Ladies and gentlemen, good day and welcome to the V2 Retail Limited Q4 FY 2026 earnings conference call. As a reminder, all participant 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 the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. Before we begin, a brief disclaimer. The presentation, which V2 Retail Limited has uploaded on the stock exchange and their website, including the discussion during this call, contain or may not contain certain forward-looking statements considering V2 Retail Limited business prospects and probabilities, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statement.
I now hand the conference over to Mr. Akash Agarwal, Director and CEO of V2 Retail Limited. Thank you and over to you, sir.
Good afternoon, everyone, and a very warm welcome to the V2 Retail Limited quarter four and FY 2026 earnings conference call. Thank you for joining us today. We trust you've had a chance to review our results. The earnings presentation and the press release are available on the stock exchanges and also on our website. Our quarter four results reflect the continued momentum across our business and the ability of our teams to execute with discipline and agility. Even on a high base, we have demonstrated that our model can scale effectively while maintaining resilience in dynamic market conditions. The 60% year-on-year revenue growth for the fourth quarter significantly outpaces the broader market. Importantly, we have consistently delivered growth in excess of 60% for two consecutive years, underscoring the strength and sustainability of our operating model.
In addition to our strong top-line performance, I want to highlight the strategic investments that are reinforcing our ability to scale efficiently in India's value fashion segment. Our ongoing focus on analytics-driven merchandising, supply chain responsiveness, and operational discipline has strengthened our operating leverage and positioned us to capture growth at scale. Customer traction across categories remains healthy, reflecting the continued relevance of our price-value positioning and product refresh cycle. A steady flow of trend-appropriate assortments, combined with strong quality standards and competitive pricing, has supported growth across our store network. This validates our approach of balancing affordability with fashion relevance, ensuring that we remain the preferred destination for value-conscious consumers. As we look ahead, we'll continue to deepen our investments in technology, expand our store footprint, and enhance our customer engagement. These initiatives, together with our disciplined execution, gives us confidence in sustaining momentum into the FY 2027 and beyond.
On the expansion front, our focus this year has been on improving geographic coverage through a balanced mix of rural market entry and deeper penetration in Tier 2 and Tier 3 cities. This approach has helped us broaden our customer reach and improve regional alignment through localized assortments and strong store-level execution. During FY 2026, we added 136 stores and our pipeline of planned openings remains robust. Backed by a strong merchandising and inventory management team, we remain focused on disciplined expansion, efficient inventory deployment, and sustainable operating performance. Importantly, our current store footprint has crossed 350 stores nationwide, marking a major milestone in our journey. Now, moving on to some key updates for the quarter and for the whole financial year. First, we completed the physical verification of property, plant, and equipment and reconciled this with our fixed assets register.
As a result, we have written off assets with a carrying value of INR 5.77 crores and this has resolved the earlier audit qualification. Second, we have been consistently sharing pre-Ind AS numbers to provide better transparency on our operational performance and we will continue to do so going forward. Our annual business plans, budgets, cash flows, store -level metrics and incentive structures are all aligned to pre-Ind AS numbers. Our revenue and profitability guidance is also communicated on this basis. Third, we are now focusing on retail business only and have moved away from in-house manufacturing operations. Fourth, the impact of new labor code is not material and has already been recognized in our financial results. Lastly, due to geopolitical tension, we have increased our safety stock in the month of March for seamless availability of stock which has resulted into higher inventory levels in the month of March.
Once the situation normalizes, we will reduce our safety stock. We are looking to maintain inventory at 90-100 days and creditors at 45 days. Moving on to some performance highlights. Revenue for the fourth quarter grew at 60% year-on-year to INR 797 crores. The EBITDA for the quarter stood at INR 109 crores as compared to INR 57.5 crores in the corresponding quarter last year, registering a stellar growth of 89%. EBITDA margin stood at 13.7% as compared to 11.6% in the corresponding quarter last year. PAT for the quarter stood at a record INR 17.5 crores compared to INR 6.4 crores in the corresponding quarter last year. We opened 33 new stores and closed two during the quarter and achieved a net addition of 136 stores in the whole financial year, taking our total store count to 325 stores with approximately 3.5 million sq ft of retail space.
