Ladies and gentlemen, good day and welcome to Vedant Fashions Q1 and FY26 earnings conference call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from JM Financial. Thank you, and over to you, sir.
Good afternoon, everyone. On behalf of JM Financial, I would like to welcome you all to Vedant Fashions Q1 FY26 earnings conference call. From the management, we have with us today Mr. Vedant Modi, Chief Revenue Officer, and Mr. Rahul Murarka, Chief Financial Officer. Thank you, and over to you.
Good afternoon and a warm welcome to all the participants. I am Vedant Modi, the Chief Revenue Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Ltd quarter one financial year 2026 results. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchange as well as the company's website. Vedant Fashions is India's leading wedding and celebration wear company. The first quarter of financial year 2026 saw a rebound in wedding calendar compared to the same quarter last year. Sales of our customers for the quarter ended June 30, 2025, was INR 4,057 million, which grew by around 23% over Q1 of FY25.
In Q1 FY26, we continued the momentum built over the past few quarters of our sustained focus on enhancing customer experience, retail training, data-driven merchandising and replenishment, omnichannel integration, and KPI monitoring, which has further contributed to strong SSG growth of approximately 17.6% over the same quarter in the last financial year. We are pleased to report that our retail KPIs also grew in a healthy and sustainable manner. With respect to our rollout expansion strategy, in light of the current retail environment, we anticipated a measured pace of retail openings during the period to ensure that our openings are both strategic and business sustainable. As of June 2025, Vedant Fashions' EBO retail area network stands at about 1.78 million sq ft globally. During the quarter, we strategically scaled up our marketing efforts across multiple channels, including social media and our various other brands, which contributed to our performance.
Our focus on digital marketing alongside traditional mediums further supported this growth. Notably, our category-specific initiative, the Rajwada collection targeting grooms and the groom squad, has helped establish a sustainable category growth strategy. Additionally, we successfully executed campaigns for Mohey, leveraging influencers and in-store activations aimed at brides and bridesmaids, reinforcing the brand's position as a go-to wedding wear choice for all women. The launch of our Twamev Sunset Soiree collection, supported by extensive digital and social media campaigns and select in-store events, further bolstered both brand and category. We also ran successful social media campaigns for Diwas, emphasizing celebration and expanding our reach. Collectively, these marketing initiatives have played a key role in enhancing our brand positioning and appeal across platforms, with the positive impact reflected in the performance.
Looking ahead, we remain firmly focused on our core strengths, supported by well-prepared inventory and designs, comprehensive marketing initiatives, efficient auto-replenishment systems, and a robust store network. A strong backend infrastructure positioned us well for sustained long-term growth ahead. With this, I will now hand it over to Mr. Rahul Murarka to take you through the financial performance of the company. Thank you.
Thank you, Vedant. Namaskar and good afternoon, everyone. I would like to highlight the key financial performance metrics for the quarter ended 30th June 2025. During Q1 of FY26, the company witnessed a rebound in wedding season as compared to Q1 of FY25. The company reported revenue from operations of around INR 251 crore, delivering a healthy growth of 17.2% over Q1 of FY25. The company also witnessed healthy growth in sales of our customers and SSG by 23% and 17.6% respectively as compared to Q1 of FY25. The company continues to report industry-leading gross margin of 66.9% and a healthy EBITDA margin of around 43.2%. The company also reported a healthy cash margin of around 25% and a profit after tax stood at around INR 70 crore, with a growth of 12.4% compared to Q1 of FY25. Thank you and namaskar, everyone.
We can now move to the Q&A session.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands as well as asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Tejas from Avendus Spark. Please go ahead.
Hi, thanks for the opportunity. The first question pertains to Vedant. You partly answered that other expense shows staff increased this quarter. Is this now from here on structural in the sense we need that much investment to keep the brand and business or the momentum going in our favor?
Sorry, is this question in regards to marketing?
Yes, yes. It's part of other expenses, right? Other expenses will also highlight this one.
Tejas, you know, actually this quarter the marketing spend was in line with how much we've always spent historically. The reason why it looks higher than the same spend in the quarter, first quarter of last year is because, if you remember, the first quarter of last year and the second quarter of last year had negligible wedding dates. Last year we had taken a strategic call of spending close to no money on marketing in the first two quarters. Hence, even though the number looks larger compared to the last financial year, it's actually in line with how much we've been spending at a quarter level usually. This is the kind of spend that we've typically done. Even though it's slightly more than last year, at the financial year level, it should not change at the percentage level.
Very clear. Second question is on our store count and our footprint and square footage. Even though sequentially we have increased the store count, square footage has gone down. Any rethink on our store size?
