Ladies and gentlemen, good day, and welcome to V-Mart Retail Q3 FY24 earnings conference call, hosted by Spark Institutional Equities Private Limited. 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ranganathan from Spark Institutional Equities Private Limited. Thank you, and over to you, sir.
Good evening, all. On behalf of Spark Institutional Equities, I would like to welcome you all to Q3 FY24 earnings conference call of V-Mart Retail Limited. From the management, we have today Mr. Lalit Agarwal, Managing Director, and Mr. Anand Agarwal, Chief Financial Officer. I would now hand over the call to the management for their opening remarks, post which we'll have the floor open for Q&A session. Over to you, Lalit.
Good evening, and thank you, Mr. Ranganathan. Good evening, everyone. Welcome to the call. We are seeing really a good season, winter season here in North India, which is speaking that the season itself is shifting, so the market is also right now very confused, and then people, especially towards the central and northern India, don't know what customers, what they want to buy. So during these times of the year, the wedding season is there, but people are in a confused territory as of now. But still, we are seeing good traction coming in from winter in this particular quarter.
But, yeah, overall, the market or the consumer sentiment, if I speak about, looks little better than the earlier quarters, and we are seeing certain improvement. Definitely, all these tactical moves by the government also is bringing in lot of confidence in the consumer in terms of their earning potentiality and their earning capability in future. And it is definitely bringing in some additional employment, which is not very effectively visible. But yes, there is definitely a confidence in the consumer or confidence in the citizens that the, there is going to be enough employment which is going to get generated.
And we are seeing some PLI schemes getting rolled out, and we are seeing a lot of those infrastructure activities, some of them getting completed, giving certain connectivity, betterment in the connectivity, in the overall business doing business scenarios, which is also bringing in a lot of new business and new industries and new factories coming up in even smaller areas, even in states. So some of those good news are there, and then I think even then, the government is trying, all the governments are trying their best to bring in industries in their particular states. So I think all of that is ultimately giving a very confident scenario, which is making a feel good factor better.
So what I understand is the feel good factor is the effective outcome of that is what is required for an outcome of good sales and good consumption also. So that we are seeing those betterment. And still there is pain. It doesn't say that the pain has gone away, because the inflation rate continue to be high, continue to be there, especially in food products, in staple products. So that is something which is already was there, has not gone...
Has gone too little down, but still has not muted, because, because ultimately, we are sitting at a very high base of inflation, and on those, on those base of inflation, we are already seeing further inflation, which is, which is actually hurting the, the pocket of a common man and hurting the, hurting them. So, which is there. As I said about weather, weather is definitely playing its role. But yes, winter has been very good this year, which is a good news. It is, it definitely has shifted almost 20 days from December to January now. So, so December, we didn't see any, any winter, very, very mild winter out there.
So, that shift in the weather is definitely something which is affecting the probability or the understanding of the forecasting on how people forecast and how the consumption is going to happen for what kind of products and what. So that's where the entire business people are confused. Otherwise, I think, agriculturally, the farmers have been doing good. The produce has been better. MSP improvements have also been there. And then we are seeing that definitely government has not done too many things for the farmers, but still there are a lot of activities, lot of smaller initiatives which has been initiated by the government.
lot of those free rations as well; it has been provided, and a lot of people are getting those benefits. So some of those are definitely giving a better impact, but yes, also making people lazy. So there's always a counter effect which is there. But yeah, we are seeing. I agree. I think farmer or the rural side, especially the farming class, I see them also in a better state, so I don't see them complaining too much right now. Overall, I think the industry has seen both sides, as I told you in the last quarter as well.
The upper segment of the industry, which is the premium segment or the upper middle segment of the industry, is getting a little stressed. There is definitely a pain that we are visualizing and then we are noticing, and we are hearing, from our peer friends, that there is a little lesser growth and or a negative growth from a like to like perspective on those particular brands and those particular retail chains. But yeah, in the value segment, we still see a lot of traction. We have seen some traction coming back. Some of the retailers have really done well. Still, some of the retailers who were earlier doing well are struggling some in certain lines.
So there is always a newness drive which the customer wants, and any new brand which is coming into the market is getting some traction for the first six months or first three months and first nine months. So that is what we are visualizing, both in the market with the new brand which is coming in, and even from our own stores that we are launching. Because whenever we launch a store, we see a very good footfall coming in, in the first two, three, four months, and then suddenly, after a slowly, we see them normalizing and getting back to normalcy. But yeah, largely, we are seeing larger mobility of the customer.
