Revenue
Margin
Demand
Guidance
Tone
Event Participants
Executives
1 Akash Agarwal
Analysts
7 Amish Kanani, Ankush Agrawal, Kushal Goenka, Meet, Omkar, Peeyush Narang, Priyanshu Jain, Samarth Nagpal, Smith Gala, Sucrit Patil, Tushar Verma, Vedant Kabra
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Store Count | 381 stores (net add of 56; 57 opened, 1 closed) | Crossed 400 stores subsequent to quarter-end; FY27 target of 170-200 new stores on track |
| Retail Area | ~40.7 lakh sq ft | Coverage across the network as of June 30, 2026 |
| Revenue | ₹997 crores | +58% YoY; driven by volume growth of 56%, network expansion and healthy SSSG |
| SSSG | 7.5% | Within guided range of 8-10% but impacted by Adhikmaas; full-year target maintained at 8-10% |
| Full Price Sales | ~90% of sales | Down from ~92% due to Adhikmaas-related slowdown and fewer wedding dates; gross margins impacted accordingly |
| Gross Margin | 28.6% | Down from 29.5% YoY; full-year guidance maintained at 29-30% |
| EBITDA | ₹139.5 crores | +60% YoY; EBITDA margin improved to 14% vs 13.8% YoY |
| PAT | ₹41.9 crores | +70% YoY; healthy operating leverage and profitability improvement |
| Pre-Ind AS EBITDA | ₹79 crores | +51% YoY; Pre-Ind AS EBITDA margin ~8% |
| Pre-Ind AS PAT | ₹50 crores | +64% YoY |
| Inventory Days (target) | ~100 days | Elevated due to geopolitical safety stock; will normalize once situation stabilizes |
| Creditor Days (target) | 45-50 days | Management prepaying vendors; creditor days inflated currently, will normalize for expansion funding |
Geographic & Segment Commentary
- Tier 2/3 Focus: Bulk of store network concentrated in Tier 2 and Tier 3 cities, where demand for value fashion remains strong; highest-performing stores are predominantly in these clusters. Management reiterated Tier 1 presence (~11 stores in Delhi NCR) as part of target market, but growth is driven by smaller cities.
- New Store Performance: New stores (opened in last 2 years; ~260-270 stores) operating at ₹730-740 per sq ft, approximately 34% below mature stores (>2 years) which run at ₹1,070-1,100 per sq ft. About 10-12 stores performing below ₹600 per sq ft flagged for corrective action, but no red flags in overall cohort. Newer stores are growing SSSG ~2.3% faster than mature stores, with 3-4 years to maturity expected.
Company-Specific & Strategic Commentary
- Product & Supply Chain: Consolidated fabric purchases by nominating fabrics directly with mills; improving quality standardization and cost economies. This initiative extends to providing tech specs to vendors.
- Technology & Analytics: Migrated data lake to AI-enabled platform; implemented prompt-based analysis for business leaders; AI on CCTV cameras to monitor billing queues in high-throughput stores. NPS-linked customer feedback pilot (~40% of bills) tied to store incentives. Automation of workflows planned over next 1 year.
- Leadership & Team Building: Announced two president-level hirings to support 50% CAGR growth ambition over next 2-3 years; strengthening organizational foundation to scale operations.
- Expansion Plan: On track to open 170-200 stores in FY27; MOUs signed for next 100 stores across 26 states. Store capex increased to ₹1.2-1.22 crores due to inflation, but growth plan unchanged.
- Working Capital Strategy: Using cash for vendor prepayments (discounted) currently; will revert creditor days to 45-50 to release ₹150-200 crores for expansion. Internal accruals deemed sufficient, with debt-to-equity headroom and talks with banks underway.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (FY27) | At least 50% YoY | Supported by 170-200 new store openings and consistent SSSG; volume-led growth model |
| Same Store Sales Growth (FY27) | 8-10% | Adhikmaas impact in Q1 expected to normalize; festive demand (Q3-shifted) critical determinant |
| Gross Margin (FY27) | 29-30% | Dependent on full price sales and seasonal sell-through; management confident of maintaining last year's levels |
| EBITDA Margin (FY27) | Maintain current levels | Newer stores operate at 65-70% of mature store productivity; margin expansion expected once growth rate normalizes (beyond FY27) |
| Store Additions (FY27) | 170-200 stores | On track; 56 net additions in Q1, crossed 400 stores post-quarter |
| Inventory Days (normalized) | ~100 days | Safety stock from geopolitical tension to reduce once situation normalizes |
| Creditor Days (normalized) | 45-50 days | Currently inflated due to vendor prepayments; will be reversed to fund expansion |
| Price Increases | ~4-5% MRP increase from Q3 | To offset raw material cost inflation; historically, volume impact offset by ASP increase |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Cost Inflation | Geopolitical tensions driving yarn/fabric prices up; 4-5% MRP increase expected from Q3 FY27. Historically, volume impact has been offset by ASP growth, so value growth relatively protected, but demand elasticity in value fashion has not been tested at such levels recently |
| Adhikmaas and Festival Shift | Q1 demand impacted by 30-day Adhikmaas (fewer wedding dates), dragging full price sales to ~90% and SSSG to 7.5%. Q2 festivals shifted to Q3, compressing revenue into a shorter festive window; management advises evaluating Q2 and Q3 cumulatively |
| Customer Experience / Service Standards | External review flagged average Google rating of 3.6 vs 4.1-4.2 for peers, with complaints on billing queues and staff behavior. Management has implemented NPS-based feedback and AI-driven queue monitoring, but service quality improvements are still in pilot phase |
| Competition in Value Fashion | 80% of stores have 3-4 competing value fashion retailers in the same catchment. Management views demand as inelastic (necessity-driven: kids wear ~25% of sales) and welcomes competition, but increased competitive intensity could pressure store-level economics |