No, sir, we are going to continue with our strategy of focusing more on the concept of flagship stores. The reason why this quarter's data looks like this is majorly on account of a larger number of SIS stores opening. These counters are typically about 150- 200 sq ft, that's why you see a higher number of store openings vis-à-vis still a slight bit of degrowth in terms of retail sq ft.
Got it. Any guidance or numbers you would like to share for this year or coming period on store expansion?
This year, strategically, the focus is to really ramp up our SSG. That is the core KPI for the company. That said, we will still be quite healthy in terms of the gross openings that we do this year. We are still targeting to open a good number of stores. However, on the other side, we are also consolidating a lot of the older stores and some of the different kinds of concepts we tried in the past two to three years, which haven't worked for us. At the end of the year, while the net sq f t expansion will not be a very large number, the quality of stores that we operate will have significantly improved. That's the major focus for the year, along with delivering good SSG numbers, which is what we are focusing on.
Got it. Last one, if I may, please, if you can share your observation on current competitive landscape and demand outlook in general.
Overall, I think the consumer sentiments remain weak across the mid-premium industry. This is something which we hope that bounces back in a couple of few quarters. However, we have not seen any positive shift yet. It continues to be how it was till, let's say, about last quarter.
Got it. That's all from my side, and all the best for coming quarters.
Thank you.
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Securities. Please go ahead.
Thank you for the opportunity. I just wanted to understand demand more in detail in terms of footfalls, conversion percentages that you are witnessing, bride versus guest purchases, how they are panning out. That would be my first question.
Thank you for the question. I would say footfalls was in line with the kind of growth we delivered, and conversions also were in an uptick, having improved just slightly by a few basis points compared to the last financial year. At the same time, given that there were very few wedding dates in the last year, same quarter, we did see our groom business improve faster than the non-groom business, majorly on account of better wedding dates. All in all, that is where we stood. ASP also slightly increased, and the majority of the growth came in terms of volume.
Okay. If the mix was better, I'm just trying to understand why margins were under pressure in this quarter versus last year.
See, again, margins can slightly shift by about 80 basis points from one quarter to another, but at a financial year level, there is no change at all.
For the PAT margin, when you compare, we had 25% this quarter, vis-à-vis 26.1% in Q1 FY 2025. The major reason is the marketing cost. This year, the marketing cost was 5.6% of revenue, and last year Q1, it was 2.3% of revenue. That is the major reason where we see. Overall, if you see, then we have a very healthy margin metrics.
Okay. Last question, if I can squeeze in, in terms of Andhra Pradesh and Telangana regions, have they started to bounce back for you, or do they still remain under constraint?
I would say one of the best positives of the first quarter was seeing a sharp rebound in Andhra Pradesh and Telangana, which has led to growth momentum for the company in this quarter. That was a big positive for us to see.
Okay. Thank you. I'll come back to the question queue for any further questions. Thank you.
Thank you very much.
Thank you. Before we take the next question, we would like to remind the participants to press star and one to ask a question. The next question is from the line of Archana Menon from Morgan Stanley. Please go ahead.
Hi. Thank you for the opportunity. My first question was on the growth side. While there are nuances on the wedding date calendar shifting and things like that, if you look at your SSG numbers, even from a little longer term, let's say from a three-year, four-year category, that number is still a little low. How do you assess that? I mean, what do you think are the major challenges that you face? Is there any expectation, is there any change in your expectations of carrying shape growth?
Thank you for the question. Like I was mentioning, even though the numbers from an absolute level compared to last year look decent, we would have liked to do better, in all honesty. One of the core reasons why we feel that the growth could have been better is because consumer sentiments remain to be subdued as we witness across mid-premium discretionary companies. That is something, once it rebounds, which will allow us to sort of get to much higher growth levels. From a company's perspective, there are three to four things which we can really work on. One of the major elements being product, there has been a very large focus on having a lot more variety.
As I was mentioning in the last earnings call as well, almost 2.3x- 2.4x the number of variety compared to last year is something we've worked on, which has enhanced our conversion rates and lovability. The second lens being marketing. There is, again, a large shift both in terms of the teams we have internally and the kind of campaigns we do. Instead of doing one big campaign for a brand, we are breaking it down into multiple mini campaigns run digitally, allowing us to be a little more viral and have a larger word of mouth spreading throughout the quarters and the year.
Finally, coming to operations, we have spent a lot of money on investing in modern age technology, the big product being the VFL Parivaar app, where we train our fashion advisors almost for two to three minutes on a daily basis instead of focusing on the two to three times training per year, which was typically done in the retail industry. On top of that, we're also investing more in terms of the omnichannel and endless style technologies to improve conversion rates alongside better and enhanced training through the use of AI intelligence. We are trying to do as much as we can from a company's perspective by focusing on these initiatives alongside building the newer brands that we focus on: Mohey, Twamev, and Diwas. Given the weaker consumer sentiments, overall, things have been relatively slower than we would have liked them to be.