We are seeing larger footfalls coming in because people are experimenting, people want to try and come out, come into the multiple stores, because they have got multiple options in the same street. There is definitely higher competition. There is definitely higher number of stores which are operating. Most of these retailers that have also expanded, and then everyone is open. But yeah, some of the large retailers who used to expand very aggressively in the last year, we are seeing some muted expansion there, especially from Reliance and stuff. On the other side, we are seeing very high expansion coming in from Zudio and other people. So that's where it is.
But, we don't see a very, very, categorical, clear, clear, competition-wise impact. There is definitely a very, very mixed response. There are certain competition in certain markets which have created certain impacts. But otherwise, there are a lot of those markets where we have seen that even after the, those competition who are supposed to be doing good, we have not got any impact on those, but we have been also growing on those growth areas. So there is definitely, there is definitely a mixed response.
It is all about how a retailer is able to operate at that given point of time, present a range at that given point of time, propose or give a price proposition at that given point of time, is what the customer is looking at, because customer definitely is checking on to most of these stores and then taking their decision. So whatever product is doing good, is it performing? Whatever stores are doing good or whatever particular season is doing good, that, that is how the impact is getting featured out. So that is where I think the consumer is, has become very much aware. The consumer is, is taking a very aware, aware decision, and then the informed decision. So consumer taste has shifted, we are able to see that.
We are able to see a little higher agility in fashion, which is coming in. Customer is adopting a little more higher fashion very fast, and that is there. But there's... Once again, there is two India. The Bharat still operates, like, a little slow, but the India part of India operates a little more faster. And then the Gen Z customer and the young customer definitely has crossed all the boundaries, and they are adopting everything which is coming internationally. And every international fashion is being seen here in the market now. So but yes, within that also, within those Gen Z segments, the urban Gen Z, which is the core urban Gen Z, we are seeing a little differentiated philosophy in terms of what they could wear.
But in terms of still the semi-urban or the 2, Tier 3, we are not seeing those kind of exposure coming in. So there is still a but people are opting for safer options and safer designs, but definitely they want newer colors and newer fashion and newer silhouettes. So those are some things that we are seeing. On the V-Mart side, I think we have been focusing very heavily on improving our product lines, working on our team, working on all those strategies that we have taken on designing, sourcing, and fabric development, even the supply chain management, the whole warehouse management, which we started nine months back, which had some teething problems.
Now we are able to see a lot of those things coming back to normalcy now, in the month of January. But still, we had some impact in the last quarter, and then, the warehouse was not able to give or become productive to even 50 or 55% of what it could have been. So that affected certain part of our fill rates and certain part of our supply chain management as well, and which gave some effect. But overall, we have taken some conscious call. We have definitely become very, very clear that we want to operate at profitability.
As anything and everything which is building for us or anything and everything that we experimented, we thought which worked or was working and not working now, we are going to take a little more stern and brutal reaction on those particular areas and those particular stores also. So some of those areas or some of those stores, we have decided to even shift or move or close. So some of those actions have been taken. So we have flagged up almost more than around 50 stores, which are not doing according to our standards.
Where we are trying to work, out of which almost 23 stores, we have taken a call to shut down and then search for a new property, to shift those property and assets to a newer location. So we have already taken a call for 23 stores, out of which 20 we may close in this particular quarter. But some of the calls we may take out of the remaining 30, we may take some call in the next quarter. We may. We are working on them to either revise those stores and then or renegotiate those stores. Maybe some of them, those stores could also close in the coming quarters.
So that's how we are managing, because ultimately we want to work on those, those particular stores where we, we are very confident and where we feel the customer is accepting us. So, so we are definitely there is, there are certain errors which has been done in the past. There are certain times where we opened those stores, those stores were not doing good, or there were certain acquisitions that we did, certain stores, which we felt we could try and experiment, but we were, we were not able to succeed in those. So all of those, I think, is resulting into betterment in terms of our, our bottom line, our inventory management, our inventory productivity. Everything we will, we'll be able to improve on those. But most of our, business, we are focusing on providing value very, very clearly.
We are once again very clear on our ability to provide value. Therefore, there is definitely higher competition, there is definitely higher, you know, fight for that particular value. And then people are or the competitor is also trying to— There are a lot of formats that has begun. There are certain formats who have also gone down on their pricing policies. So we are also trying to match them up. A lot of areas we are trying to re-engineer the way the product has to be made, re-engineer the way the sourcing has to be done. So some of those things we are doing, some of the margin cuts also has to be done or has been done or could be done in the future as well.
But our primary objective and our primary goal is to provide real value to the customer so that we can have higher volume metric growth and higher volume, and then feed in more customer and convert more customer in our store. So that's how we are looking at. Definitely, there can be a slight dip in the EBITDA, or the EBITDA may be a little flat as a percentage, but we will definitely improve on all those lines. First of all, we want to restate and reconfirm our trust with our customers, so that our customers have larger trust with us and then we are able to perform better than what we have been doing.