The SSSG for quarter four stood at 7.74%. There was a robust volume growth of 53% in the quarter. The full -price sales contributed 89% in the fourth quarter. Now consolidated performance highlights for the whole financial year. Revenue for the year grew 63% to INR 3,067 crores. EBITDA for the year stood at INR 455 crores compared to INR 258 crores in the corresponding period last year, registering a stellar growth of 77% year-on-year. EBITDA margin improved to 14.9% compared to 13.7% in the same period last year. Profit after tax for the financial year stood at a record INR 162 crores compared to INR 72 crores in FY 2025, registering a strong growth of 125% year-on-year. Same-store sales growth for the financial year stood at approximately 8.6%. Robust volume growth of 47% in the whole financial year. The full -price sales contribution was 90% in FY 2026.
Our ROE continues to improve and now stands at 26% compared to 23.2% in FY 2025, and around 10.7% in FY 2024, reflecting disciplined capital allocation and strong operating leverage. Moving on to pre-Ind AS reporting. For quarter four, FY 2026, revenue remains the same at INR 797 crores, 60% up year-on-year. Gross margin was 30.3% compared to 27.6% in the corresponding quarter last year. EBITDA was INR 54 crores, up 98% year-on-year, with an EBITDA margin of 6.8% in the fourth quarter. PAT came in at INR 25 crores, up 118% year-on-year. The full financial year highlights on the pre-Ind AS basis. Gross margin improved to 30.2% from 29.2% last year. EBITDA was INR 277 crores, up 83% year-on-year, with an EBITDA margin of 9%. PAT stood at INR 162 crores, up 87% year-on-year. It is important to note that company has achieved a PAT of INR 173 crores on standalone basis.
Looking forward, our priorities remain clear: profitable growth, capital efficiency and disciplined execution. With sustained revenue momentum and improved inventory operating leverage, every initiative is directed towards one ultimate goal, enhancing long-term shareholder value. With that, I will now open the floor for questions.
Thank you, sir. Thank you. We'll now begin the question and answer session. Anyone who wishes to ask question may press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Piyush Jain from Growth and Infinity. Please go ahead.
Hi, Akash. Am I audible?
Yeah.
Hi, Akash. Congratulations on good set of results. Last two years has been really great for us, and you and the whole team has contributed a lot in this. Kudos to that. I have few questions. First will be on the store side. Last year we opened around 136 stores. How much we are planning for this year? Around 170 - 180, we guess.
I think for this year, the target would be anywhere between 170-200 stores. Completely dependent on how we are performing and how the momentum continues.
Okay. We are able to manage store openings through our internal accruals only, and the cash on the balance sheet, right?
Yes. For at least this financial year, we are covered with internal accruals and the cash on the balance sheet.
For next upcoming two to three years, we have to do another QIP for that?
Our debt to equity ratio is very healthy, so we have the option of getting more debt on the books. I think that will be our first preference, even if we need some cash for future expansion.
Okay. I have another question on the SSG side. Can you tell us, because we are maintaining around 8%-10%, so going forward, this doesn't go below 8%, so what kind of a strategies we are using on our existing stores so that we can able to achieve 8%-10% SSG going forward?
I think the strategies remain the same, and we are focusing on the strengths and all the strategies that have previously worked over the last three years. It is strengthening the product. It is making the back end more robust. That includes the supply chain, that includes the visual merchandising, that includes the customer experience at the store. I think if you're giving a good product at the best value, and it is supported by a good supply chain and good retail operations, good visual merchandising, that itself should lead to at least 8%-10% SSSG. We're just doubling down on all the strategies that have previously worked on us, and now investing more in technology that can future support this better.
Are we running any kind of a loyalty programs or something like that?
We don't have a loyalty program per se, but we have a database of about 800 million customers, and we do reach them through WhatsApp, RCS and SMS, and we give them gift vouchers and other kind of gifts, not loyalty points.
Okay. I just have two more questions. First will be on the, as we are seeing recent geopolitical tensions have increased the commodity prices. We are capable enough, around 3%-4% will pass on the prices to the customers so that they won't impact our margins going forward.
Yes. We have seen some movement in yarn prices, and that would have to be transferred to the customer. We will maintain our gross margins, and prices might go up in the future by 3%-4%.
Okay. Just last on the CapEx side. As of today, I think last quarter, we have around INR 2 crores-INR 2.2 crores per store we require. It's maintained right now as well?
It's about INR 2.6 crores. It will increase because of the price increase. It'll become around INR 2.7 crores-INR 2.8 crores now. That includes CapEx and inventory. The CapEx would be about INR 1.2 crores-INR 1.3 crores. The rest would be paid inventory.
Okay. Thank you. Thank you, and all the best for the future.
Thank you.
Thank you. The next question is from the line of Avinash Karumanchi from MOSL. Please go ahead.