Understood. Thank you, Dan, for the detailed response. Just in continuation to this, do you think that the benefit of some of these initiatives that you've taken has already been reflected in your growth? Do you think that even if we assume that the consumer demand environment remains as is, we should see a growth pickup in the quarters ahead as these initiatives start helping you?
This is a very tricky question to answer because one thing which I have learned over the last couple of years of working is no initiative is thought of as set as fireballs. An initiative which we as a company take can take three years to show us results, whereas something can show us results in the first month itself. It's a very difficult question to answer. That said, the goal is to do as much as we can in terms of investing in our people, in our technology, investing in great customer experiences to satisfy the needs of all. If we are supported by the macro, then no doubt the growth should be tremendous.
Understood. The second part of the question was on the margin side. For the last four quarters, we've seen our other expenses growing quite sharply. One aspect of it is marketing, but is there any other element which is shaking that number up?
If we talk about the last financial year, I would say it was majorly on account of operating de-leverage because of the lease costs, because these costs are fixed. If the SSG number is not what we anticipate, that kind of hurts the margins. From the first quarter perspective, I would say it was a very positive quarter in terms of margins because all the operating leverage kicked in. Marketing, which is a variable cost, which is something we actually plan at an annual level, not at a quarter level, is the major reason why almost 300 basis points extra was spent on marketing. I would request you to not look at that at a quarter level, but to look at something like marketing at an annual level.
Got it. What I was trying to check was has there been any impact of, say, you opening more stores under the model wherein you guys pay the lease or the franchise? Or any strategic change that's helping to set you in this economy now?
Sure. There are two things which are important as far as our PL margins are concerned. One is the gross margin, which has been pretty stable across. Another is the lease cost, which comes under a lease cost as well as under ROU depreciation. Now, as you're aware, we have been opening stores in the last couple of years, but the revenue has not grown to the extent it should have. That is the reason there's a negative operating leverage which is there on account of the lease cost. Once we are back with our normal revenue levels, of course, the margins would improve. The lease cost is another element apart from the gross margin, which is important.
Lastly, to your question, yes, there has been a slight shift, not large enough, where the percentage would have moved slightly towards stores where we bear the lease cost versus where the partners bear the lease cost.
Got it. Thank you so much for this. This last question from my end is, strategically, do you think that there's an opportunity for you to, you know, because your margins, EBITDA margins are still very, very healthy, I would say. Is there a strategic decision between growth and margin that you can make in terms of spending more? If you think that could drive up more growth, how do you think of growth versus margin?
It's, again, a very interesting question. I think we are a highly growth-focused company. There are two, three kinds of things when it comes to margins. There are things which are more long-term in nature, let's say lease cost, for example. These are areas where we would not want to sacrifice our operating leverage. On the other hand, there can be a dynamic need where a marketing campaign really works for us and we would like to spend a lot more money than we had anticipated. We will absolutely push the pedal and make that investment. Depending on if the action long-term margin is destructive or attritive, those decisions and calls will be made. If anything makes sense from a long-term perspective, we will absolutely take those calls for growth.
Understood. Thank you so much.
Thank you.
Thank you. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Hi. Vedant, my question is with regards to the competitive intensity, and it is more so not from the organized players, but from the unorganized player lane. If you can highlight how the competitive intensity has been over the past quarter and has it seen any change versus the previous period.
Like we've been mentioning, over the last 8- 10 quarters, we've definitely seen a large number of store openings. However, given how closely we track them and monitor them, the majority of these Me-too brands, the performance is something which makes us question if the intensity of openings can keep up. We've already seen it slow down, and our common sense would tell us that this slowness in terms of the opening should be there from now on.
Sure. You expect, you know, the competitive intensity to moderate going ahead, if that is the right understanding?
While I can't give you an objective answer, qualitatively, we feel the intensity of the store openings would definitely slow down.
Sure. Vedant, would like to have your comment on the other brand's performance, like Mohey and even the freshly launched Diwas. How have they been trending? How are their KPIs trending? If some color you can throw on this.
With Mohey, we have had a strategic shift in terms of how we look at the brand. We've invested a lot in terms of moving from it being a bridalwear brand to it being a weddingwear brand. That has really worked in our favor. We are continuously beating the company average when it comes to Mohey SSG, and overall growth has also been positive. With this strategy in mind and the evolved digital marketing strategy, we feel we are poised to continue growing Mohey. I think the way the stores are now looking, we've just come back from a store visit in Hyderabad, we seem very confident about the brand overall and how it's going to perform in the next couple of quarters as well. In terms of Diwas, the last perspective was when the brand was launched. It did decently well, although at a very small base.