So that's how we are going ahead, both in Unlimited and V-Mart, because even in Unlimited, our strategy has been similar to V-Mart. Our expansion plan has been similar to V-Mart. We would definitely want to expand, but not very aggressively as we are also recalibrating or renovating certain stores, and we are also closing down certain stores. So our expansion plans will be limited to maybe around 50 stores per year, so that's how we will do. And some part of that, almost 50% or 40% of some part of that will go to Unlimited also, but there is also some closures which is happening there. So most of them are good.
LimeRoad, we continue to stick on our policy, where we are not looking at too much of top-line growth. We are definitely looking at reducing the expenses, reducing the losses, and bringing that business towards the trajectory of profitability, and that is what we are trying to do. So we are definitely reducing the expenses. We will further reduce every quarter those. We'll try to maintain the pace of reduction of expenses in the similar level. That's how we will do. There is definitely a lot of initiative which is going on the omni situation.
There's a lot of good. There's a very good product which has been developed, which we will convey in the next quarter, once we are able to successfully implement that in the stores, and that's something that we are trying to do, wherein the customer at the store can really integrate well with the LimeRoad platform and get some real value, and the benefit can really go both to the platform as well as to the offline stores. So that's how we are looking at those, because that's how the break even at this marketplace can be achieved, when we are able to convert those offline customers into an online and then not pay the acquisition cost of those customers. That's how the strategy is, what we are working on.
We will talk later in the question and answer session. I'll ask Anand to give you a brief and an expanded view of all the details. Thank you so much.
Thank you, Lalit. Good evening, everybody. Let me take you through some of the key highlights from the quarter, and then we can open the session for questions. It's been a reasonably good quarter, although a little less than what we had originally planned or expected. But for this quarter, sales grew by 14% year-on-year, with LTL growing by 5% from V-Mart and Unlimited like-to-like growing by 1%. Unlimited growth had been struggling for the last five to six months, as we had cut down the pricing and average selling prices by almost 20%, which could not get fully compensated by volume growth. But we have started to see green shoots in South as we introduce even better merchandise for the fresh season.
At an overall level, sales per sq ft increased by 3% and like-to-like grew by 4% for the quarter, while for the full year, both SSG and sales per sq ft increased by 1% each YTD. Coming back to the quarter, the average selling price reduced by 6%, which was partially part of our strategic drive towards making the product pricing more value-driven for mass consumers, and also partially because of the slow start to winter, wherein the heavy winter and higher priced product sales got shifted to January. Tier 1 markets continued their growth journey and outperformed Tier 2, 3, and 4, reaffirming the K graph growth that we have been seeing for the last many quarters. Tier 4, in fact, outperformed on growth versus the other cities because of a much lower base.
But on an overall sales per sq ft basis, Tier 4 still remained 10% lower than the other tier of stores, having an opportunity or headroom. While the YTD numbers show Tier 3 sales per sq ft de-growth by 5%, but for the quarter, Tier 3 sales per sq ft was a positive 2%, 2%, which is a good sign, because that is where the bulk of our stores are situated. The festive period went off well, but winters were significantly delayed, and winter sales contribution got impacted due to the shift. Normally, when winter sales shift to January, the margin realizations also are partially impacted as end of sales season period kicks in in mid-January, impacting profitability.
We opened 20 new stores in the quarter, with 16 in V-Mart and four under Unlimited, and also closed three non-performing stores, two in V-Mart and one in Unlimited, taking the tally to 454 stores pan-India, out of which 87 are in South. All the new stores opened this year, including in South, have been performing well and in line with the established V-Mart business model. There was a strong push on increasing the online sales contribution with the acquisition of LimeRoad. There have been a lot of activities going on around consolidating and integrating the operations for the eventual omnification of V-Mart. Focus at LimeRoad is to truly build an Omni offering that supplements the online LimeRoad target customer and also the V-Mart offline customer requirements through a multi-channel ease of access.
Strategically, we have curtailed the marketing expenditure to focus on capacity building around key initiatives and drive efficiency with lower burn, and as a result, the losses have been coming down. The EBITDA loss at LimeRoad, LimeRoad came down by 23% in quarter two, and then again by 29% in this quarter. And as we move forward, I think that's the trajectory that we will definitely want to follow, that quarter-over-quarter, we should look at around 25%-30% reduction in losses, so that we are able to eventually break even, by the end of next year. We remain optimistic on getting to breakeven, as we limit our losses in the current year to a predefined limit.
