology across all its stores in Delhi NCR, following successful pilot experiments. The full network rollout is projected to slightly exceed a one-year timeframe. Key benefits identified include significantly improved inventory management, enabling full store stock counts in 4-5 hours instead of overnight, enhanced data quality on merchandise aging, and a reduction in shrink due to the design of non-removable RFID tags.

The company is strategically expanding its small store format, which is half the size of a regular format, primarily in states like Uttar Pradesh and Haryana where the opportunity for larger format stores is largely exhausted. This ensures that small formats deliver comparable revenue per square foot and return on capital employed. Management sees a significant opportunity for almost 3,000 small format stores across the country and plans to accelerate their opening pace after successful initial experimentation.

Vishal Mega Mart has proactively capped foreign investment at 49.99% to ensure the company remains Indian-owned and controlled, particularly due to its multi-brand retailing activities through its subsidiary, Airplaza. In organizational news, Mr. Sashi Gumma has taken over as Chief Operating Officer, replacing Mr. Manoj, who has moved on from the company after over 10 years of service. No other changes to the organizational structure were reported.