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Management provided a cautious but optimistic outlook, emphasizing the complexity of the competitive landscape and its impact on growth. They affirmed their target of achieving 100% year-on-year growth over the next one to two years, contingent upon competition remaining rational. The management plans to open 3,500 to 4,000 stores, although competitive dynamics may alter this trajectory.

Key forward-looking points shared include:

1. Store Expansion: The management indicated plans to add 3,500 to 4,000 stores to support growth targets, which would imply a significant market capture and aim for a blended growth rate of 100% YOY.

2. Market Share Growth: A substantial portion of future growth is expected from gaining market share in sub-segments like events and movies, indicating that achieving their projected $3 billion Net Order Value (NOV) by FY30 would primarily hinge on internal market share expansion rather than overall market growth.

3. Margin Trends: While contribution margins and EBITDA were positive in the recent quarter, management highlighted that future margin expansion is unpredictable due to competitive intensity. They expect long-term margins to stabilize between 5% to 6% of NOV.

4. Capex and Working Capital: Capex per store is projected to increase as the company focuses on automation and infrastructure improvements. They anticipate maintaining net working capital days around 18, which is expected to support a Return on Capital Employed (ROCE) above 40%.

5. Competitive Landscape: The management acknowledged high competitive intensity affecting their operational strategies. They noted that while their current margins are stable, sustained competition might require tactical responses, impacting short-term profitability and store performance metrics.

Overall, management's outlook reflects a strategic focus on expanding their market presence while navigating competitive challenges, and they remain cautiously optimistic regarding future growth and profitability.

Key Q&A Section from Earnings Transcript

Question 1: "If you assume competition remains irrational, why should margins not continue to improve at the same pace as last quarter?"
Answer: It's tough to predict margin trajectories consistently. Margins are affected by many variables, including geographic specifics and fluctuating competitive intensity. While we're optimistic about margin expansion, the pace may vary due to these complexities.

Question 2: "What explains the 6% QoQ decline in store throughput?"
Answer: The decline stems from our focus on expanding assortment, which can slow turnover rates. This is reflected in margins that improved despite lower throughput. We believe this won't be a long-term concern, so we're optimistic about future growth.

Question 3: "You've maintained your $3 billion NOV guidance for FY30. Why is current growth low?"
Answer: Future growth will largely derive from market share gains in sub-segments where we lag behind competitors. Delivering a 30% CAGR doesn't depend solely on industry growth; it's a strategic plan to increase our share in underrepresented markets.

Question 4: "Will slower order growth in quick commerce normalize?"
Answer: We can't predict that definitively; it's influenced by overall market dynamics and competitive behavior. We're focusing on consumer demand and adapting accordingly.

Question 5: "How will increased automation impact capex?"
Answer: We anticipate a rise in capex per store due to investments in automation and expanded warehousing. While the initial capex may increase, we expect long-term ROCE to remain strong at over 40%.

Question 6: "What is the impact of new labor codes on your margins?"
Answer: Current impacts are negligible, and any future costs will either be absorbed or passed to customers. We believe the long-term margin guidance remains intact despite these codes.

Question 7: "With the launch of the District Pass program, where are losses heading?"
Answer: The increased losses are tied to this unplanned initiative, aimed at driving multi-category usage. We expect losses to decrease sequentially and move toward breakeven in the next four to six quarters.

Question 8: "What is the mix of your inventory model, and how does it affect assortment?"
Answer: We retain about 10% in a marketplace model for specific SKUs that benefit from seller ecosystems. This blend allows us to manage inventory effectively while still meeting customer needs.

Question 9: "Will you need to dilute your ESOP pool in the near future?"
Answer: Given the expansion of the ESOP pool from unvested shares, we don't foresee needing to dilute in the foreseeable future.

Question 10: "How will store sizes evolve in mature cities?"
Answer: Store sizes are generally increasing across the board, even in mature markets, driven by our expansion strategy and the need for effective handling of inventory and assortment.