We saw a very positive response in terms of the trade shows we've recently done in the last two months. That was a great thing to see for Diwas. The real test for Diwas is going to be in the upcoming festive season when we will actually be prepped from an inventory perspective, and we will see the power of the brand on the multiple marketplace channels where we operate and our own D2C website. Finally, coming to Twamev, again, from an SSG perspective, it's been doing very well. We will also have one very strategically important EBO opening in this financial year for Twamev in the heart of Bombay. With all of these things running, I think with Twamev as well, we are very confident about the product mix and portfolio, and continued growth momentum.
Sure, Vedant. Thanks a bit for coming.
Thank you very much.
Thank you. The next question is from the line of Rahul Agarwal from Ikigai Asset. Please go ahead.
Hi, very good evening. A few questions. Firstly, to start with, and I'm sorry I joined the call a bit late, so if they're repetitive, I'll read up the transcripts. On Andhra Pradesh, Telangana, what is your assessment in terms of the growth bounce back? I mean, should we assume right now, is this the time to assume that this growth, obviously not 17%, but in terms of direction, this growth should be sustainable going forward? Was there, you know, some seasonal impact or maybe some state behavior which caused this?
There are two, three aspects here. We've actually just come back from a visit to Telangana. The kind of numbers we saw in Telangana in the first quarter were actually much better than the company average itself. There is definitely the impact of having weddings in this quarter versus not having weddings in the first quarter of the last financial year. Given the intensity of growth, we would feel there are other macroeconomic elements as well which have led to the growth in bookings. This is something we would like to see for one or two more quarters before commenting on this. The first quarter numbers, and I would even go on to say the current quarter two numbers which we see in July, have also been decent for Telangana.
Got it. It needs a couple of more quarters for the right assessment in terms of the direction to call out. Is that correct?
Absolutely.
Got it. Second question was, on these emerging brands. I think Gaurav already asked that, but just in terms of the thought process, like, scale and size, let's say five years out, Mohey obviously is going to be the, you know, the largest one out of Mohey, Diwas, and Twamev. Just on Diwas and Twamev, what is the vision here? You know, let's say if we talk about three to five years, could you just help in terms of the thought process, what you have, where do you want to, where do you see these brands in terms of scale and size?
Great question. In terms of Twamev, I would say the real goal from a three to five-year perspective for us is to have a large market share in the British luxury category. This is the market where typically boutiques and small designers operate today. Given the unorganized nature of working, the kind of product being delivered at the kind of price point, we feel we can do a much better task at having better products at better price points because of the supply chain we have. The goal is to open the best store in the top 30- 40 markets of India and have a large market share of those markets. This is something we are focused on in terms of Twamev and to carry a big brand legacy of a premium brand as we sort of move on with this journey.
In terms of Diwas, we want to be the flag bearer of Indian wear when it comes to anything and everything festive. If you look at India, there are 50+ festivals that India celebrates. At an individual level, each individual in India celebrates four to five festivals. Yet when you look at the men's Indian wear industry, it is still very small. The majority of Indians are not even buying a single piece of Indian wear annually today. With Diwas, we want to change that. We want to ensure that every Indian has the ability to afford and celebrate the festival of their choice, wearing the right product for that festival.
Given the channels that we've chosen, very focused on the e-commerce route through marketplaces, through diwas.com, along with the multi-brand outlets and affairs route which we're taking, we feel we can really change the aspect of the festival agreement in India when it comes to a three to five-year perspective. Currently, for the next one to two years, the goal is to have a much higher market share of marketplaces. As we grow the brand, we want to improve the industry's market share of festive wear. That will be the larger focus for Diwas.
Got it. Just two follow-up questions on the same question. Essentially, how do you achieve this? Let's say if we have to achieve a higher industry market share for every celebration through Diwas, how do we change that behavior in terms of go-to-market, right? If you could share a couple of examples, that would help. The second is both for Twamev and Diwas, in terms of, you know, obviously the TAM is, you know, we're talking about very large numbers. From a Vedant Fashions Limited perspective, would you have or could you share something on, you know, let's say you foresee Twamev or Diwas as an INR 500 crore brand five years out, you know, three years out, something like that? If you could quantify, that will help and give a direction to us.
