V2RETAIL - V2 Retail Limited Share Price

In the Q3 FY 2026 earnings call for V2 Retail Limited, management provided an optimistic outlook, emphasizing strong revenue growth and a disciplined expansion strategy. The company reported a remarkable 57% year-on-year revenue growth for Q3, reaching Rs.929 crores. The EBITDA for the quarter was Rs.174 crores, marking a 56% increase year-on-year, with an EBITDA margin of 18.7%. The profit after tax (PAT) rose 99% to Rs.102 crores.

Management shared ambitious plans for ongoing expansion, with a target of adding 150 new stores in FY 2027, following the addition of 105 stores in the first nine months of FY 2026. Currently, V2 Retail operates 294 stores, with plans to increase this to 304 shortly and maintain a store size averaging 10,000 to 11,000 square feet. Same store sales growth (SSSG) targets are set at 8% to 10% for the upcoming year, with mature stores already averaging Rs.1,200 per square foot and new stores achieving Rs.730.

Key points from the call include:

1. The recent successful QIP raised Rs.400 crores, aiding aggressive store expansion.
2. A physical verification process of assets resolved previous audit qualifications, resulting in a write-off of Rs.5.06 crores.
3. The management has shifted towards a pre-IndAS focus for clarity on operational performance, anticipating that this will minimize the accounting differences in future reporting.
4. Gross margin strategy remains focused on competitive pricing, with targets between 28% to 29% to ensure value delivery while prioritizing EBITDA margin growth.

Overall, V2 Retail is positioning itself strategically for robust growth, emphasizing efficient operations, inventory management, and responsive store execution to enhance shareholder value.

1. Question: If you can explain in simple language regarding what changes you have made in your lease accounting, and how is it compared to the industry practice?
   Answer: We focus on pre-IndAS numbers as IndAS doesn't suit retail. Our lease accounting now aligns with industry peers, allowing us to reassess leases annually based on store performance. This change helps us determine whether to continue operating each store. Our peers like Trend and V-Mart follow this practice too.

2. Question: Is it fair to assume that this line of credit from your payables will always be available to you whenever you require it?
   Answer: Yes, it is. We expect that as we allocate funds for capital and new stores, our credit terms will return to the usual 55-60 days duration.

3. Question: Can you clarify the difference in your standalone and consolidated statements, and which should investors focus on?
   Answer: The standalone numbers should be the focus, as we shut down three manufacturing units. We're liquidating remaining inventory from the subsidiary, and the retail business primarily exists in the standalone numbers.

4. Question: What is your outlook on the demand side, both in the near-term and medium-term?
   Answer: We anticipate an 8% to 10% SSSG target next year, bolstered by the wedding season and positive government measures to boost consumption. Our new stores are expected to perform favorably relative to older ones.

5. Question: Is there scope for improvement in your gross margins, which are below your peers'?
   Answer: Our strategy prioritizes competitive pricing over gross margins, aiming for a gross margin of 28%-29%. We focus on maintaining high EBITDA margins through increased sales per square foot rather than solely higher gross margins.

6. Question: How have the older stores performed on margins and PSF compared to the new stores?
   Answer: Mature stores are performing at Rs. 1,200 PSF with margins around 28%-29%. New stores opened this fiscal year are averaging Rs. 730 PSF and have similar costs, indicating that their performance aligns with expectations.

7. Question: Can you give an update on the employee expenses per square foot, which seem to have decreased?
   Answer: Employee expenses have come down because we are expanding our area of service without proportionately increasing headcount. We are getting better operating leverage by servicing more space with the existing team.

8. Question: What kind of inventory levels do you expect now and how does it compare to last year?
   Answer: Our inventory is around Rs. 900 crores, comparable to last year's levels. With the increase in store openings, turnover days have remained stable, maintaining efficiency.

9. Question: Can you provide clarity on your guidance for store rollouts in FY 2027?
   Answer: We aim to add at least 150 new stores with an average size of 10,000 to 11,000 square feet, anticipating around 30 to 35 new stores in the fourth quarter alone.

10. Question: Regarding the impact of quick commerce on your business, what is your assessment?
    Answer: We haven't seen significant impacts from quick commerce on our sales, as apparel purchases remain experiential, particularly in Tier-II and Tier-III towns. Therefore, we expect minimal disruption from online players.