Coming over to gross product margins, the gross margin at 35.5% was 10 basis points higher than last year due to a higher contribution of revenue and margin from LimeRoad segment versus last year. The V-Mart gross margins were stable, while the Unlimited gross margins went down by 5% due to a higher provision on old inventory. On a go-forward basis, we shall be prepared to compromise on product margins in favor of making the value proposition more sharper for consumers, as we understand that the lower strata customer is still battling the inflation-led challenges. Coming to expenses, at an overall level, total expenses was 10 basis points lower than last year on the back of a base impact of one-time LimeRoad costs incurred in last year, quarter three.
The digital marketing cost for LimeRoad has started to taper down since November and has been the single biggest change in the overall expense breakup since the last quarter. On a go-forward basis, LimeRoad marketing spends will further rationalize to deliver better productivity, resulting in a healthier balance sheet. Coming to EBITDA for the V-Mart core business, EBITDA for the quarter came in at 16.7%, with Unlimited at 8.6% due to the one-time impact of inventory provisioning for the old, uh, you know, Unlimited inventory. For V-Mart as a whole, including the losses from LimeRoad, the EBITDA came in at 13.5% for the quarter. Coming to inventory, the quarter closed at INR 740 crores at 108 days of DOI, slightly higher than our target due to late winters, but still under control.
Winters have been delayed and winter sales slightly shifted into January, leading to a slightly higher closing inventory than planned. The per store average inventory came down by 15% to INR 1.6 crore per store. On CapEx, I think, YTD, we have spent INR 103 crore, which included spends on the new warehouse, 7+ new stores, and refurbishment of a few stores. The warehouse has already been operational, and no recent major CapEx is expected on this front. We should be opening 10+ stores in the current quarter and refurbishing a few more stores in quarter four, further ahead. Old store refurbishment remains a high priority area, and we shall be making more investments towards this in the coming year.
The working capital limit utilization has reduced by 56% since the start of this year and remains in comfortable range with more efficient stable management and better cash flows from operations. Lalit talked about the store closures, and we have been taking a hard look at all the non-performing stores and shall be initiating a closure of 20 stores in the current quarter, out of which 75% will be V-Mart stores and 25% will be Unlimited, at least for this quarter, the coming quarter. The V-Mart stores are majorly the ones which were opened during COVID period and could not see the early footfalls, leading to, you know, a non-profitable situation right now. This cleanup shall ensure a more efficient operation base and improve profitability going ahead.
Owing to this pending closure, the requisite financial impact has already been taken in the financials, resulting in accelerated depreciation charged and also reversal of Ind AS 116 provision, which is reflected in other income. There may be a few more non-profitable stores that may get replaced with new locations in the next financial year, but, bulk of the cleanup has already, has already happened and closed as stated. So that's all from my side, and I request, Ranganathan now to open the house for questions. Thank you.
Thank you, Anand. Now we can open the floor for questions.
Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge who wish to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Varun Singh from ICICI Securities. Please go ahead.
Yeah, thank you for the opportunity. Lalit sir, my first question is, like, while we analyze the nine-month numbers, as Anand sir has also pointed out regarding Tier 3 cities declining revenue per sq ft. So I mean, given the context that more than 50% of our contribution is from Tier 3 cities. That is the only place where on nine-month basis we see, I mean, 5 odd % of revenue per sq ft decline, whereas in all other cities our performance has been quite healthy. So given this context, I just wanted to judge and analyze the 20 store closure number that we called out, that where these stores belong to, I mean, which class of cities.
And also, I mean, in this backdrop, if you can help us uncover that, the reasoning or you think that what is behind and, the, strong and healthy SSG of 4%, which is, in, in the top quartile, I mean, if you look at all other retail companies' performance. So help us, understand the robustness of the current SSG, as well as the store closure with regards to the, tiering of the cities and underperformance in Tier 3 cities, when it is likely to, be back.
Yeah. Hi, Varun. Anand this side. So, you're right. So on a YTD basis, the Tier 3 cities still are showing a degrowth. But happy thing to note, as I stated in my opening comments, was that in this quarter we've seen a positive trajectory in Tier 3 towns, and Tier 3 performance has, is back in black. So there was a +3%, SSG that we saw from Tier 3, and that is where, as you rightly stated, almost 50% of our stores are located. And that is the, that is the, you know, the sign that is giving us also the confidence that there is some amount of recovery which is now happening or started to happen in our core CG or core customer segment.
Having said that, I think it's also a seasonal impact, and it's been while it's always quarter three is always a good quarter for us, but it's also a sort of a early sign that things should started to now look up in Tier 3 as well as Tier 4 . In terms of, you know, where the store closures, the stores which are getting closed, where are they located? Bulk of them are in Tier 3. You know, almost seven stores are in Tier 3.