Hi, sir. Good afternoon. Congrats on good set of numbers. My question is regarding the gross margin. This year, because of the higher full prices too and all, we have seen a good improvement in the gross margins. How should we see this number going forward, one, in the near term, and two, mainly because of the yarn and the cotton business that you have indicated?
We started focusing a lot on inventory management and freshness of inventory, we started doing interstore transfers of inventory also, better product mix at stores. That all led to a better gross margin this year. Going forward, you can look for us to maintain this gross margin anywhere between 28%-30%. Like I mentioned earlier, all the price increases in raw materials will be passed on to the customer, and there will be an increase in MRP while maintaining the margins.
Okay. Because I'm asking this, the other competitors, they have said that they don't want to pass on the full increase to the customers. They want to retain some part and take a hit on the margins. How do you see that?
I don't want to comment on any competitors, but our strategy is, we won't absorb it in our gross margins because a 3%-4% increase is not significant. If our average selling price is INR 300, that translates to about INR 10-INR 12 additional MRP. I don't think it's a significant impact. We would look to maintain our gross margin at 28%-30%.
Okay, sir. That clarifies. Thank you. I'll be on the queue.
Thank you. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, what gives you confidence that despite of all these uncertainties on a global front, demand will be good and you'll be adding 170-200 stores, which is higher than what you had guided earlier?
What we are building today is not for the near term. We are building for our 20-year vision, which is to be one of the top value fashion retailers in the country. Hopefully, what is happening around the world is temporary. India is poised to grow at 5%-6% GDP in the next 20 years. If you look at organized retail, it is poised to grow at 9%-10%. We want to capture most of that market. That's why these kind of short-term hindrances don't sway us from our long-term plan.
Sir, won't this put any pressure on your near-term margins?
We have seen a little bit of sale impact in May because of the war. I think overall, what we have seen in March, April, I think we can continue the positive momentum, and it will not have a huge impact, especially in Tier 2, Tier 3 towns.
Okay. Sir, two more questions. One is, what is the quantum of more than six months and one-year-old inventory? Will you be able to grow at 50% despite of everything?
More than one-year-old inventory is less than 5%, and more than six months old inventory is less than 24%. About 76% of our inventory is less than six months old. Out of that also, about 50% of the inventory is less than three months old.
Okay. Sir, on growth, any comment?
No. We are guiding for at least 50% revenue growth over the next two years.
Okay. That's it from my side, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Raj Shah from Fident AMC. Please go ahead.
Yeah. Hi. Thank you for the opportunity. This year, I was just noticing we have opened up quite a few stores in quite a few new states. You have also entered Gujarat, Maharashtra, and increased
Sorry to interrupt, Mr. Raj, sir. Could you please come in a network area? Your voice is breaking, sir.
Can you hear me now?
Yeah, much better.
Yeah. Thank you.
Yeah. I was asking, sir, we have-
Sorry, sir, you're breaking again.
... stores in quite-
Sir, can't hear you. There's a lot of disturbance from your phone.
Hello. Can you hear me now?
Yeah.
Yeah, I was saying that, we have entered quite a few new states in this financial year, particularly in the western region. Going forward, what is our strategy? Are we going to go deep in these states, particularly Gujarat, Maharashtra, Rajasthan, in terms of new store expansion? Which geographical area will they be largely concentrated into?
Our strategy remains the same. Whenever we enter a new state, we open about four to five stores there just to get a lot of data points in terms of what assortment, what sizes, what colors sell there, and then we make an optimum model. For future expansion, it all depends on the performance of each state. We are tracking that every month. For example, we had entered Karnataka, and now we have almost 15-16 stores there. The future expansion would completely depend on how each state stores are performing. Looking at the data now, Gujarat is performing very well for us. All the south states, Andhra, Karnataka, Goa, they have been performing well. Maharashtra also, we've opened three stores, and two of them are performing phenomenal.
We are looking to open 30%-40% new stores in the newer regions that we've entered. Of course, 50%-60% will come from our core strong regions.
Understood. Secondly, on our SSG growth. SSG growth has been close to 7%-8%, but the sales per square feet has declined by close to 7%-8%. What explains this? Is it because we are opening larger stores, that is one of the reason?
We opened 130 new stores, and the new stores start at about 70% of old stores per square feet sale. If you look at only old -store PSF, those have increased 8.5%, equal to the SSG. Because we have opened so much new area this year, it gets the overall company per square feet sale down. As they mature, you'll see the growth in company PSF also.