Very interesting question. When it comes to the overall go-to market strategy, this is something we've delivered in the past with Manyavar. Two decades ago, organized Indian wear did not exist as an industry. If you go to our YouTube page of Manyavar, and I love to do this sometimes, and I go, you know, sort of looking at the videos from the oldest videos to the newest, there is a sort of journey to organize that industry and to make Indian wear aspirational along with making it value for money, which democratized the aristocracy of India, making sherwani affordable for a lot of Indians. That is one journey we've done with Manyavar, which has to be done with the kurta wear industry for festive wear, which is what we are attempting with Diwas. There will be a big marketing strategy behind that.
If I give you one example of Calcutta, which is where we live, if you walk around the city in Poila Boishakh, you will see the majority of the people here wearing a yellow kurta. The city being cultural, we've kept up with those values. If the same values were to replicate in each city of India for their respective festive occasions that they celebrate, that is all we have to do. This is one thing which we truly believe from our hearts adds so much cultural value to the country. The kind of happiness that can be felt across the city when something like this happens is also truly beyond words. This is something which we will truly work hard towards as we build the category and build the supply chain to cater to the amount of people we want to.
Again, to your second part, which was to give numbers, this is something which we don't do. We would not like to give any guidance as such. The goal is to be much larger in terms of both Twamev and Diwas where we stand today. Also, while we build those brands, increase the TAM of those brands also significantly.
Got it. Got it. Just last thing, on the same-store sales growth, the retail area additions, where are we on the store consolidation journey? How should we think about new store additions? Coupled with that, the question was also on lease rentals because you mentioned that, you know, overall lease rentals still in metro markets are higher. Even Twamev will need, you know, top 30- 40 cities will have that kind of impact. Both things together in terms of how do you think about new store additions and how are the lease rental trends and what should we expect for Vedant Fashions overall?
To your second part, the retail inflation continues to remain high. While we see some pockets where the inflation is slowing down, these are the pockets where we are again growing stronger expansion. Where the inflation continues to be very high, where we don't see that the rental yield for us overall, like a rental lease cost, makes sense, those are the markets we are still slow on in terms of expansion. Secondly, to your question of the overall growth numbers, I feel again at the end of this year, we will have decent growth in terms of growth numbers, which is opening newer stores. However, when it comes to closure, there is definitely consolidation of older stores. On top of that, we are also rectifying some of the strategic new things we tried in the past two to three years which did not work for us.
I'll give you one small example. Rajouri Garden as a market is strategically very important for us. Inside the market, the stores are very old and there are no large stores. We had a small store doing very good business for us. We took a call where we opened a 15,000- 16,000 sq ft store right outside the market. That is something which did not work for us. Now we are moving back into the market with a store which is half the size of this flagship we had opened, so about 7,000- 8,000 sq ft, which is still the largest store inside the market. While we have cut down in terms of square feet inside Rajouri market, we will still do much better in terms of revenue.
These are some of the mistakes we want to clear out where square feet number might reduce, but the quality of business will actually improve by a lot.
Got it. Got it. From a gross addition perspective, is there a count here or how should we think about that?
Again, I don't want to give a particular guidance as such, but ballpark from a gross number, it should be between 8%- 10% of where we stand at the end of the last financial year.
Perfect. With much more higher throughput, which will help the overall sales to be higher than despite the net adds being lower. Got it.
Absolutely, the goal is to improve the quality of retail significantly.
Perfect. Thank you so much for the patient answers, Vedant, and wish you all the best for the rest of the year.
Thank you very much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. The next question is from the line of Aliasgar Shakir from Motilal Oswal Mutual Fund. Please go ahead.
Yeah, thanks for the opportunity. I am starting from town. Just a question on growth, just follow up on the last question. Now that we are indicating that, you know, by gross number, we'll be at least 8%- 10%, but we'll have a lot of tool here, so you know net numbers may not be there. I think growth will be more led by, as you mentioned, SSG. If you can share some more color on how the SSG trends might be seen throughout this quarter because there will be multiple key words in here, right? One is the restructuring of the, you know, non-performing stores. Second is that we have seen now two years of, you know, negative SSG. We are basically below and there were, you know, very weak wedding season also, so that benefit should also be there.
When I see from a very short-term point of view, I think last year, you know, we are probably, you know, September and December quarters were very good. Maybe, you know, the impact is from there. If you could just share some color in terms of how we are looking at the, you know, SSG performance and each of these weeks being out in your favor, you know, that I think will be the key year of growth for you and your.
Thank you for the question. Again, we don't give any guidance as such, but from a qualitative perspective, the goal every year is to do decently well in SSG. Firstly, there is the lever of ASP where we want to grow by about 3% to 4% within each of the categories we operate in. Alongside the category improvement, because the share of Mohey and Twamev is increasing in the company, there is again an 80- 90 basis point jump in ASP at the company level every single quarter because of this. That is one big lever which we have.
