Metrics raised 2
- FY27 SSSG guided to mid-to-high single digits, aiming to better last year's SSSG
- Unlimited/South India store additions in FY27 guided to be higher than FY26 pace
Metrics cut 1
- Q2 FY27 sales and margins expected to see negative YoY impact due to Durga Puja shifting 19 days into Q3
Event Participants
Executives
2 Lalit Agarwal (Managing Director), Anand Agarwal (Chief Financial Officer & Chief Operating Officer)
Analysts
6 Ashish (Leo Capital), Avinash Karumanchi (Motilal Oswal), Hitendra Pradhan (Maximal Capital), Kunal Bhatia (Dalal & Broacha Stock Broking), Rahul Agarwal (Ikigai Asset), Sameer Gupta (IIFL Capital Services), Videesha Sheth (Ambit Capital)
Note: Videesha Sheth (Ambit Capital) also participated; total distinct analysts identified: 7.
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | Not explicitly stated in ₹; grew +23% YoY | Broad-based growth; 11th consecutive quarter of positive LFL |
| Same-Store Sales Growth (SSSG) - Total | +9% YoY | Driven by merchandising uplift, disciplined expansion, sharper controls |
| SSSG - V-Mart (core) | +8% YoY | Steady execution on existing stores |
| SSSG - Unlimited | +13% YoY | Significantly outperformed core V-Mart |
| Unlimited Revenue Growth | +33% YoY | Strong momentum in South India |
| Unlimited EBITDA Growth | +40% YoY | Healthy operating leverage in the format |
| Unlimited Sales per Sq. Ft. (SPSF) | ₹710 per sq. ft. (+18% YoY) | New stores outperforming legacy acquired stores |
| Footfalls | +39% YoY | Higher store traffic across network |
| Memo Count | +18% YoY | Healthy transaction growth despite lower conversion |
| Apparel ASP | +2% YoY | Mix-led, not inflation-led; combo products contributing |
| Gross Margin | 34.5% (-80 bps YoY) | Decline due to mix change and regular aged-inventory provisioning |
| Total Expenses | +15% YoY | Growth well below revenue growth; drove 150 bps operating leverage |
| Pre-IndAS EBITDA | ₹83 crores (+36% YoY) | Margin expanded to 7.6% from 6.9% (+70 bps) |
| Post-IndAS EBITDA | ₹161 crores (+27% YoY) | Margin expanded to 14.8% (+50 bps) |
| PBT | ₹60 crores (+39% YoY) | Operating leverage more than offset gross margin contraction |
| PAT | ₹47 crores (+41% YoY) | Strong bottom-line growth |
| CAPEX | ₹38 crores | Primarily toward new store additions and selective refurbishments |
| Operating Cash Flow | +₹76 crores | Positive cash generation during the quarter |
| Days of Inventory | 86 days (-8% YoY) | Continued improvement in inventory productivity |
| Inventory per Store | ~₹1.5 crores (-5% YoY) | Lower working capital utilization |
| LimeRoad NMV Growth | +18% YoY | First time in 8 quarters of healthy NMV growth with loss reduction |
| LimeRoad EBITDA Loss | -39% YoY, -7% QoQ | Reduced to "insignificant and manageable range" |
| Store Network | 591 stores across 335 cities (51 lakh sq. ft.) | Net addition of 14 stores (15 added, 1 closed) in Q1 |
| Long-term Debt | Zero | Asset-light, debt-free balance sheet |
Geographic & Segment Commentary
Unlimited (South India): Delivered 33% revenue growth and 40% EBITDA growth, with SPSF reaching ₹710 per sq. ft. (+18% YoY). New stores opened in the last 1-2 years are delivering significantly better SPSF than acquired legacy stores, and management expects new store averages to progressively overtake legacy numbers, sustaining continued progress.
V-Mart (Core): Core V-Mart posted 8% SSSG, slightly below the consolidated 9% SSSG. Performance was driven by improved merchandising, sharper price architecture, and regional relevance in the company's core North/Central India markets. Inventory discipline remained a key lever.