Understood. If your sales per square feet improves from here on because the expansion in terms of percentage of new stores opened will slightly come down. Do we see your EBITDA margins on a pre-Ind AS basis to improve further from here on? On standalone basis, we closed at around 9.4%. Can we cross close to around 11% in the next two years?
We are, again, guiding for opening more than 50% new area, so it becomes a challenge to increase the company-level PSF and expand EBITDA margins along with the 50% growth. You're right. The year when we add only 20% new area, then you can expect that. Next two years, we want to add 50% new area, have 50% revenue growth. We are guiding for the similar margins and the similar PSF.
Understood. Okay. Thank you.
Thanks.
Thank you. The next question is from the line of [Anupa] from RatnaTraya Capital. Please go ahead. The next question is from the line of Arvind Arora, [ASquare Capital]. Please go ahead. Mr. Arvind Arora, please go ahead, sir. As there's no response from Mr. Arvind Arora, the next question is from the line of Kushal Goenka from Mangal Keshav Financial LLP. Please go ahead.
Hi there. Congratulations on good set of numbers. My first question is, sir, how does the management look into tinkering into related verticals or opening newer format stores? Just trying to extrapolate from the likes of Trends, which created different brands under one umbrella. I know immediately we would not need that because we got a lot of scope to expand. But want your views that if there is any discussion in the board meeting and have you thought about it, about the same, and at what scale do we start thinking about it?
I think we don't want to dilute our focus until we have at least 2,500 V2 stores. I think we've built a very strong model, and we want to get to every part of the country because still, good fashion at affordable price is not available to most middle-class consumers in India. We want to capture that blue ocean first, and then maybe we would think about the other strategies.
Okay. That's helpful. My second question is, Akash, looking from a naked eye and from the likes of investors, you seem to be a one-man show. However, it's the whole unseen team that is delivering such stellar results. My question is, if tomorrow, hypothetically, if you are not able to attend a con call, who are in the organization would do so to answer? Would really love to know the people who knows the in and out of the company and has a fair understanding and works closely with you. Yeah, that's my second question.
There would be at least six people who would be able to take the call if I'm not available. Most of them have been with us for a journey of more than, I think, 10 years now. It's just that I have been the face of the investors and the community. Of course, all the business leaders and the senior management people we have, they have all the gist of the data because most of our reviews, most of our performance appraisals, everything is done on data, and most of the decisions that we take is also done on data. That is how we have built the culture around the company.
Okay. Just a suggestion, if you could just include the management team and the people closely working in the presentations also so that we can have a view on that.
Sure. That is noted.
Yeah. Just the last small clarification, there was a minuscule pledge creation of some INR 3.5 lakh shares, I guess. Any reason behind that?
No, that was only for working capital needs, because we give a lot of prepayments. Even the QIP proceeds we use for a prepayment. You'll see that our creditor days have come down. We want to be the best paymasters in the industry, and we want to be the priority vendor for all our suppliers, and we want to help them with their working capital.
Thank you so much. Best of luck.
Thank you.
Thank you, sir. The next question is from the line of Aman Bansal from PESP. Please go ahead.
Hello, am I audib le?
Yes, sir, you are.
Okay, sir. Congratulations on the amazing set of results. I just have two questions. The first will be, I think in the last con call, you had mentioned that you did not want to increase the prices of our clothes. Basically, we want to remain at the same price. This year we saw a volume growth of 47% while our revenue for the entire grew by 63%. Like, what's the main driver for that, and how do you look at prices going forward?
That's not a right insight. It's all because of product mix. What we have seen is products like kurtis, product like men's woven pajamas, product like men's casual shirts, these were the highest growing categories for us. We gave them more space in our stores. What that does is that reduces the quantity of maybe lower price point items like kids' Bermuda. It's all because of product mix. The price ASP increase within the category is only inflationary. I think that would be around 4%-5%, but everything else is attributed to different product mix.
Okay. Just to understand, so between men's, ladies and kids, what would be the ideal ratio?
Men's would be about 41%-42%. Women's wear is around 27%, kids is about 25%.
Okay. We are basically at what you want to be in this segment.
Yes.
Okay, sure. Finally, you mentioned that every new store starts at about 70% of the PSF of mature stores. Just how long does it take to become EBITDA positive? The new stores.
It is EBITDA positive from the first month itself because the break-even point is around INR 500 per square feet of sale, and they start at about INR 700-750. To mature and reach old stores level, it takes about three to four years.
Okay. That's amazing. Thank you so much.
Thank you.
Thank you. The next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.
