VMART - V-Mart Retail Limited Share Price

Management provided an optimistic outlook for V-Mart Retail Limited during the Q1 FY'26 earnings call. They indicated that while customer sentiment in the Bharat market remains positive but cautious, significant growth is expected as festivals approach. The company anticipates increased consumer spending, particularly due to enhanced reasons for celebrations. Management noted a shift in consumption patterns, with consumers celebrating a wider array of occasions.

Inflation is under control, specifically staple inflation, which is crucial for influencing consumer behavior. The management reported confidence stemming from favorable monsoon conditions, which are expected to bolster rural consumption. They highlighted improved footfall trends due to new store openings and strong customer feedback.

Key forward-looking statements include:

1. Store Expansion: V-Mart aims to increase its retail space by 13% to 14% in FY'26, targeting approximately 65 net new stores, while strategically closing underperforming locations (estimated 7 to 10 closures).
2. Sales Growth: Management projects a mid- to high single-digit same-store sales growth for the full financial year despite a challenging comparative base.
3. Margin Strategy: The focus will be on growing rupee gross margins over percentage margins, driven by better inventory management and product strategies.
4. Technology Integration: There's an emphasis on adopting technological advancements to increase agility and efficiency in operations, particularly concerning product management and consumer preferences.

Overall, V-Mart's management is confident about capitalizing on emerging opportunities, despite recognizing the competitive landscape and potential challenges in specific regions.

Q&A Section Summary from the Earnings Transcript

Question 1: What is the target number of new store additions for the full financial year? Answer: Our forecast for new store additions this year is around 65 net new stores. We're looking to add slightly more, but there could be some corrections, so net-net, we expect 65.

Question 2: What specific criteria do you consider when exploring new locations in Tier 2, 3, and 4 cities? Answer: We have a playbook that involves about 500 checkpoints, including population density, demographics, growth potential, and proximity to existing stores. The advent of technology has made this process somewhat easier, but real estate costs present challenges.

Question 3: Why is the same-store sales growth (SSG) lower compared to previous quarters? Answer: The lower SSG is primarily due to seasonal shifts caused by the monsoon and slightly sluggish consumer sentiment across the market. We don't see significant competitive shifts affecting sales negatively.

Question 4: Can you provide guidance on your EBITDA margin expectations for FY '26? Answer: While we're optimistic about rupee gross margin growth, I prefer to be conservative about percentage margins. Quarter 1's performance has not been particularly strong, but we expect improvements in later quarters.

Question 5: How does your vendor consolidation strategy provide competitive advantage? Answer: We focus on integrating cost efficiencies with our vendors and creating transparent cost-based relationships. We're working with a diverse vendor base, reducing reliance on larger vendors to mitigate risks.

Question 6: Are you seeing any impact from quick commerce in Tier 1 and 2 cities? Answer: There is some muted growth in about 20% of locations, particularly where quick commerce operates. However, its impact on our overall revenue is minimal at this stage.

Question 7: What is your strategy regarding online marketing expenses for the upcoming quarters? Answer: We have been reducing marketing expenses, especially for LimeRoad. For the offline business, we aim to maintain lower marketing costs, though we will invest more as we approach the festive season.

Question 8: Given the recent investments in Bihar, how will it affect your operations there? Answer: Any improvement in Bihar's economic conditions will benefit us, as we have a strong presence in the state. We are monitoring opportunities but can't confirm immediate additional store openings there yet.

Question 9: How are your average selling prices (ASPs) compared to competitors in the market? Answer: Generally, our prices are 15% to 20% lower than more urban-centric retailers like Style Union and Yousta. We aim to keep our pricing competitive while meeting value expectations.

Question 10: What specific geographical areas are you focusing on for new store openings? Answer: Our expansion plan is pan-India, focusing on areas where we already have a presence. We do not have specific states as our target; rather, it's about proximity to existing locations.

This summary encapsulates the essential questions and respective responses from the earnings transcript, keeping key information intact and concise.