SPENCERS - Spencer's Retail Limited Share Price

In the Q1 FY26 earnings conference call, management of Spencer's Retail provided an outlook focused on transitioning from efficiency-led EBITDA improvement to top-line growth. The company reported a consolidated revenue growth of 1% quarter-on-quarter, despite challenges such as supply issues and deflationary pricing in staples.

Key financial metrics included:

• EBITDA improved by 119 basis points, reaching INR 5 crores (up from breakeven the previous quarter).
• PBT loss reduced to INR 62 crores from INR 68 crores in Q4.
• Spencer's offline format maintained a gross margin of 19.1% despite flat sales.
• Nature's Basket revenues grew from INR 61 crores to INR 69 crores quarter-on-quarter, with margins improving to 28.2%.

Forward-looking points include:

• A major shift in focus for Q2 is expected, driven by the festive season, with initiatives like a newly launched membership program aimed at increasing customer retention and spend.
• Management projected mid-single-digit growth for offline sales and approximately 50% growth for online sales for the full year.
• Expansion plans include 8-10 new stores in FY26, with strategic openings focused on areas like West Bengal and Uttar Pradesh, aiming to enhance store productivity and performance.
• Operational improvements in the online segment suggest ambitious targets, with a goal of achieving 10,000 orders per day by September and maintaining 31-minute average delivery times.
• Despite previous losses in the online segment, management aims for the overall offline business to reach operational EBITDA breakeven by the end of FY26. Total net debt stands at INR 950 crores, with expected repayments of INR 140 crores in FY26.

These initiatives are intended to generate significant top-line growth and ultimately enhance profitability across both Spencer's and Nature's Basket platforms.

Question: Have you started to see any early signs of recovery in demand in July or Q2 so far? Any specific category?
Answer: Yes, we have begun to see a stronger start in July for Q2. Our key categories, including staples, FMCG, and fresh produce, are gaining momentum. However, the substantial demand uptick is anticipated to be more profound starting in August, coinciding with the festive season.

Question: Are you seeing better unit economics in the refreshed Oberoi and Inorbit locations compared to older stores?
Answer: Yes, the results from the reopening of both refreshed stores have been encouraging, with higher sales per square foot (SPSF) observed. However, we need a few more months to confirm these trends, as early months often show inflated numbers.

Question: What's the capex plan for FY'26?
Answer: Our capex plan for FY'26 includes around 8 to 10 new stores, equating to about 100,000 square feet of retail area. We anticipate total capex spending in the range of INR10 crores to INR12 crores, covering both store expansions and online development.

Question: How is the sales per square feet (SPSF) between Spencer's and Nature's Basket?
Answer: Spencer's SPSF stands at around INR1,450, while Nature's Basket is slightly higher. For consolidated numbers, we look at INR1,560. We're optimizing for efficiencies to improve these figures further.

Question: Can you specify the contribution of store closures versus savings initiatives in the operating cost reductions?
Answer: About 65% of the cost reductions stem from store closures, while 35% are from efficiency initiatives such as trimming regional operations and optimizing corporate headcounts, leading to annualized savings exceeding INR30 crores.

Question: What is the expected revenue mix regionally for Spencer's?
Answer: Approximately 65%-70% of our sales come from West Bengal. Specifically, we have 55 stores there, along with a presence in East UP across Lucknow, Banaras, Gorakhpur, and Allahabad.

Question: What is your guidance on top-line growth for FY'26?
Answer: We are targeting mid-single-digit growth for our offline segments, both Spencer's and Nature's Basket, with an expectation of at least 50% growth in the online business segment.

Question: When do you expect Jiffy to reach EBITDA breakeven?
Answer: For Jiffy, achieving EBITDA breakeven will likely happen at around 15,000 to 16,000 orders a day. We're focused on driving growth and retaining customers rather than just short-term profitability.

Question: What kind of repayment plans do you have for debt this fiscal year?
Answer: We anticipate around INR140 crores in debt repayment this fiscal year. This will help maintain our net debt around INR950 crores, although we may need to borrow further to manage operating needs.

Question: What kind of discounting practices do you have in Spencer's stores?
Answer: We utilize selective promotional days like "Wow Wednesday" for fruits and vegetables and special pricing cycles primarily in the first 10 days of the month, avoiding everyday low pricing strategies to manage our promotions effectively.