But I think more important than the tier of these towns is the fact, is the timing when these stores got opened, and that we have been stating, at least in the last couple of calls also, that there are a few stores of, you know, at least 50-100 stores which got opened in the last two to three years. And those times were a bit of a troubled times because the market was still battling with COVID and the footfalls were not normal. And these stores could never get the, you know, the early start that any store gets. And that is where the impact was seen more in these kind of towns.
So I will not say that, you know, by tier, if we are closing seven stores in Tier 3, then Tier 3 is a problem. I think in general, the closure is happening not because of the tier of town, but more happening because of the timing and the kind of performance that we were able to extract from those locations.
Understood.
Just to add on there, why do you see this LTL? And then I think, being very genuine here, this is still much below what we would expect our business to perform and what we had thought, what we had targeted. So we are still not more than 22% of what we had thought. So this is something the market definitely is coming back, and there's more for us to right there and more as for us to bring in there. There's definitely a lot of challenges internally that we are working on. There's a lot of work that needs to be done, and there's still a lot of calibration which needs to be done. So still, we believe that the growth could be better.
It's all about our internal capability and ability to do that, and that's how we are working on. And then as of this last quarter, it was largely also because of this few days of Puja sales of certain markets like Bengal and Odisha. They perform a little better during Durga Puja. So the Durga Puja, which was last year in September, this year came in October. So some part of that also came in because of that. Especially the state of Uttar Pradesh for us has not been very, very good. So that is where we are seeing some pain.
It is largely in the entire state of economy and in the state of Uttar Pradesh, because we definitely are seeing a lot of transition that we discussed in the last call, and then that, you know, the state of Uttar Pradesh is going through a massive transition in terms of professionalization or formalization of economy. So there's still a lot of movement happening there, so we are still not able to get back to our original growth rate in that particular store. And that particular state has highest number of Tier 3 for us. So that's how this whole thing adds up.
Sure, understood. And, Lalit sir, also, like you pointed out, that customer is more demanding in nature, they are evolving, and the fashion quotient, et cetera, is maybe improving more, and it is bound. I mean, consumers are demanding, they are likely to become more demanding going forward. And, given the context that competitive landscape also keeps on evolving along with consumer, and as a consequence, we see the fashion element or the degree or the choice, et cetera, all these things to be having its own natural way, the way it manifests.
So, in that context, Lalit sir, like, do you want to call out anything that we are doing in particular, while we are obsessing about consumers all the time? What are the changes, in V-Mart, which is our core, I mean, that we are doing now, which is significantly different compared to maybe two, three years back, what we would have done?
Sure. As you all know, that we have been working with, our, especially our, our product team, our merchandising team, reorganizing them, reworking them, bringing a design department and, and bringing a signature, bringing a signature of our own design, our taste, and, an element of internationalization, which can be accepted by our consumer, because we are the ones who understand these consumer the best, and we understand them, the way they would adopt those kind of fashion. And then that's how the uniqueness that we are trying to drive. But one thing that we have learned and we, we have established, and we would want to do more and more, is, is work on quality. Because that is one thing that we have, we have really learned, and, and give quality in the same time, same price, same prices.
That is also a very, very tough call, you know, in this high fashion or high agile with high competitiveness industry. You know, providing fashion with quality is so difficult at this price point. That is where we are working on. But, yeah, largely, for us, family segment consumer fashion is very, very important because the youth is definitely who is there, who will definitely get driven.
But for us, the larger part of our ecosystem is the young family, and that is where whatever that they want, because there's also a lot of change that you can see in the young family, the behavior, the kind of wearing, the kind of pattern that they wear, and the kind of life they're building, and their children that they want to live. So that is how we are also working on, especially very, very, you know, very, very important to bring in those colors, newer fabrics, newer innovations. How do we give the newer silhouette? The silhouette is such a big part of this particular fashion now. So all of those new things has been learned, and then I think because of this agility, our team is also becoming much more agile.
They are also learning, they are also adopting a lot of things. Because we used to have a little bit of mindset where we used to fear, "Yahan pe chote scale mein nahi chalega." But now, now we are, we are becoming a little more bolder and then, and, letting them out, because certain, certain competitors like us, has also done it. And then that's how, that's how you learn in the market, and that's how you grow. So, so I think the acceptance level has been good, but still there are a lot of variation and diversity is so high in India that, managing, all of their perception and the requirement, to the fashion, is becoming tougher.
So that is where the digital play also comes in, and that is where a lot of our digital team is working and lot of work is happening towards the whole, understanding of the cluster, understanding of the consumer and the fashion, and then integrating that with the product. So those are some of the few things that we are doing now.