Yeah. Hi, Akash. Akash, can you just share the sales per square feet for the older stores and new stores for FY 2026?
Sorry, can you repeat that question?
Sales per square feet for old stores and new stores separately for FY 2026.
Our old stores were at INR 1,124 per square feet for the whole year, and new stores were at INR 750 per square feet. New stores is any stores that opened after FY 2024.
We are continuing to see that new stores are starting at more than 70% of the old stores throughput, and which is why I think they're continuing to sort of scale up aggressively on new stores, right?
Yes, of course, it changes month-to-month, it is at a very respectable level. Like I said, it's already at an INR 750 per square feet of sale level, which already starts contributing to the company EBITDA from day one. I think we have a good amount of margin of error for the new stores. That's why we continue expanding.
Okay. Secondly, you mentioned that the increase in inventory is partially because of you stocking up because of geopolitical uncertainty. Is there a number of what quantum of inventory will be because of that early sourcing?
According to our closing area in March, we look to maintain about INR 2,500 - INR 2,600 sq ft of inventory. That's around INR 900 crore of inventory that we need. We have additional inventory of about INR 125 - INR 150 for the 60 stores that we have planned to open this quarter. About INR 100 - INR 150 is the pre-GRC that we did because we saw a lot of supply chain disruptions. Because we were opening so many newer stores and we had a good festival coming up in April and wedding season, we did early GRC and we wanted to have extra safety stock rather than empty shelves at our store. I think if you include new stores and this together, it'll be about INR 300 crores of inventory.
Okay, got it. That was it for me. Thanks.
Thank you.
Thank you. The next question is from the line of Smith Gala from RSPN Ventures. Please go ahead.
Yeah, thank you for the opportunity. My first question will be, while throughout the year, for the first three quarters, we have been outperforming the peers, in terms of SSG growth. In this fourth quarter, specifically, the SSG growth was a bit under par as compared to the peers. Any color on that and how are we supposed to go back to normalcy where outperforming our peers?
I think, again, you have to look at it from a different lens. The base that we're talking about, so the SSSG that we are calculating is on a base of INR 1,000 per square feet of sale. Growing at 8.5% on INR 1,040 per square feet of sale, our old stores are now at INR 1,125 per square feet of sale, which is, I think, at least 40%-50% more than our peers. As the base increases, of course, the percentage growth, you cannot keep being number one. I think if you look at the full year SSSG growth, we are still right at the top, even with a higher base. Look at the profitability numbers, look at the EBITDA numbers. For us, the ultimate aim is highest per square feet GP and highest per square feet EBITDA and highest return on equity.
I think we beat our peers on all those metrics that matters the most.
Okay. We continue to guide to 8%-10% SSSG for the future?
Yes.
Secondly, one bookkeeping question, that depreciation has increased materially, sequentially, while our stores increased sequentially by 11%- 12%. Depreciation has taken a drastic increase. Is it a one-time somewhere or something like that?
Yeah, it is a one-time accounting change. A lot of small items like nuts, hard tags, hangers, what we used to capitalize earlier, now we depreciated them because we want to expense it off.
Okay. What was the quantum of that one-time hit that we have taken this quarter?
I think it would be about INR 6 crores-INR 7 crores.
Okay. That was helpful. I'll talk to you.
Thank you.
Thank you. The next question is from the line of [Deepak Ruti] from Wealth with Wisdom. Please go ahead.
Hi, Akash. Great set of numbers. Just wanted to understand, what was our marketing spend in financial year 2026?
It was about 0.3%.
Okay, 0.3. What is the marketing budget for the coming year, FY 2027?
It's similar numbers. Most of that marketing happens for newer stores. For older stores, I think our product is the biggest marketing ambassador for us and a lot of word-of-mouth marketing has been working for us. In fact, we've been more targeted in terms of marketing and more efficient, but going forward, it'll be less than 0.5%.
Okay. One last question. What do you do with the off-season inventory? Let's say, if you are left with some winter season inventory, how do you dispose it off? What do you do with it?
About 15% of every season inventory is left with us. We sell it the next season. We don't dispose off any inventory because winter season is so short, it's only three months. We get it back to our warehouse, we reprocess it, we repack it, and we send it in the next season.
Okay. Thank you. Those were the questions. Thanks, Akash. All the best.
Thank you.
Thank you. The next question is from the line of [Anupa] from RatnaTraya Capital. Please go ahead.
Yeah. I just had a question, what is the kind of expectation on the SSSG growth for next year, considering the number of stores we are opening?
