Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- V2 Retail Ltd (BOM:532867, Financial) reported the highest ever quarterly sales in Q1 FY25, with a 162% increase in year-on-year PAT.
- The company opened 10 new stores during the quarter, bringing the total to 127 stores, with plans to add 40 to 50 more stores this year.
- Same-store sales growth was robust at 37% in Q1 FY25, indicating strong performance across existing stores.
- Revenue from operations stood at INR415 crores, registering a growth of 57% on a YoY basis.
- EBITDA for the quarter was INR55.5 crores, up 56% YoY, with an EBITDA margin of 13.4%.
Negative Points
- Gross margin stood at 29% for Q1 FY25, which is relatively low compared to industry standards.
- The company’s strategy to pass on cost benefits to customers may limit gross margin improvements.
- Employee costs have increased due to new store additions, which could impact profitability if not managed well.
- The company has a current debt of INR78 crores, primarily used for bill discounting and working capital.
- There is significant competition from other value fashion retailers like Zudio and new entrants from Reliance, which could impact market share.
Q & A Highlights
Highlights of V2 Retail Ltd (BOM:532867) Q1 FY25 Earnings Call
Q: What pre-Ind AS EBITDA and PAT margins are we targeting for FY25 and the coming years?
A: We are targeting an EBITDA of 7% to 8% this year and 8% to 9% going forward. For PAT margins, we expect this year's PAT margin to be 4.5% and 4.5% to 5.5% in the future. - Akash Agarwal, Whole-time Director
Q: Can you share the share of proprietary labels and own manufacturing for FY24 and future projections?
A: Our private label contribution is almost 80%, and we aim to make it a 100% private label business in one to two years. - Akash Agarwal, Whole-time Director
Q: What is the expected gross margin trend considering the increase in proprietary labels and full-price sales?
A: We are targeting a gross margin percentage ranging from 27% to 29%, focusing on providing maximum value to the customer. - Akash Agarwal, Whole-time Director
Q: How do you plan to compete with market leaders like Zudio?
A: We focus on EBITDA percentage and ROCE/ROE. Our aim is to be at par or better than the best players in the space, targeting a pre-Ind AS EBITDA margin of 9% and beyond. - Akash Agarwal, Whole-time Director
Q: What are your plans for store expansion in the next three to four years?
A: Depending on performance and execution, we might open another 60 to 70 stores next year. Our target is to grow at least 30% to 40% in terms of revenue and EBITDA over the next three to four years. - Akash Agarwal, Whole-time Director
Q: What is the current debt position?
A: The current debt on the books is INR78 crores, primarily used for bill discounting and vendor payments. - Akash Agarwal, Whole-time Director
Q: What are your expectations for the upcoming festive season?
A: We are bullish and targeting 30% to 40% revenue and EBITDA growth this year. - Akash Agarwal, Whole-time Director
Q: How do you plan to handle competition from new entrants like Reliance's affordable clothing brand?
A: We focus on our strengths and aggressive growth strategy. The market is big enough to accommodate multiple players, and we haven't seen any impact on sales from competitors like Zudio. - Akash Agarwal, Whole-time Director
Q: What is the payback period for new stores?
A: The payback period for new stores is around three years. - Akash Agarwal, Whole-time Director
Q: What is the expected ROE going forward?
A: We are targeting an ROE of around 20% to 22%. - Akash Agarwal, Whole-time Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
