With fierce competition from online players, also emblematic of the deepening retail gloom, taking a toll on volume growth, V-Mart Retail has once again lowered its same-store sales growth (SSSG) target to 3-4 per cent for the year, from 5-7 per cent earlier.
During the second quarter of the current financial year, SSSG growth stood at a tepid one per cent, while volume saw a de-growth of 8 per cent — a first negative number in last 14 quarters. “Till now, we haven’t got a lot of growth so it may not be what we had initially targeted. But, 3-4 per cent SSSG will be able to take care of inflationary expenditure,” said Lalit Agarwal, CMD, V-Mart Retail.
Among the bigger markets, pain points were Jammu (due to political turmoil) Punjab, Uttaranchal, Himachal while Bihar’s SSSG was negative low single digit.
The company, however, will not shy away from its ongoing expansion drive as it is bullish that the winter sales, starting November, will rev up sales and the third quarter will be better than the last. It expects to add another 18 stores to take the total count of stores to 270 spanning over 20 lakh square feet.
In a post earnings call, Agarwal explained, the company’s expansion plan is driven by three factors. “One is that it has to be a cluster-based expansion, which means we don’t really get into absolutely new territories but nearby or adjoining our existing stores. Second, we try to expand only until the point that we are able to manage with cash internally. And third, all new stores have to be profitable. They have to add to the profitability and not be a drain or a stress. So if all these three parameters are met, we continue to expand in a range, but that does not mean that we are going out of range.”
Admitting there is some stress in the market due to the ongoing economic slowdown coupled with a conscious shift to online market which has impacted the volume growth, Agarwal said that the lower footfall was also because the new stores are yet to complete a year of operation since inception.
“In the last 12-month period, V-Mart opened 51 stores. Because there were less operational days for the store, we didn’t get much footfall,” he added.
In the quarter under review, footfalls were weak, up just nine per cent year-on-year (down 25 per cent QoQ). EBITDA margin for the quarter dipped 203 bps year-on-year largely due to increase in employee costs by 29.7 per cent on year.
Apart from the slowdown blues, the losses expanded also due to changes in accounting standards. “Almost, Rs 8 crore per quarter was extra provided at notional interest. There has been nearly `16 crore effect of IndAS 116 and some effect also coming from the books or from actual business,” said Agarwal.