SSSG has no relation to the number of stores that we're opening because SSSG that we declare is for the older stores, and we guide for 8%-10% SSSG going forward.
You said that the new stores open at INR 750 revenue per square feet. How many months or years does it take to reach a mature revenue per square feet of INR 1,100?
Takes about three to four years.
Three to four years. Okay. Yeah. Thank you.
Thank you.
Thank you. The next question is from the line of Subhanu Bangal from [3 Head Capital]. Please go ahead.
Hello. Good afternoon, team. I have just one question on operating leverage. I think, as you mentioned, our margin will not increase. Second, our old store PSF stabilized around 8%-10%. How can we get the operating leverage going forward?
Sorry, I did not understand your question.
I have one question on operating leverage. Can you hear me?
Yeah, I can hear you now.
As you mentioned, our margin will be stable at your guided level and our PSF growth around 8%-10%. How can we get the operating leverage going forward?
We are opening so many newer stores, we are adding almost 50% - 60% new area, and they start at about 70% of old store PSF. That's why we cannot get an operating leverage at the company level, because old stores' EBITDA is around 11% - 12%, and new stores' EBITDA is around 5% - 6%. The blended EBITDA remains the same. If you look at only old stores in isolation, then of course there's an operating leverage because the per square feet costs come down, and with an SSSG of 8.5%, the store level EBITDA also increases. It's only because we are adding so much new area. At the company level, it will take a few years to see.
That means FY 2027 will be leverage in consolidated level?
Yes. FY 2027, you will see similar EBITDA margins and similar company PSF numbers.
Got it. Thank you.
Yes. Thank you. Good luck.
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Vidisha from C. R. Kothari & Sons Stock Broking . Please go ahead. Mr. Vidisha, could you please go ahead? As there's no response from Vidisha, the next question is from the line of Arvind Arora, [ASquare Capital]. Please go ahead.
Hello, am I audible?
Yes, sir.
Yes.
Hi, Akash. First of all, congratulations. Akash, is it like in the current quarter, our sales was good from new stores if I compare previous year quarter four sales number from new stores? If I see my SSSG, like SSSG growth in the current year is 7.7% like in the current quarter. If I compare previous year quarter, it was 24%. Still we are able to accelerate our GP margin by 270 basis points. Is my understanding correct?
No, GP margin is not related to new or old stores. The gross margin expansion was because we did less discounting during the winter season and a better product mix, and we did a lot of interstore transfers.
Quarter four and quarter four is comparable, correct?
Yes.
Previous year quarter four, current year quarter. If my SSG growth was not so great, like if I compare with the previous year quarter four, which was like 24%, still my margin is expanded.
Because of, again, a better product mix and more full price sale. The gross margin across old and new stores was higher. Because the gross margin was higher, the EBITDA margin was higher.
Okay. Understood. Akash, is there any plan where we are venturing into another segment other than this retail fashion? I have seen some advertisements where we are asking for vendor to publish a product or something like that in the media, social media, or something like that.
We don't have any other model or no plans for any other model. We're completely focused on this model and trying to make this better and better and reach our next target of INR 1,200 per square feet at company level.
Understood. Okay. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Kushal Kasliwal from InVed Research. Please go ahead.
Hi. Thanks for taking my question. Akash, just wanted to understand our expansion for next two years in terms of store addition. How many stores are we planning to add? What is the strategy around store additions? Will these stores be within our existing locations or are we also entering into new locations? Just wanted to understand, how do we evaluate when we set up a store in a new place? What are some of the, let's say, top three, top five points which are most important for us to set up a store in a locality?
Yeah. We want to open 50%-60% new area every year. This year we want to open at least 170-180 new stores. Again, next year, the same, if we end the year at around 500 stores, so we would want to open 250 stores next year. Again, this is all conditional that we're not compromising on any of our profitability or operating numbers and metrics. If the momentum continues and if we keep performing well and both old and new stores keep performing well, then we will go ahead with this expansion. To answer your second question, so we have, I would say, a scorecard for every location, which has at least 70-80 different metrics.
That includes how far is it from the metro station, how far is it from the train station, bus station, floor plate, parking, frontage, the access road width, how many cars are passing every 10 minutes during different times of the day. There are different metrics that we put for a location that gives us a confidence score as to how that store would perform. Of course, it includes population density, per capita income, and we do sales benchmarking from the unorganized and organized players in that particular city. That's how we take a decision to enter a city.