Sorry, how much did you say?
3% within the categories and I would say 70- 80 basis points because of a larger share of Mohey and Twamev of the company. All in all, 3.6%- 3.7% is something which we sort of target as ASP growth, which is one lever. The second big lever for us is improving our average basket size, which again, in terms of the kind of training which we deliver, the kind of layouting which we do in our stores, we've been able to improve it quite decently well over the last couple of financial years. The third aspect is to continuously improve on footfall.
This is the one major area where we've lagged in the last many quarters and the last two financial years overall, which is something with both very good marketing and rebounds in the macroeconomic environment can really help us step up the overall footfall numbers, driving a lot more bill counts. Finally, there is a large play in terms of our retention strategy, in terms of ensuring we are able to recall a lot of the INR 80- 90 lakh customers that have already purchased from us, the data with which we carry in our systems. These are the overall growth levers, in terms of having good SSG growth. That said, there are a lot of micro KPIs that we work on, which I mentioned for an earlier question, which is in terms of product, in terms of marketing, in terms of the operation standards.
The real goal is to ensure that we do the best justice to every single guest walking into our store, making them feel extremely happy with what they've purchased.
Got it. Please elaborate in detail. Thank you so much. Just one quick follow-up. Last two years, we were indicating that we will have a double-digit footprint-led revenue growth. Now that this year we are not having a net level strong footprint growth, do you think that double-digit growth will be difficult, or do you think that SSG should be able to compensate for whatever impact we will have from a lower net store addition?
The goal of the company is to always deliver on the best financial performance. This year, we believe improving the quality of retail is more important than improving the number of sweatshirts we update in, which at a net level will be much more beneficial to us. For any retail company, having a tail is the worst thing possible because that means great inventory gets stuck at the back of the non-performing stores along with the overall operating fee leverage that comes with it. The goal is to ensure great SSG along with improving retail quality, making us poised for good growth at the end of the financial year. If there is any market where we don't operate in, we will absolutely open a store. There is no reason to slow down in terms of store openings.
We just want to do it in a manner which is sustainable and has great financial outcomes in both mid to long term as well.
Okay, got it. Thank you so much. This is very helpful.
Thank you.
Thank you.
The next question is from the line of Jignesh Kamani from Nippon Mutual Fund. Please go ahead.
Yes, hi, Vedant. Thank you. I just want to know on the consumer sales grew around 23%. You must see reported sales growth of around 14%. Since last seven or eight quarters, consumer sales growth has been much higher than the reported sales. Generally, it moved hand in hand, and if there is any variation, probably one or two quarters it will reverse. I just want to know the reason behind it. As the store was having very high inventory two years ago, that's why reported sales look weak because of clearing the inventory?
On a full financial year basis, if you look at the growth in primary and customer revenue, it moves in a similar direction. On a quarterly basis, it can be depending upon what is the upcoming quarter which is coming up. The goal of.
Last eight quarters, it is happening.
Sorry?
If you take out last eight quarters, except fourth quarter, every quarter the consumer sales growth was higher than the separate sales growth.
No, so that to some extent it can be because of, in general, if you look at full financial year, like FY 2025, if you look at it, right, it was in the similar direction. It was moving in the similar direction in FY 2025. What is important is to look at the full financial level. Like if I tell you last year our primary revenue growth was 1.2%, okay? Our customer revenue growth was 2%. It was similar. That is what we are saying that if you look at financial year level, it will move in the similar direction. In any particular quarter, there can be variations because our model is auto-replenishment. Every replenishment happens automatically. There is no manual intervention. The replenishment happens based on the demand and supply, what is, how is the season in the upcoming quarter. These factors play a role. It is fully automated.
There is no manual intervention at all. That is why we are saying it is important to look at the full financial year level rather than quarter to quarter.
Sure. Let me ask this differently. Over the last two or three years, have you seen an increase in the inventory for stores, either in number of SKU or the absolute amount? How is it currently?
See, it again depends from a store-to-store perspective. At an overall level, our receivables have not changed dramatically. They might have improved for some stores where we've taken a strategic call to add Mohey and/or Twamev or both. In those stores, you would find that inventory levels in terms of MRP have increased because each store can only carry a certain number of pieces. The moment we decide that we will change, let's say, 10% of the inventory from Manyavar to Twamev, the overall store's MRP value actually moves from 100 to about 130 because Twamev carries a much larger revenue. That is one reason why receivables increase from a store-to-store perspective. As a company, we love to be a company that has very high inventory turns overall. The goal is never to fill up stock. We look at our stores to be beautiful retail environments.