Sure, Sir. And, Sir, just one last question, if I may. On LimeRoad business, quarterly, we see, if not deterioration, maybe decline in the key metrics, like, number of unique, customers and, customer visits, et cetera. So when we guide for, breaking even by the end of FY 25, so this, like, breaking even should be happening by, more amount of business or maybe by reducing the overall size of the business itself?
So we don't aim to reduce the business, Warun, but we are not targeting to increase it superficially. So we definitely want consumer who are relevant to us. We want consumer who, when paid, are... If we pay for those consumer to acquire, they buy, and they don't return, and they don't, we just don't acquire because we want to bring in the footfall. So we're not trying to bring out those key metrics. We are here trying to build a profitable, sustainable business which is useful to my offline consumer, and where I can also approach certain consumer, likewise consumer, who is not residing near my store, but want certain fashion.
Certain fashion which we are not able to give out to our consumer in our store, so that those products are also available for both our offline and online consumer. So that's how we are, we will do. Definitely, we don't want to reduce the top line. We, the business will not become smaller, but if required, we will not burn money. That is very clear. We will want to create a sustainable model and then work towards increasing those top line. So that's how we will work towards. At the cost of profitability, we will definitely not want to grow too much.
Got it, Sir. That's it from my side, Sir. Thank you very much.
Thank you very much.
Thank you very much. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, good evening, everyone, and thanks for taking my question. So firstly, a little more dwelling on the store closure part. I know a lot has been already discussed, but just trying to understand it a little more in detail. So you, we've, we've done a 30 store additions on a net basis in nine months, and you're guiding that, you'll add 10 stores and probably close 20. So in all probabilities, FY 2024, a net store addition of around 20 stores is likely. Going forward, also, you have mentioned that there are some 30 more stores under the radar. So how should we look at net store addition for V-Mart and Unlimited in FY 2025? Is it going to be another tapered in terms of store addition because of these store closures?
So, Samir, partially what you're saying is right, but not entirely. So, for the next year, we are looking at opening around 50 stores, and while no store closure number is decided as yet, what Lalit mentioned in his opening remarks was that we have a list of around 30 stores which we are working on, and it is not decided that we will close them. I think the first priority always is to rework and to renegotiate either the rentals or the product proposition or the employee proposition or the customer proposition, and make it work. If every effort fails, only then we take a call, and the call also always is to replace the store with a nearby new opening.
So in all probability, we should be looking at, you know, at least 30+ net store or 40+ net store addition in the next year.
... Hello, Tejas?
Yeah, hi. Hello?
Hope sir answered your questions.
Yeah, please go ahead.
Tejas, sir, line has been disconnected. Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah, good evening team, and, thank you for the opportunity. Sir, in your opening remarks, you did allude to the fact that the situation in the rural areas is not as bad as envisaged, given the farm income has been rising. So is it fair to say that we would have lost some market share to unorganized players in the last 1.5 years due to higher pricing? And now that we are taking pricing actions, large part of this market share can also get recouped?
Yeah, Bhargav, see, definitely we all know the way this particular segment, which is the lower middle class or the lower class, which is the poor or the farmer class. They have behaved in the last three years post-COVID and inflation and pressure, how did all of that affect their consumption? So all of those were definitely there, but we also made those mistakes of taking the prices up, and we definitely lost some customers because of that, which we realized, and that is how we have taken corrective actions, and we are able to see the results now in the ASPs also. So we definitely believe that is happening. Still the pain is there, not that the entire pain has gone away.
But yeah, we are seeing betterment every quarter is what I thought, and that is what we are able to see. So at that point of time, did we lose to the unorganized player? I would not really say that. Because they were also struggling at that point of time, but now, as things are becoming better, we are also seeing some brighter faces from unorganized players as well.
Sir, would it be fair to say that till the time we sort of recoup our market share, our ASPs will continue to be fairly tight, meaning that we'll be very aggressive in terms of our pricing even in FY 25?
Yeah, I think, see, that's how V-Mart has originally been, and that is what we are. And we don't want to say that we will want to reduce from that particular pricing. Because we took a steep hike in the last year and last to last year, so that is how we are trying to balance that. That is also because of the fact that the raw material prices have gone up, which is stabilized a little bit, but there's a lot of new innovation, there is a lot of new processes, and then there is definitely a lot of customer expectation and then the competition expectation, which is there. So we have to manage all of those. But yeah, but this is where we are. From here, we should not see a further deep, steep fall.
From here, we may see a little 1 or 2, 2% plus or minus, year-on-year.