LimeRoad (Digital Marketplace): NMVs grew 18% YoY while EBITDA losses reduced 39% YoY and 7% QoQ, marking the first instance in eight quarters of simultaneous NMV growth and loss reduction. Marketplace is being repositioned to support omnichannel integration across V-Mart and Unlimited offline stores.
Company-Specific & Strategic Commentary
Disciplined Store Expansion: Added 15 stores (net 14) in Q1 FY27, with full-year guidance maintained at 90+ gross additions. Management reiterated discipline on rentals, catchment quality, ROI, and throughput, deliberately avoiding aggressive expansion that could dilute productivity.
Unlimited Acceleration: Management committed to higher store opening pace in South India/Unlimited versus last year, citing better unit economics and stronger customer traction in the lower mass/lower age strata segments. The Unlimited format is expected to progressively deliver margins comparable to core V-Mart.
Inventory & Supply Chain Discipline: Days of inventory reduced 8% YoY to 86 days, and inventory per store dropped 5% to ~₹1.5 crores. Management is integrating AI/analytics for demand forecasting, trend identification, assortment planning, and replenishment, with the objective of faster fashion cycles and healthier sell-through.
Leadership Transition: Anand Agarwal assumed the additional role of Chief Operating Officer, consolidating CFO and COO responsibilities. The transition was described as having played out well, with Lalit Agarwal continuing to oversee overall direction and long-term development.
Technology & AI Integration: AI and analytics are being applied across demand forecasting, design, trend identification, assortment planning, replenishment, CRM, and store productivity, functioning as practical enablers rather than standalone projects.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Store Additions (FY27) | 90+ gross (8-10 closures expected) | Disciplined expansion focused on ROI and throughput; Unlimited/South to accelerate |
| SSSG (FY27) | Mid-to-high single digits | Management aims to better last year's SSSG; 3-4% SSSG historically sufficient to offset inflation |
| Q2 FY27 | Negative YoY impact on sales and margins | Durga Puja shifted by 19 days into Q3; timing-related, expected recovery in Q3 festive quarter |
| ASP Increase (FY27) | ~2-2.5% inflationary increase within 3-5% range | Mix change is also contributing; customer sensitivity to price hikes remains a constraint (learnings from FY23) |
| Unlimited Store Adds (FY27) | Higher than FY26 | Format gaining traction; profitability profile converging with core V-Mart |
| Gross Margin | Focus on rupee gross margin rather than percentage | Provisioning drag expected to reverse as older inventory liquidates in coming quarters |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Inflation | ~10% increase in overall RM prices (crude-linked, cotton yarn, chemicals, dyes); partially passed on, partially offset by vendor efficiencies; ~0.5-0.75% margin compromise absorbed; FY23 experience cautions against aggressive price hikes |
| Minimum Wage Hikes | UP and other states have implemented hikes (2 of 3 months' impact already in Q1); Karnataka under stay, not yet implemented; management is offsetting via productivity and sales growth to keep employee cost flat as % of sales |
| Monsoon Deficiency | Current rainfall deficiency ~30%; non-uniform distribution with flood risk in some states and drought in others; could create uneven demand patterns, particularly in rural/Bharat markets |
| Geopolitical & Crude Volatility | Crude-linked RM volatility affects ~80% of forward purchases; supply chain pricing remains unstable; potential disruption to vendor delivery timelines for festive season |
| Conversion Rate Decline | Conversion has declined from mid-40s to 38-39%; attributed to greater competitive intensity (customers visiting more stores before buying) and prior counting methodology adjustments; footfalls up 39% partially offset |
| Q2 FY27 Timing Disruption | Durga Puja shifting 19 days into Q3 will negatively impact Q2 sales and margins YoY; management expects festive-to-festive recovery in Q3 |
Q&A Highlights
Gross Margin Compression
- Question: How much of the 80 bps gross margin compression is attributable to mix change versus aged inventory provisioning? (Videesha Sheth, Ambit Capital)
- Answer: Mix change and provisioning do not contribute in equal proportions and will vary quarter to quarter. Mix change is customer-driven (e.g., combo sets vs. single kurtas driving 2% ASP growth), not deliberate. Provisioning follows a consistent 10-15-year-old policy every quarter (Anand Agarwal).
