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Nirmal Bang Report
Q2 is seasonally the weakest quarter for the retail industry and this year the weakness is accentuated as all festivals fall in Q3. Bata India Ltd. and V-Mart Retail Ltd. the two retail companies under coverage - will show modest growth and likely not hit volumes achieved in Q2 FY20 – more so V-Mart.
The pre-announced revenue growth (YoY) for V-Mart in Q2 FY24 – which was 3% below our expectation – was driven by retail area expansion while like-to-like was down in mid-single digits.
For Bata, we expect average selling price expansion to drive the estimated 5% YoY revenue growth. The muted growth is also a function of pent-up demand in the base quarter.
The Ebitda margin will see bigger cut for V-Mart due to investment in LimeRoad and lower gross margin as the company is trying to keep inventory fresh by liquidating old high-cost inventory through an extended End of Season Sale.
Bata will see YoY margin expansion due to higher sales of premium footwear, reduced EoSS impact and efforts to streamline supply chain costs.
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