Please note that this conference is being recorded, and I'll hand the conference over to Mr. Varun Singh. Thank you, and over to you, sir.
Thank you, Neha. On behalf of ICICI Securities, it's our pleasure to host Q4 earnings conference call of V-Mart Retail Limited. From the management side, we have today Mr. Lalit Agarwal, Managing Director, and Mr. Anand Agarwal, Chief Financial Officer. I will now hand over the call to the management for their opening remarks, post which we will have the floor open for a Q&A session. Over to you, Lalit, sir.
Thank you for being on the call. Things are looking a little brighter. So a lot of, a lot of, mobility is being seen in the market. Definitely a lot of action.
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Yeah. So there is a lot of action in the market. A lot of movement of political parties, election hoardings, a lot of gossip in the market, a lot of media watch. So some real good actions coming in, real politics getting discussed at the ground level. But yes, definitely, it is also bringing up some confidence-boosting measure for the consumers. And the customers seem to be looking a little more confident. We are seeing some betterment in terms of the way they would look at consumption or the way they would look at their future income also. And when we speak to a lot of consumers, the potential or the propensity for them to consume more looks a little more better. Definitely, there are a few things that we are seeing on observing in the consumer sentiment.
A lot of Gen Z talk is coming in. A lot of consumers, youth consumers, are being promoted. Even the government is also very, very clear on the fact that there is a long, big percentage of voting population which is youth. So a lot of programs and a lot of initiatives for the, for the youth is getting discussed. So, so youth is being pampered a little more. Youth is being pampered both by the administration as well as by the, by the, by the market or by the consumers or by the companies. So I think a lot of, a lot of initiatives are being launched, for, for targeting the youth. So, so, so we are seeing some, some, better consumption from youth also coming in. Plus, we are seeing some change in consumption pattern also. Like what we witnessed is, people are spending.
People are coming out to spend, but they are still spending on a little lower price point products, compared to the higher price point products that they used to. So there is some change that we are witnessing. We are also seeing some change in the, you know, what we call the exclusives, the premiums, or the brand businesses, being a little more muted and slower, versus the lower price point products. So there's some of these changes which is clearly being witnessed across the market.
And that is something which is setting the base expectation of the customer at a lower level, saying that, "Okay, I will need this T-shirt, or I want this shirt, but I will only need it at this kind of price." So that's the kind of mindset of fast fashion that the consumer is trying to focus on, but definitely not leaving aside the quality perspective. Inflation has also been very, very controlled in this particular quarter. And we've seen good response on Amazon. So prices have really gone down or became muted for even the food and the staple products, which used to be higher in the entire two-year period. So there is some respite, and there is also some confidence which gets generated because of that.
The Rabi crop, we know, will bring in good results, and is definitely going to create a better consumption impact on the rural market and the farming sector and the farming-dependent, self-employed sector also. So we are very confident on the fact that, you know, the agriculture income should also bring in some kind of higher mobility in the consumption space as well. The weather seems to be quite okay. We are hearing that the monsoon is going to be good. So we don't expect any kind of disturbance in the monsoon. So that is, once again, going to be a good news because earlier two years, we have seen bad monsoon or a little weaker monsoon in Uttar Pradesh and Bihar.
So which had impacted some part of the consumption, also in these states in the past that we have seen. Overall, geography-wise, we see some good response coming in. Some trigger has started coming in even from markets of Uttar Pradesh where it was very muted for the last one year. We have seen some betterment in the month of March and April. April has been a little better. We have seen some betterment, also in the states like Madhya Pradesh, Rajasthan, which has been really under pressure for the last six months, six to eight months. So some triggers are being seen. These may be early indicators, very, very early. So we can't, we can't really tell you, but these are some indicators. South India also, we are seeing, you know, on the high price point ticket items, it is, it is going low.
But in the low price point ticket items, it is definitely being accepted more and consumers are coming in. So, consumers at the base of the pyramid or the lower part of the pyramid, they are definitely coming back now. We are seeing better footfall in the market. We are definitely expecting the festival which went in the month of March as well as month of April. We saw some good footfall coming in. We saw some lot of customers who were earlier in the midst not coming in. Some of those customers returning back. We also saw a good sales which is coming from repeat customers. So that particular side is good. Definitely, new customers rate of growth has not been too big.
So, but yeah, I think there are also enough competition which is now in the market. Definitely, a lot of stores have opened up. So, that competition spree continues. We keep hearing about stores which have been opened by the competitors. And definitely, we are watching them very closely. There are competitors who are performing a little better than the market, and we are aware of all of those performances. But yes, there are certain fundamental levers that people might be compromising on which could be a little shorter-term approach, versus a longer-term approach. Those are some of the debates that we are also doing internally, trying to understand what are those different tactics and different philosophies that the competitor is using to attract the consumer and give them more value and give them a better fashion.
So, so trying to learn on a lot of those. So for us, we have been focusing very, very heavily, as you know, on, on a lot of those strategies of internal development, internal betterment, internal process improvement. So some of those have started showing some results, the integration, the collaboration between the team, you know, integrating all the departments into, into delivering the best experience to the customer, right, from the product forecasting, designing to, to buying to, actual visual merchandising, supply chain, and then, and then talking about that in the marketing piece. So all of these integration was, becoming a little difficult. So those are pieces which are coming aligned. We are able to see some of those impacts. We also have experimented, largely with the, the Gen Z merchandise.