We don't want them to look like warehouses. The goal always is to have only the optimum inventory on the floor level. Yes, when we move from Manyavar to having a little bit of Twamev or Mohey, both the receivables and the inventory line at the store increases because of the change in ASP of the product.
On an overall level, if you look at in TTM June 2025, our receivable days is 71 days. Whereas in FY 2025, it was 77 days. It has actually come down compared to FY 2025 at the [receivable days].
Sure. Second question on the SSG. Like last almost two years, SSG has been very soft. Are we seeing the franchise partner, you can say there's a fatigue created at their end because their pivot period has elongated and ROI has been much deteriorated because of the overall condition? On account of that, are we seeing a higher number of closure or when we want to open a new store, interest from the new existing franchisee owner for the second or third store has been slightly weak now.
I'll take this question in multiple levels. From a workflow perspective, the way we function is our business development team signs a store. After signing a property, we look for a partner from the existing network or from outside as needed. That has never been a challenge for us, including even now. That's rather one of the easiest parts of the operations we've had. Coming to the ROI of our partners, the majority of our partners are well-established retailers having worked with us for many, many years. They understand what the mid-premium discretionary spend is going through. They are wary of the facts. The best thing is that even two years ago, we operated at ROI, which was extremely high. While that number would have come down slightly for the partners, it is still very healthy and positive.
That is the reason why there is a lot of hard work that needs to be put in by our franchisees and the company. However, there is no sort of story of negative ROI as such. Hence, all partners remain to be committed towards the overall growth of the brand. Finally, when I talk about closures, the majority of the closures that we take up are actually led by the company itself, which is more strategic in nature due to the reasons I mentioned. Very rarely do we have closures coming from the partners' end.
Understood. My last question was.
Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions.
Okay.
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Hi. Most of my questions are answered. We can move on to the next participant. Thank you.
Thank you.
Thank you. The next question is from the line of Sameer Gupta from IIFL Capital. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. I'm sorry if somebody is an artist who has joined the call a little late. I was of the impression it starts at [four] . First thing on the EBITDA margin. Now, historically, if I look at EBITDA margin in first quarter and full year, normally it's in the same range. This quarter has started on a very, you know, unexpectedly lower note at 42%- 43%. Now, how should we look at it? Is it that ad spend this quarter has been disproportionately higher and we expect some phasing, or this is the normal level which you think will sustain going forward? If you can elaborate on that, please.
Hi, Sameer. This time, the marketing cost is the main reason why we see a decline in EBITDA margin because last year in Q1 FY25, we had a very negligible marketing cost because there were negligible weddings last year in Q1 FY25. That year in Q1 FY25, the marketing cost was only 2.3% of revenue, whereas in this quarter, we have spent 5.6% of revenue as marketing cost. Around 3.3% is the impact of marketing costs only. That is a major reason where we see that the EBITDA margins are looking lower compared to last year's Q1.
Understood. If 5.6% is going to be a consistent number for the full year, that would mean that all things equal, 43% is also going to sustain for the full year, right?
No, no, no.
No, no. Point here is, look, there are multiple things which play a role. Another thing, one is the marketing cost. Another is there is operating leverage as well because, you know, when we look at the full financial year, Q3 is the highest revenue-generating quarter for us. By the time we reach a nine-month period, of course, the revenue levels are very different compared to the cost, right? Of course, the margins at EBITDA levels also look different because of positive operating leverage.
Just for reference, quarter one advertisement cost was 5.6%. Last year's entire year, financial year advertisement cost was also similar to that level, if not slightly higher. At the financial year level, advertisement costs are always at that level. We have strategically decided to save money last year first quarter to spend more in the second half, which we decided not to do this year. If we remove that, we also had operating leverage improving the overall margins. That 80 basis points that came down from a gross margin level is more of a quarterly thing, something which will fix itself in the remaining financial year.
Got it. A little bit of follow-up over there. I'm noticing this GM contraction. It's still not high, but it's happening for the last three quarters. The reasons, we still are not sure.
I mean, it's something similar that we have mentioned last two quarters also. What exactly is happening over there?
On the gross margin, if you look at in Q4 FY 2025 we had 66.2% of gross margin. In this current quarter we have 66.9% of gross margin. Our point here is that it is always better to look at gross margin at an annual level, right? On your point of quarter on quarter, we have actually improved on gross margin, but our recommendation would be to look at annual level. As a management, we are very comfortable with the gross margin of anything above 65%.
Okay, let me ask this in a different way. I was actually looking at YoY contraction. 80 basis points is the contraction this quarter. Last quarter was 90 basis points. Prior to that was 50 basis points. This is what I was referring to.