Is it possible to give a basis on whatever data we collect? What is the % of stores where we go wrong? I mean, there are obviously new store openings and with new store openings, there's obviously growth, but there's obviously a risk if the store opens at a wrong location. Do you have data around how many times do we go wrong in terms of our new store openings, and how quick are we to kind of reverse that decision or close that store?
See, I think that is a very subjective number because four years back, that number used to be around 10%. The company base PSF used to be INR 650 per square feet ft. About 10%-12% of the locations used to go wrong because some new stores started from INR 300 per square feet. Now, because the company base level has increased to INR 950 per square feet and INR 1,000 per square feet, newer stores are starting at INR 750. That percentage from 10%-12% has come down to 2%-3%. What we have understood is it's usually not about location being wrong, but it's more about your product and you as a brand. I think it was just two years back that we had identified about 22 stores that we wanted to shut down, and all of those stores are profitable now.
21 of them are profitable now, and we just had to shut down one. That tells you that more than location, it's about the product.
Got it. Thank you. Thanks for answering my question.
Thank you.
Thank you. The next question is from the line of [Nikshit Kiwi] from [Kiwi and Associate]. Please go ahead.
Hello.
Yes, sir, we can hear you.
Sir, is there any planning to open store outside India? Why means your competitor also entering their segment.
I think, sir, India is big enough for us to feed us for the next five years, at least, because we want to have 2,500 stores. We're not looking at any other geographies.
Okay, sir. That's one answer. Thank you.
Thank you. The next question is from the line of Amish Kanani from Knowise Investment Managers. Please go ahead.
Sir, you've given to the previous participant in terms of entering new area. One, if you can a bit more elaborate, you did also mention that you enter first with some four or five stores in a state, and then you expand depending on your understanding of that area and geography. I did have observed that in few of the states, we have four, five, seven stores, and few we have well penetrated well in terms of 35-50 stores each state. The question is, sir, how have we expanded state by state in last two years, and how do we see that in next two years? If you can give us some flavor of how we are approaching state by state or cluster-wise, and how are we presenting ourselves with some, say, the warehouses and stuff like that. That's question number one.
Sir, second, I've observed that 90% of our sales, you said, is normal pricing, so we're not resorting to discount sales and stuff like that. We've been a value format. The question there is, sir, how do we ensure that we keep our regular customers calling back? If you can give us some sense of what is working for us, given we have a very healthy same-store sales growth. If you can give us some sense, we'll be able to appreciate the model better. Thanks.
Sure. I'll answer your first question. We are already present in 25 states now, and earlier we used to have one central warehouse. We already opened one zonal warehouse in Kolkata, and now we are finalizing one in the south. We'll have three zonal warehouses, and we already have about 18 hubs, especially in all the states where we are densely located in. That's about supply chain. Going forward, I think I already answered this question that now it all completely depends on the performance of the stores in each state. To give you an example, we had entered West Bengal and Karnataka a few years back with a couple of stores, and now we have 20 stores in Karnataka and we have 15 stores in West Bengal. Similarly, so we have entered, I think, nine new states.
We've entered Andhra Pradesh, Telangana, Maharashtra, Gujarat, Rajasthan, Punjab, Haryana. We will see the performance, we'll judge the performance, we'll make the optimum model, and we'll expand wherever we see that we're getting the best traction. Going forward, we want to be present in every state in the country. We have seen a good response and a good performance of new stores in all the new geographies. That gives us a tremendous amount of confidence to actually expand further in these states.
To answer your second question about why the customer keeps coming back, I think value fashion, anywhere around the world, it's about creating an ecosystem where the designs that you're churning out or the assortment that you're churning out and what the customer sees at the store, it's something that he thinks is fashion-forward, affordable, and good quality in terms of fabric, in terms of colors, in terms of fits. It's about creating that brand identity in the minds of the consumers. Once you have that trust in the minds of the consumer that, okay, if you go to V2, you'll find the latest fashion, you will find the most affordable price, and you will always find availability and a good customer experience. I think a mix of all this gets them back to the store, and we do not want to be a discount store.
That's why we're selling more than 90% at full price.
Thanks. That helps, sir. All the best.
Thank you. The next question is from the line of Avinash from MOSL. Please go ahead.
Hi, sir. Thank you for the opportunity again. My question is regarding the right-of-use lease liabilities on the balance sheet. If I look at them, the proportionate increase was not equivalent to what the area growth looked like. Does this mean that we are signing leases for the shorter terms, or how should we look at it?
