Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales grew by 20% for V-Mart and 5% for Unlimited year-on-year, indicating strong overall growth.
- New stores under the Unlimited brand in the South are delivering higher sales and profitability.
- Improved footfalls and higher number of invoices cut reflect better efficiency measures.
- Gross margins for the offline business remained healthy and stable.
- Significant reduction in LimeRoad losses by 60% year-on-year, showing improvement in the digital segment.
Negative Points
- Impact of political events and election rallies caused disturbances in smaller towns, affecting business operations.
- Inflation rate around 5% continues to be a problem for consumers, impacting spending on non-essential items.
- Closure of 15 Unlimited stores since last year affected sales growth for the brand.
- Reduction in marketing spend by 59% could potentially impact brand visibility and customer acquisition.
- Employee costs increased by 17% due to increments and higher incentive payouts, affecting overall expenses.
Q & A Highlights
Q: The portfolio growth reported this quarter is strong, but still lower than pre-COVID levels. How are Tier 3 and Tier 4 markets performing in terms of footfall recovery?
A: Footfall has improved significantly, though it is still not at pre-COVID levels. The market has broadened with more retail and brand openings, leading to a higher quality of customers. Despite a reduction in advertising expenses, natural footfall has increased, indicating strong consumer trust and satisfaction.
Q: With the strong margins reported this quarter, what is the outlook for LimeRoad's losses and overall margin expansion in the coming quarters?
A: LimeRoad's losses are expected to reduce by 20-30% quarter-on-quarter. Quarter 1 is typically strong, and while Quarter 2 is usually weaker, we expect better performance in Quarter 3. The focus remains on retaining margin percentages while improving rupee margin throughput through higher volumes and reduced discounting.
Q: Can you clarify the store addition targets for the year and the expected number of store closures?
A: The target is to add 50 stores this year, with a focus on opening more stores before the festive season for better outcomes. While some store closures are expected, the overall strategy is to increase the store count significantly in the coming quarters.
Q: What are the key efficiency measures taken that have led to improved like-for-like sales?
A: Key measures include improvements in product design, assortment, quality, and pricing. Additionally, the new warehouse has improved supply chain efficiencies, and there has been a focus on reducing inventory and increasing freshness. Employee motivation and retention strategies have also contributed to better performance.
Q: How does the company plan to compete with traditional mom-and-pop stores in Tier 3 locations?
A: V-Mart offers a larger variety, better quality, and more transparency compared to mom-and-pop stores. The focus is on providing a superior shopping experience, better pricing, and maintaining high freshness in inventory. The company also runs a loyalty program with a database of over 50 million customers, ensuring strong customer retention.
Q: What is the strategy for product assortment and inventory management to stay competitive?
A: The focus is on maintaining a high freshness index and reducing old inventory through discounts. The company is working on making the assortment more agile and better suited to current fashion trends. This includes a significant improvement in the freshness index and a strategic approach to inventory management.
Q: How are the early signs of festive trends and same-store sales growth (SSG) tracking post the quarter?
A: The efforts to improve performance are ongoing, and the company expects continued growth. The festive season is expected to contribute positively, with some sales shifting to the second quarter due to the timing of festivals.
Q: What is the outlook for LimeRoad's physical store format and its impact on overall performance?
A: The LimeRoad physical store format is still in the testing phase but has shown encouraging results. The focus is on driving omnichannel growth and leveraging digital customer engagement. The team managing LimeRoad is partially separate but shares common resources with V-Mart.
Q: What is the expected steady-state working capital cycle for V-Mart, considering the recent improvements?
A: The focus is on reducing inventory and improving cash flow efficiency. Seasonal variations will impact working capital, but overall, the company expects continued improvement in inventory management and cash flow.
Q: How does the company plan to achieve the pre-COVID EBITDA margin levels, and what is the timeline for LimeRoad to break even?
A: The goal is to achieve high single-digit same-store sales growth (SSG) for two consecutive years to reach pre-COVID EBITDA margin levels of around 8-8.5%. LimeRoad's losses are expected to reduce significantly, with a target to bring them down to negligible levels by next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
