SPENCERS - Spencer's Retail Limited Share Price

In the Q4 FY25 earnings call, Spencer's Retail management provided an outlook focused on growth and efficiency. For the full year, consolidated revenue fell to Rs.1,995 crores, a 15% decline from Rs.2,345 crores in FY24, attributed to the closure of 47 stores in north and NCR regions. Despite this, management reported significant improvements in EBITDA, reaching Rs.60 crores compared to Rs.14 crores in the previous year, suggesting a 400% increase.

For FY26, management expects mid-single digit growth for both Spencer's and Natures Basket while targeting optimized operating costs. They aim to maintain the same cost level as in FY25, indicating a controlled approach to expansion without incurring excessive losses or reliance on heavy debt financing. The targeted growth for Spencer's is pegged at approximately Rs.320 crores and a store-level EBITDA margin of around 8%, while Natures Basket seeks to improve operational efficiency and increase its top-line revenue.

Spencer's ambitious plan for its newly launched e-commerce platform, Jiffy, includes a goal to double its scale and achieve 3 lakh monthly orders, elevating online revenue contribution to 20% in the overall business mix. Management expressed optimism about Jiffy, highlighting a 58% year-on-year growth in user base and a solid average order value of Rs.760, suggesting a robust engagement with customers. Overall, the strategy is a transformation through efficiency, playing to the current strengths in both offline and online segments.

Here are the key questions and answers from the Q&A section of the earnings conference call:

Q1: On Natures Basket's EBITDA levels, can you share more about the challenges faced by newly opened stores? Is it footfall or ticket size driven?
A1: The challenges stemmed from supply chain disruptions for gourmet foods and the lack of expected ramp-up in new stores. It's intertwined; if a new store doesn't have the right product availability, it affects initial footfalls and repeat visits. We're addressing these operational issues.

Q2: How is the company planning to deleverage its high net debt of Rs. 860 crores, especially with long-term debt maturing in FY26?
A2: We recognize our high debt and are exploring equity-raising options. We are stabilizing our operations and expect to improve our margins, which could make capital raising easier. Our focus has been on optimizing costs while working on operational numbers.

Q3: Are we confident about maintaining profitability in FY26, given another income is likely not to be as high?
A3: Yes, while large other income will not recur, we are confident both businesses will reach operational EBITDA breakeven by FY26. Our operational costs have been calibrated accordingly, focusing on sustainable growth rather than relying on one-time gains.

Q4: When do you expect Natures Basket to generate profit at the NPAT level?
A4: We aim for operational EBITDA breakeven by end of FY26. After that, we will address our financial restructuring to focus on PBT profitability. While predicting exact timelines is challenging, we anticipate significant improvement in PBT losses.

Q5: How does the inventory for Jiffy work compared to competitors in quick commerce?
A5: Jiffy utilizes store inventory; there's no separate stock for it. We manage risks by ensuring that low stock items don't appear on the app and updating store inventory in real-time. Our fill rate exceeds 90%, and we aim for high efficiency within our existing network.

Q6: Will the online business share of the overall top line change with Jiffy's growth?
A6: Our goal is for online sales to represent around 20% of total revenue, up from 13-14%. However, we expect the overall mix between Spencer's and Natures Basket to remain stable, while both will see an increase in online contributions.

Q7: What is your guidance for Natures Basket's revenue and profitability?
A7: We aim for Natures Basket to achieve around Rs. 320 crores in revenue in FY26, targeting an operational EBITDA breakeven, with improvements in margins and cost efficiency as key components of our strategy going forward.

These answers summarize the core responses from the company's management during the call, maintaining clarity on future objectives and strategies.