V-Mart Q1 Results Review - Steady Revenue Growth; Margin Pressure Exacerbated By LimeRoad Losses: Systematix

Systematix Research Report

V-Mart Retail Ltd.’s Q1 FY24 results were in-line with our muted expectations, with margins under significant pressure given losses in Limeroad exacerbated by higher discounting during 'End of season sale'.

Revenue witnessed steady growth at 15.4% (same-store sales growth - 2.7%; SSSV +2.9%). V-Mart’s core business grew 15% YoY with 0% SSSG (80% contribution to sales) whereas Unlimited grew 4% YoY with -10.9% SSSG (17% contribution to sales).

LimeRoad revenue got consolidated with-effect-from November 11, with V-Mart’s online business; LimeRoad business grew 47% QoQ contributing 3% to revenue.

Average selling prices contracted on an overall level (-6%YoY) and apparel (-6%YoY) due to focus on lower price points and are expected to reduce further going forward; while footfalls grew 23% YoY, partially offset by a decline in conversion rate from 60% to 56% during the quarter.

Gross margin declined 152 bps YoY to 36% due to lower Unlimited sales and higher discounting while Ebitda margin contracted sharply to 7.7% (-736 bps YoY) due to LimeRoad losses and 467 bps increase in other expenses.

V-Mart added nine new stores and closed one store in Q1 FY24, taking the total store count to 431 (V-Mart: 349, Unlimited: 82).

Total retail area grew 12% YoY to 3.8 million square feet (including Unlimited). Debt is expected to increase by end of Q2 FY24 to build up inventory prior to the festive season during Q3 FY24.

Management maintained a positive outlook on the demand front going ahead with signs of inflation coming down and consumer confidence inching back.

They do not intend to slow down on footprint expansion or online investments as of now, which in our view would keep the financials depressed for the forthcoming quarters.

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