We've changed the policy last quarter. What we decided was we'd look at least two to three years of performance of a new store before deciding whether we want to continue operating it or not. Because our lock-ins and all the leases are about one year, and the vendor lock-in is 11 years. We changed that accounting policy last year in line with all the retailers in the country, because that also helps us reduce the gap between pre-Ind AS and Ind AS.
Okay, sir. Understood. Thank you.
Thank you.
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Omkar Ghugardare from Shree Investment. Please go ahead.
Good afternoon. My question is regarding the cash flow. In the current year, you will be opening around 175-200 stores, as you just stated. Is it possible to be cash flow positive even after opening around 175-200 stores? That's the first question.
If I talk to you about operating cash flow, of course, that can be positive.
Yes.
When we reinvest it, the net cash from operating activities can be positive even after opening 175 stores, yes. You saw that last year also when we had opened 174 stores. This year, because we had prepaid a lot of vendors, if you look at the creditors, it has come down by almost 10 days. That shows an increase and a little bit of working capital. As and when we need the money for opening the newer stores, we can stop the prepayment program.
You are saying that wouldn't be the case this year, so you will be cash flow operating positive this year?
Yes.
Okay. Another question is, you mentioned that maybe in couple of years or maybe five, seven years, you plan to open around, total store count should be 2,500 and your aim is to have a INR 1,200 square feet. How does this both align in your long-term vision?
Both periods are different, again. Like I already mentioned, till we keep adding 50% new area, we won't be able to increase the company per square feet sale.
Yeah.
There will be a time when we reach 2,000 stores, we would only happen to open 500 new stores. That year we'll be able to expand operating leverage, EBITDA per square feet sale of the company as well. Again, we're talking about two different timelines here.
Correct. This 2,000 store count of 2,000, what is the timeline for that? After that, this is like a five-year time period or what you are talking about?
It is completely conditional to performance and it's just about building a model. We are looking to grow at least 50% if we keep performing well. You can just build the model and see what year we reach 2,500-
Correct
if we keep growing at 50%.
Correct, because you earlier said that you would want to grow at least 50% for the next 10 years. That's why this question arises.
Again, the capacity of number of stores of V2 in India, today, we think it's 2,500. We can only grow at 50% till we reach that number. For beyond that, to grow at 50%, we would need a different model or to enter a different country.
Okay. Till 2,500, you still feel confident that even after the base keeps increasing, you can still deliver 50% growth?
That's the idea, and that's what we want to target, conditional to good performance and continued momentum.
Correct. Another question is on the EBITDA margin front. For FY 2027, you have said that you will be maintaining the margins, but what can be the margin level? Can it go to pre-Ind AS early double -digit or low double-digit margins in next two to three years?
There are three levers to this. One is, of course, consolidating and purchasing fabrics. Because still we are only nominating about 20% of our purchases, and vendors are buying those raw materials in silos. We have the potential to save at least 3%-5% there by centralizing and nominating fabrics. The second operating leverage is, of course, per square feet expenses. We've already been able to reduce it from around INR 200 per square feet of sale to around INR 190. Going forward, it should go down to, I think, INR 175. 1%- 1.5% comes from there. The third one is, of course, SSSG, that increases your per square feet sale. Because we are adding 50%- 60% new area, it offsets all these three levers.
That is why you're able to maintain such a high EBITDA percentage even after adding so much new area.
Okay, basically for near term, similar growth on the top line as well as similar growth on the bottom line. Correct? At least for the near term.
Yes.
Okay. Just a last thing. After all these long-term questions, just wanted to know, almost two months of this current quarter is gone. You have said that May has been a little bit slow as compared to what you are guiding for or what you have delivered. What can we expect? Because only a month is remaining for this current quarter.
So again-
Yeah.
Again, I think it's too early to say. Like I said, April was very good for us, and May has been a little slow and June is supposed to be one of the biggest months for us. That will define the quarter going forward, but it all looks good and whatever is happening around the world, like I said, it's I think hopefully short-term and we can end those animosities and have peace.
Yeah. Even if there is a little bit here and there for the quarter, so for the year as well as for the next two to three years, you are guiding for 50%, right?
Yes.
Okay. All right. Thank you very much.
Thank you.
Thank you. Due to time constraint, we take this as the last question. I now hand the conference over to Mr. Akash Agarwal for closing comments.
Thank you for joining us today. We hope we've been able to address your questions and give you a clear view of our performance and outlook. If you need any further information, please feel free to reach out to Marathon Capital, our investor relations advisors. We sincerely appreciate your continued interest and support. Thank you and have a nice day.
Thank you. On behalf of V2 Retail Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.