That is what, Sameer, I mean, look, at the full financial level, if you look at last year we had 67.2% of gross margin in FY 2025, right? Now we are at 66.9% of gross margin in Q1, right? There is only a 0.3% difference which we are talking. That also can be of different reason on a quarterly basis. Firstly, it is important to look at the financial year level. That is what we are trying to say because quarterly it can always vary.
I would also just like to add one thing. FY24, gross margins were 67.2%. FY25, gross margins were 67.2%. Absolutely the same. Quarter one, FY26, is just 30 basis points lower than that, 66.9%. All we are trying to say is if you look at it from a full financial year level, you will hardly find things moving here and there. That said, as a company, the goal is to improve our gross margin within each category of a brand. With Mohey, Twamev, and Diwas growing its share of the pie at company revenue level, managing the same gross margin we operate is becoming more and more difficult, but somehow we are able to manage to stick to the same levels. That is something which I would say is a great achievement by our merchandising team.
The goal is if we are able to maintain these numbers, that means a significant improvement in the departments that are operating Mohey, Twamev, and Diwas. Got it. Sorry, just to elaborate on this point again. Logically, if a Mohey, Twamev, Diwas is giving higher growth versus Manyavar, there should be a natural contraction in GM. Is this a correct understanding? See, that is a correct understanding, but that is what I'm trying to say. Even though they've grown much better than the company average, still the FY24 gross margin and the FY25 gross margin was absolutely the same. Even the current quarter's gross margin is almost the same at 66.9%. We are actually improving a lot on our gross margins when it comes to within the brand levels. There is a lot of other improvements happening.
The goal is to actually maintain the company level average, for which we will actually have to do a lot of hard work within the brand.
This is very helpful, Vedant. Thanks for sticking around and answering this in detail. Second question, if I may.
Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions.
Sure, I'll do that. Thanks.
Thank you. The next question is from the line of Vishal Dhudwala from Trinetra Asset Managers. Please go ahead. The next question is from the line of Jignesh Kamani from Nippon Mutual Fund. Please go ahead.
Hi. I just want to know more on the, you can say, Mohey and Twamev. There I believe since Manyavar is a more established brand versus Mohey, Mohey and Twamev is more on the sitting sales right now. Your revenue per square foot will be slightly weak there. As you said, there are ASPs that are higher, so your inventory turn also will be higher, and inventory amount will be higher, and inventory turn might be weak. From the franchisee partner point of view, ROI on the Mohey and Twamev will be spiking for you versus the Manyavar. Are we compensating them enough for them to make it motivated? Because when I interact with some of the [franchising] partners, they were not keen to promote more or Mohey because from their perspective, it is diluted on the ROI.
I would like to take this answer up in two parts. When I talk about Twamev, when we talk about having Twamev within Manyavar Mohey stores, then it will always add ROI value to any partner that operates with us because Twamev is added in the same space where Manyavar is kept. In basically a nutshell, it increases the ASP of the store and also improves the average ticket value of the customers because of having better ASP products and satisfying to the already existing demand. It will always be ROI, you know, sort of improving the ROI for our partners. Now, when I talk about Mohey, what we have seen is in the larger stores, Mohey actually has tremendous value in terms of the growth it gives to that particular store.
On the second part, when you are building your store, let's say 5,000 sq ft store versus 7,000 sq ft store, the amount of CapEx you spend for that incremental 2,000 sq ft is much lower than the average of the 5,000 sq ft you are spending because there are economies of scale when you are building that store. The second part is in the store operations as well. There are some larger cost components, let's say the store manager. Now, the same store manager is able to handle both Manyavar and Mohey, and you don't need to have another person doing that job. Even from an operations economy of scale, having Mohey makes so much more sense than not having it when you have a larger space.
From an ROI perspective, when I look at Mohey as an incremental perspective to the Manyavar store that was already going to open, it will be at a very similar ROI level. That is what our understanding is. The majority of the partners we interact with across India, everyone is now pretty happy with Mohey and very happy to have Mohey in all the new stores that are opening. Hence, you will find 40%.
What about the existing store? Like I understood about the new store, but the existing store which is already doing the Manyavar, there you are replacing part of the area of Manyavar with Mohey. There the ROI will get compromised, right?
No, because I would say two years ago that exercise was completed. In the last two years, we've never really transferred the Manyavar store to being Manyavar Mohey because any store where there was enough space and we could have done that, we've already done that. That opportunity does not exist anymore.
Understood. Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for closing comments.
It is always a pleasure interacting with all the analysts. Thank you very much for joining. Looking forward to interacting again the next quarter. Namaskar and thank you very much.
Thank you. On behalf of Vedant Fashions , that concludes this conference. Thank you for joining us, and you may now disconnect your lines.