Sir, my last question is on LimeRoad, that now that we are sort of cutting the ad spends, how do we keep the team motivated? Because that is one of the big drivers to V-Mart as a disruptor. So, how are we trying to get that motivation going in that team?
No, I think the team is fully charged up. For them, they are trying to create history, because in the entire marketplace model, no model has still been able to break in and break even and work in the fashion industry, especially the value fashion industry. So that is something which is a big, big target for them, and they all are motivated because they all have certain options of V-Mart stock and stuff. And if-
Okay.
- If that does well, V-Mart will do well, and they all get motivated and benefited as well.
Okay. No, that's a smart thing to do.
Good luck.
Great, sir.
Thank you, Smile. Thank you.
Yeah. Great, sir. Thank you very much, and all the very best.
Thank you very much. The next question is from the line of Shirish Pardesi from Centrum Broking. Please go ahead.
Hi, good evening, Lalit and Anand. Thanks for the opportunity, and I really appreciate what we discussed last call. You have taken those hard steps and moving towards the profitability. Just one candid question. When we inherited Unlimited stores, and there is a legacy store which is pulling down our overall revenue momentum. So how many of those legacy stores we have already closed or we are planning to close? Basically, the large size stores.
So Shirish, out of those 20 stores that we are planning to close down this particular year, there may be around 6 stores of those legacy type which we have to close there. We still have more than 10 stores or 12 stores which are flagged out on those particular areas as well, where we are working aggressively. Some of them has been worked upon, but some of them still are under discussion or some new experiments are being done those. So we can take some three, four, five more calls in the coming quarters.
Anand is trying to specify me, but I'm trying to be a little more blunt in expressing that we will not take any shyness in trying to take those calls, if things are not performing for us.
So, with this store closure, this is I would assume largely it is in AP, Telangana. Though, then, the question is that after the new stores which relocated, do you really see on-ground metrics improving?
Currently, Shirish, definitely, what we look at is cost level metrics and store level metrics, and store level metrics would bring in results. And each of the store delivers profitability. Each of the stores deliver the desired sales per sq ft. That's how the business will run, and that's how we will be able to execute the ideas of the business. Otherwise, there are a few stores which accumulates the inventory, do not allow us to operate, and the inventory becomes the dead inventory, which then goes back to other stores, and they have to sell back. So everything has a spiral or a compounding effect. So that's how we need to filter that out.
We did experiment, we did try, but things which are not working out, we need to filter them out.
I like that. On the quarter footfall, we have shown a very strong growth of 23%, while nine-month growth is 20%. I was more curious, I don't know whether you tracked that metrics. What would be the contribution of first-time buyers in the quarter? And basically, I'm asking, when you've taken a sharp pricing action, is there a new buyer which has started coming or the footfall increase is driven by the new buyers?
Sir, you're asking about V-Mart?
Yes.
At V-Mart, we have seen almost 62% of the sales coming in from the repeat buyers.
Okay.
Hello?
Yes.
Yeah, 62% of the sales coming in from the repeat buyers. 38% of the sales still is from the new customer, but the number of customers that we have as new is almost 48%. So we have definitely attracted more customers. Not every customer has converted into buying, but yes, yes, we are still working on them.
So that confirms that your strategy is working?
I mean, I would still rate it low because we have still better plans to execute, and we will have to better perform much better. This is not our standard still, so we'll have to do a little more hard work.
Okay. And the second question, we have also taken a very strong pricing action on Unlimited, though you were anticipating the competition will have some dent, but whether you have taken a right strategy or whether this strategy of taking price cuts in Unlimited is really helping us to attract the footfall in the south?
So, Shirish, it definitely has taken some time, and it will take further little more time for the customer to realize and understand the value, and those kind of customers who need value to come and get loyal to this particular store type. So, it is what we know the best. It is what is sustainable. It is what will remain there. And everywhere people need value, so value and worth of product is so important. So that definitely will come because if you overcharge and just keep charging and then you sell on discounts and stuff, that's not something that V-Mart will done. So V-Mart has to operate in its own principle, and that is what we are trying to do.
There is definitely customer will understand the honest pricing, will understand where, where the products are getting delivered. They will test, they will try. Once they feel that the products are good and succeed, success comes in, that is how the whole compounding effect also starts happening.
Okay. My last question on LimeRoad, now, we have done one year, so obviously there are a lot of learnings which you had, and there were initially for yeah, that we will fulfill our omni-channel strategy. So if we need to build LimeRoad in our modeling next two to three years, of course, you have now good handle on the cutting losses. But in the medium term, what kind of growth aspiration and what kind of margin profile you would be expecting from LimeRoad?