RM Inflation & Pricing Strategy
- Question: What is the current RM inflation in incremental orders, and how is management balancing growth versus margins? (Sameer Gupta, IIFL Capital)
- Answer: ~10% rise in overall RM prices (crude-linked, cotton yarn, chemicals/dyes). Some passed on, some offset via vendor efficiencies, with ~0.5-0.75% margin absorption. FY23 caution cited: aggressive price hikes demotivated customers. Target ASP increase of 3-5%, of which 2-2.5% is inflationary (Lalit Agarwal).
Minimum Wage Impact
- Question: How much of the minimum wage hike in UP/Karnataka is already in Q1 numbers, and what is the vendor exposure to Karnataka? (Sameer Gupta, IIFL Capital)
- Answer: 2 of 3 months' UP wage impact already in Q1; Karnataka minimum wage hike is on stay, not implemented, and no provision made. Karnataka vendor exposure is less than 5% and "not too material" (Lalit Agarwal).
SSSG Guidance
- Question: What SSSG does management expect for FY27? (Ashish, Leo Capital)
- Answer: Mid-to-high single digits, aiming to better last year's SSSG. Historically, 3-4% SSSG is sufficient to offset inflationary pressures given 95-98% fixed-cost nature of expenses (Anand Agarwal / Lalit Agarwal).
Memo Growth & Transaction Size
- Question: Can memo growth be split between old and new stores, and is the ABS revival sustainable? (Rahul Agarwal, Ikigai Asset)
- Answer: New stores deliver 100% memo growth (no base). LFL memo growth is ~6-7% (9% LFL revenue growth minus 2-3% ASP growth). Sustainability driven by better store services, product mix, and UPT improvement (Lalit Agarwal).
Unlimited Expansion & Margin Convergence
- Question: Should Unlimited store additions accelerate given the closing margin gap with core V-Mart? (Avinash Karumanchi, Motilal Oswal)
- Answer: Yes, South India/Unlimited will see higher store openings versus FY26. Unlimited has historically delivered better gross margin; EBITDA margin gap is closing as legacy stores' higher cost base normalizes. Expecting similar margins from both formats over time (Lalit Agarwal).
Inventory Optimization Outlook
- Question: Is there further room to optimize inventory from current 86-day levels? (Rahul Agarwal, Ikigai Asset)
- Answer: Management indicated significant work remains, preferring to focus on execution rather than commit to specific targets (Lalit Agarwal).
Key Takeaway
V-Mart Retail delivered a strong Q1 FY27 with consolidated revenue growth of 23% YoY and 11th consecutive quarter of positive same-store sales growth of 9%, driven by 8% SSSG in core V-Mart and 13% in Unlimited. Operational discipline drove 150 bps operating leverage, with total expenses up only 15% YoY, leading to pre-IndAS EBITDA growth of 36% to ₹83 crores (margin +70 bps to 7.6%) and PAT growth of 41% to ₹47 crores. Strategic priorities include accelerating Unlimited expansion in South India (SPSF ₹710, +18% YoY; revenue +33%, EBITDA +40%), tightening inventory (86 days, -8% YoY), scaling LimeRoad profitably (NMV +18%, losses -39%), and integrating AI across merchandising and supply chain. Management maintained FY27 guidance of 90+ gross store additions and guided to mid-to-high single-digit SSSG, while flagging near-term headwinds from RM inflation (~10%, ~0.5-0.75% margin absorbed), minimum wage hikes, monsoon deficiency, and a Q2 timing disruption from Durga Puja shifting into Q3, with festive recovery expected in Q3.