Release Date: October 25, 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 a strong first half performance in FY25, with revenue from operations standing at INR795 crores, marking a 61% year-on-year growth.
- The company added 22 new stores in the first half of the year, bringing the total store count to 139, with plans to add 40 more stores in the second half.
- Same-store sales growth (SSG) was robust at 36% for the first six months, driven by a customer-centric and product-first approach.
- The company achieved a significant volume growth of 49% in the first six months, with full-price sales contributing 91% compared to 85% in the previous year.
- V2 Retail Ltd (BOM:532867) has improved its EBITDA for the quarter to INR33.1 crores, a 60% increase from the previous year, with a focus on achieving a 10% pre-Ind AS EBITDA level in the next 2-3 years.
Negative Points
- Gross margin for the quarter decreased to 27.3% from 28.1% in the corresponding quarter last year, indicating pressure on profitability.
- The company experienced elevated employee costs due to recruitment for new store openings, impacting overall expenses.
- Despite strong sales growth, the EBITDA margin remained relatively flat at 8.7% compared to 8.6% last year, suggesting limited operational leverage.
- Two stores were closed during the quarter, one due to lack of profitability and another for relocation, highlighting challenges in store performance.
- The company faces increased competition in the market, which could potentially impact customer acquisition costs and future profitability.
Q & A Highlights
Q: What was the reason for the loss this quarter, and is it expected to continue?
A: Akash Agarwal, CFO, explained that the business is cyclical, with Q1 and Q3 being stronger quarters. Despite this, all four quarters are now EBITDA positive, which was not the case before. The festive season in Q3 typically makes it the best quarter, followed by Q1, with Q2 being more muted.
Q: Why were two stores closed, and what is the plan for future store closures?
A: One store was closed due to lack of profitability, and another was relocated for a better location. Akash Agarwal mentioned that they anticipate a 3-4% closure rate as part of their business strategy, considering the rapid expansion.
Q: Can you explain the increase in employee costs this quarter?
A: The increase is due to recruitment for new stores planned for the third quarter. Akash Agarwal noted that they are training new store managers in existing stores, which temporarily raises costs.
Q: How is the festive season demand shaping up, and what are the expectations for Q3?
A: Akash Agarwal reported better-than-expected performance with a 34% SSG in the first half and high double-digit SSG continuing into October. They expect revenue growth of over 30-35% in Q3, driven by the festive and wedding seasons.
Q: What is the strategy for store expansion, and how does it impact profitability?
A: The company plans to open around 40 stores in H2, focusing on existing clusters. Akash Agarwal emphasized that the expansion is supported by internal accruals without leveraging the business, and they aim for a 10% pre-Ind AS EBITDA level in the next 2-3 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