I think it's a two, that's too many questions in, in a very short time, short term mode of time. Maybe you put them down and then take that separately from Anand. We are definitely working towards, as I told, we are working towards bringing a sustainable model at any business level, so but definitely there are more plans that we have on omnification, and we are working very highly on them. So we'll be able to bring in lot of customers from those particular offline stores. That's the plan that we are doing. So there's a lot of work which is getting. It is all about execution. How well are we able to execute? How well are we able to change the culture within the offline store at the store employee level?
All the 10,000-11,000 people who are working there has to all get adopted on this omni-channel and have to see customer and have to see the business both online and offline. That, how well we are able to execute all of that is where the whole growth rate or the margin will also get affected.
All right. Thank you and all the best.
Thank you.
Thank you very much. The last question for the day is from the line of Tejas Shah from Avendus Spark. Please go ahead.
Hi, Lalit. Hi, Anand. Thanks for the opportunity. Lalit, so after long time, we are hearing very positive commentary from you on consumer sentiment. Now, you also very honestly highlighted that there were one-offs like tailwinds, like Puja also being there and winter also being strong. So if we have to kind of separate this tailwinds versus your reading, how confident are you that the sentiments are here to stay or you are relatively more positive than you were before?
Look, Tejas, I think the sentiment, as I said, is definitely positive. But coming forward, we are, we are seeing some disruptions also coming in. There are risks also in the market where the election is on the, on the corner. We are seeing certain disruptions always going to come in during election period, rallies and operational disturbances and communal disturbances. Now, those things are also going to come in. So when there's a disturbance on those lines, there'll be also disturbances that May and June, we are not seeing a lot of weddings coming in. So there will be some things which will also disrupt our, our nature of business, but, most of those, I think betterment on the consumer sentiment is definitely there.
It is also about us, how well are we able to catch up those, and how well, how well are we able to deliver those? And I, I'll put more, four fingers towards ourselves more, than the market first. So, so that's how we are looking at right now. I'm being more, more stern on myself more here rather than on the market now.
Very encouraging to hear, sir. The last question, so we are making two major corrections in the model right now, that we are weeding all the poor stores and also you said that merchandising philosophy is now more on quality of the product. So we have also seen in the past that both these aspects are very personality driven also, depending upon who's heading these two particular initiatives. So first of all, what are the learnings from both the—I won't call it mistakes, but both the experiences that we had in the last four years on both these counts? And how are we ensuring that this, whatever learnings are there, it gets institutionalized so that we open better stores and we also line up the assortment on merchandising side?
Learnings of these two acquisitions, are you saying?
No, no, no. The stores that we opened during COVID and now we are shutting down.
Okay. Okay. Okay.
Yeah.
So I think, yes, we definitely, for our business, one learning is very clear, that every action that we have to take has to be very, very focused. And we definitely have to understand we cannot go one-sided, on our approach, on our calls, that if we are growing, we'll keep growing whatever the market is, supposed to go there. And so there are situations where we have to be a little more careful. There are situations where we need to take some calls and slow down a little bit and then re-look the strategy and then reconsolidate or then go with a little more finer action. And still there are mistakes that we make.
It is not that we have not—we have done mistake and we will not do it again. There will always be mistakes that we make. It is all about the process that we inherit. It is all about the ownership that the team takes in. And it is also about the collaboration and the integration, because the team becomes bigger, when the teams become bigger, one hand doesn't talk to the other hand, and that's how things at times also happen. So once again, I'm coming more from the internal perspective rather than external perspective. There are external reasons which has made it happen, but there are also internal reasons which makes it happen.
Very clear, sir. Thanks and all the best.
Thank you very much. In the interest of time, that will be the last question. I now hand the conference over to management for closing comments.
Thank you, everyone, for being there. Definitely we still hope, we still are below our expectation, our own internal expectation, but we definitely are being cautious enough to manage our inventory well. We are being very cautious enough because in this agile environment, the inventory freshness and the inventory fashion, fashion inventory is very important to us. So we are taking a lot of calibrated approach. We are taking a lot of calibrated calls as well. We are not going all out, whether in terms of store expansion or in terms of our planning for like-for-like growth, higher like-for-like growth, or in terms of reducing the prices and taking a margin cut. We are balancing all those activities.
We are definitely trying not to give any shock to the system, not to give any shock to the customer, and play out sensibly, play out in a reasonable manner, because there will be competition, there will be players who will come in with certain kind of schemes and tactics. We have to stay on our confidence, we have to stay on our proposition, and we have to be honest to all of those. That's how our strategy is, and that's what we will try to do. Please be patient with us and then be there with us. Thank you so much for being here.
On behalf of V-Mart Retail, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.