V-Mart Retail, India’s leading value fashion retailer with 271 stores across 19 states, announced its audited financial results for Q2 and H1 ended 30th Sep 2020. The Company's Board of Directors approved the results in its meeting conducted virtually on 10th Nov 2020.
In Q2, the Company’s total revenue recovered to 56% of last year, while like-to-like (LTL) sales stood at 50% of last year. The recovery was driven primarily by a higher base of store operational days (79%) in Q2, as compared to 34% in the Apr-Jun quarter that witnessed a nationwide lockdown owing to the COVID-19 pandemic. However, even in Q2, the Company lost around one-fifth of operational days due to prolonged lockdowns extending into early September in its two largest markets, Uttar Pradesh and Bihar. Moreover, a spurt in COVID-19 cases in tier 3 and 4 towns in the two states in Q2 impacted customer footfalls even when stores were operational.
The Company reported a revenue of Rs. 176 Cr in Q2, increasing 126% sequentially over Q1 when store operations had been shut for most of the quarter due to the pandemic-related lockdown. The sequential rebound in Q2 came despite the delayed onset of the festive season starting with Navratras and Dussehra by almost three weeks into Q3. On the macro front, phase-wise acceleration in unlocking, pent-up consumer demand, and overall resumption of economic activity collectively supported the revival of discretionary consumption in the second quarter.
This is reflected in higher average bill size, ABS (19% up YoY), and units per transaction, UPT (up 24% YoY). Three apparel consumption trends witnessed in Q1 – one, higher summer mix led by Easywear and Loungewear categories; two, increasing consumer preference for Athleisure in day-to-day fashion; and, three, increased contribution from Kidswear segment – continued into Q2 as well, while a slight uplift in the contribution of higher ASP apparel was witnessed during the festive period of Raksha Bandhan.
Considering that most of the Company’s costs are fixed in nature, YoY cost reduction of 41%, neutral EBITDA, and a 44% sequential reduction in PAT (loss) underscore an effective cost control mechanism in place and augur well for cushioning the pandemic’s impact on the Company’s profitability. Moreover, by temporarily renegotiating lease agreements with landlords, the Company has managed to generate rental savings of Rs. 19 Cr so far.
Owing to agile and proactive cost control and cash flow management, the Company has managed to maintain a robust cash position, utilizing less than 20% of its approved working capital limits.
Following its ethos of prudence and agility, the Company has proactively implemented efficient inventory management measures. Through a deft mechanism of inter-store transfer, significantly controlled inventory purchases, agile store-level replenishment, and a responsive supply chain strategy, the Company has achieved its leanest-ever inventory. This will lead to the enhanced freshness of stock in the forthcoming seasons, and ensure higher inventory efficiency. Despite a very healthy inventory situation, the Company conservatively continues to carry provision against any unforeseen disruption due to COVID-19.
Commenting on the Q2 performance, Lalit Agarwal, CMD, V-Mart Retail, said, "With the onset of festive and winter season and a definite bounce-back in consumer sentiment, we are maintaining a sharp focus on market and customer dynamics and trends in the current environment, to ensure our supply chain and business response is agile. At a time when resources are even more scarce, our agility will be crucial not only in providing adequate and right merchandise in every store but also in ensuring better utilization of resources to create customer delight."
A sustained recovery in macroeconomic indicators like GST collection, automobile sales (especially tractors), normal monsoons, and higher Kharif crop procurement coming on the back of a rich Rabi harvest, bode well for retail and discretionary spending in the coming months. Also, the prospect of a ‘winter’ Diwali in mid-Nov, can lead to the bundling of festive and winterwear apparel shopping, contributing to a higher ASP and sales.
To cater to the customer aspiration of better fashion at better value, the Company has ensured ample availability of one-of-its-best-ever fashion collection at even more affordable price points this year for both its festive and winter merchandise, including kidswear and ethnic range, mens’ and ladies’ jackets, sweatshirts, hoodies, and cardigans. With festive shopping commencing in October, early indications from customer response to the Company’s merchandise have been very promising. Considering the early onset of winter, as indicated by lower-than-usual temperatures in Nov in the Company’s key markets of Uttar Pradesh and Bihar, its latest winter fashion merchandise is witnessing robust customer footfalls at stores.