V-Mart Q3 Review - Demand Remains Muted With Online Investments Expected To Keep Margins Depressed: Systematix

Systematix Research Report

V-Mart Retail Ltd.’s Q3 FY23 results were a big disappointment on both growth and margin fronts with a dual impact of erratic climate conditions in October and December (impacting demand) coupled with significant investments in the online business (mainly LimeRoad) impacting margins.

Revenue grew by only 12.3% YoY (1% same-store sales growth) in a seasonally strong quarter despite price corrections and a low base.

V-Mart core business grew 2% YoY (80% contribution to sales) whereas Unlimited grew 87% YoY (17% contribution to sales). LimeRoad revenue got consolidated with-effect-from November 11, with V-Mart’s online and LimeRoad business collectively contributing 3% to revenue.

Average selling prices remained flat given focus on lower price points while footfalls grew 13% YoY, offset by a decline in conversion rate from 61% to 55%.

Gross margin contracted 160 bps YoY to 35.4% due to an inferior sales mix while Ebitda margin contracted to 13.3% due to increased employee cost and other expenses (Rs 363 million spends on online business including Rs 118 million onetime integration expenses).

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