| Store Profitability Deviation | ~10-12 stores performing below ₹600 per sq ft; considered early to conclude, with remedial measures underway. If these stores fail to improve, closure or write-offs could impact near-term profitability |
Q&A Highlights
Price Increases and Demand Impact
- Question: With geopolitical tensions driving raw material price hikes, will price increases affect the volume-led model? (Priyanshu Jain, GrowthXInfinity)
- Answer: Price increases of 4-5% on garment costs will be passed on from Q3 FY27 (orders through Q2 already placed). Historically, minor volume impact is completely offset by ASP increases; value growth remains protected. (Akash Agarwal)
Expansion Funding and Capital Requirements
- Question: Will 170-200 store openings require additional capital (QIP) given cash usage on prepayments? (Priyanshu Jain, GrowthXInfinity)
- Answer: Internal accruals sufficient. Normalizing creditor days (45-50) will release ₹150-200 crores; EBITDA generation plus debt headroom (low debt-to-equity) and ongoing bank limit discussions cover the rest. (Akash Agarwal)
Execution Priorities and Demand Risk
- Question: Top 2-3 execution priorities and biggest demand risks? (Sucrit Patil, Eyesight Fintrade)
- Answer: Priorities: (1) fabric nomination with mills for quality and cost standardization, (2) AI-enabled technology/automation of workflows, (3) team building with two president-level hires for 50% CAGR ambition. Demand risk is perceived as low—business is necessity-driven (kids wear 25% of sales), making demand inelastic. (Akash Agarwal)
Gross Margin Contraction and Full Price Sales
- Question: Why did gross margins contract YoY despite inventory stocking? Is 30% gross margin sustainable? (Ankush Agrawal, Surge Capital)
- Answer: Q1 Adhikmaas (30 days) caused full price sales to drop from 92% to 90%; wedding-related demand slowdown in Tier 2/3. Gross margins guided at 29-30% for FY27, dependent on sell-through; should maintain last year's levels. (Akash Agarwal)
New Store Productivity and Maturity
- Question: What's the throughput of new stores versus mature stores? (Ankush Agrawal, Surge Capital)
- Answer: New stores at ₹730-740 per sq ft (~34% lower than mature stores at ₹1,070-1,100). Maturity journey expected over 3-4 years. All new stores operating at respectable levels; no red flags. (Akash Agarwal)
Customer Experience and NPS Tracking
- Question: External research shows low Google ratings (3.6) vs peers (4.1-4.2) with complaints on staff behavior and billing queues; are these tracked? (Vedant Kabra, AVN Capital)
- Answer: Management doesn't focus on Google reviews; uses internal NPS links after billing (pilot at 40% of customers), linked to store incentives. Implemented AI on CCTV cameras to auto-alert area/regional managers on queue lengths beyond set benchmark; corrective actions taken immediately. (Akash Agarwal)
Demand Environment and Festive Season
- Question: How is demand in Tier 2/3 cities given inflationary pressures? (Smith Gala, RSPN Ventures)
- Answer: Too early to call—bulk of sales occur in the 2-month festive season (now shifted to Q3). July-August at par with forecasts; real read will come post-Diwali, answerable on the next call. (Akash Agarwal)
Repeat Customers and Store Maturity
- Question: Has repeat customer rate improved over the last 3 years? (Peeyush Narang, Narang Capital)
- Answer: Repeat rate within first year improved from ~40% to ~55% over last 3 years, supporting SSSG; headroom remains, limited only by internal capability. Older stores showing no saturation—some at ₹1,600-1,700 per sq ft still growing 18-20% SSSG; overall old cohort grows slower than new cohort due to lower headroom. (Akash Agarwal)
Working Capital and Inventory Strategy
- Question: How does the inventory pipeline work for new stores? (Meet, Integrity Ventures)
- Answer: Inventory needs to be in-house ~2 months before store opening (3,000 options; ~300 new options weekly). For 50-55 stores per quarter pipeline, ₹100-150 crores of store-specific inventory already in system. This is structural, not a red flag. (Akash Agarwal)
Operational Leverage and Margin Expansion
- Question: Will new stores maturing drive operating leverage from FY29 onwards? (Amish Kanani, Knowise Investment Managers)
- Answer: EBITDA margin expansion is challenging while growing >50% new area since new stores operate at 65-70% of mature store productivity. Once growth rate normalizes, margin expansion and operating leverage will kick in. (Akash Agarwal)
Key Takeaway
V2 Retail delivered a strong Q1 FY27 with revenue up 58% YoY to ₹997 crores, EBITDA up 60% to ₹139.5 crores (14% margin), and PAT up 70% to ₹41.9 crores, despite Adhikmaas-related demand softness that pulled SSSG to 7.5% and full price sales down to ~90%. The company added 56 net stores (381 total; crossed 400 post-quarter) and remains on track for 170-200 stores in FY27, funded through internal accruals, ₹150-200 crores from creditor normalization, and debt headroom. Strategically, management is deepening fabric nomination with mills for cost and quality gains, scaling AI-enabled analytics (data lake, queue-monitoring CCTV, NPS-linked store incentives), and strengthening leadership with two president-level hires to support its 50% CAGR growth ambition. Gross margins are guided at 29-30% for FY27, with 4-5% MRP increases expected from Q3 due to raw material inflation—historically offset by ASP gains. The pivotal near-term watch point is the Q3 festive season (shifted from Q2), the true test of consumer demand; management also flagged elevated inventory due to geopolitical safety stock and 10-12 underperforming stores as areas under active monitoring.