We created a small team, and we have started, you know, focusing on experimenting certain lines of products which we have experimented in few Unlimited stores. The response of those particular lines has been very good. So we feel we may expand that a little more, and we will take it forward and then do it a little more bigger and then and focus more on that particular audience, which we may be losing right now. So some of those pieces have really come aligned very well. We are very confident on certain some of these facts. So we are trying to really focus on our internal capability which is scalable, which is replicable, and which is sustainable.
So those are certain things that we are trying to do, not putting any kind of steroids in the, in the overall process so that we get certain growth just because giving more value to the customer or giving more discounts to the customer. We are not acting on any of such thought processes. We are not acting on any of the thought processes of reducing the gross margin, working on trying to, just, just give more value by reducing the gross margin. So those are not the things that we are that are sustainable. So we are trying to focus on fundamental things which give the better experience and supply chain management to the consumer with the great designs. We are definitely working a lot on quality. Quality parameters have been improved massively in the company.
A lot of, a lot of, work is happening on quality parameters, quality inspections, and a lot of rejections are also happening for the vendors. So that is also causing a little bit of supply chain problems in the midst which caused a little bit of sales. But yeah, those are fundamentally good for the long-term future. So some of those pieces are being worked on. We have also done a lot of, a lot of cutdown of bad stores which we are bleeding and which we are taking away a lot of our EBITDA. So, we, as I, as I also flagged, told you in the last call, there were a few stores that we had flagged out of which we closed down almost 25 stores in the complete full financial year.
We said we did a lot of aggressively closed down in the last quarter as well. So we will definitely want to continue that streak. For the time being, we have taken action on a lot of those. There are a few more that we are working on. If they don't turn up, we may, we may plan to or we may not shy away from closing them down as well because we are very, very clear that anything which is bleeding and anything which is causing damage to the cash flow in the organization has to be either repaired, immediately improved, or, or, or they, they get the brunt of closing it down. So some of those pieces we are working on. We are, we will continue with our expansion plan.
We are not being very, very aggressive, but we are very being, very, very mindful and analytical on our approach in terms of trying to open up the stores which can retain and sustain the ROE that we expect and ROCE that we expect. So, so a lot of those work is happening, being very, very, selective in our approach, not, not because the market is, getting a little bit, corrupted in terms of people are competitors are trying to give a little more higher rentals and give more favorable terms in terms to the consumers. So some of those pieces, are definitely, being worked on. Apart from that, I think, we are focusing on our products very, very highly.
We are focusing on those design integrations, design, better designs, youth designs, some, some of those, some of those, what we call the forward fashion and trying to bring them a little more faster to our market. We see some of those adoption coming in even from Tier 3 towns very fast. So some of those things are good. If those are better, the sell-through price, sell-through rates should be better. And if the sell-through rates are better, then maybe the gross margins and the EBITDA should be positive and should be healthy is, is what we expect. And we are expecting certain growth rate coming in. The growth rate has been shown in the last few months. March has been good. April has been good. May till now also has been okay in spite of marriages not being there in the month of May and June this year.
So we are still able to manage our sales of the last year. We are able to see some growth there. So there is definitely some betterment that we are able to see. It should result into a better EBITDA and better gross margin as well, going forward. So we have closed down a lot of stores in the Unlimited market also. Our net count has gone down in the Unlimited market. But yes, those were the stores which were last stores, high-rental stores that we acquired as a part of the deal, which we now have very clearly figured out that this is not something that we want to do. So we are opening up our stores in the Tier 3 towns of South India. So those stores will continue to open.
We will have those little extra expansion plan in the southern market which we feel is good and then is giving us good results and good margins. So all of those remain good. At the Limeroad level, we have definitely restricted our losses. We are bringing in some changes in this business, the way that business is being done, the way the management is being done. So some of those changes are also being coming in. So we will, some of those changes will also come out in the few weeks. You may learn about it. But yes, we will want to be very aggressive and very clear that the integration between the V-Mart Unlimited and Limeroad has to happen. There's a lot of omnichannel drive which has to go on.
A lot of omnichannel drive has also resulted into better customer satisfaction at V-Mart and Unlimited stores because the customers who could have gone unsatisfied or unserved, when they don't get sizes or they don't get products have really got satisfied. More than 1,200, more than 1,500 orders are being generated from the stores where customers are clicking on certain tools. So there is a tool called One Click that we have already launched. And then we are seeing good adoption by the consumers, by the store staff. So that some of those omni-integrations are happening, and that is where we will focus very highly on. And we will want that business to go towards breakeven, breakeven towards the last quarter is our vision. But that looks a little difficult.
But yes, that's where we will focus on and try to bring in the omnichannel business more in the online space rather than the acquisition of marketplace orders or acquisition of orders from the social media front end and pay on performance marketing. So some of those changes we will want to bring in. There's a lot to discuss. There's definitely a lot happening at the company level. A lot of governance features. We are very highly focusing on those areas. We have been very, very conservative in our approach, whether it is being on aged inventory or old inventory or shrinkage inventories or even on certain provisions that we want to take and not take. Our audit committee, our board has been very good. We also introduced two new members on the board.
We want to broaden our board of independent directors. So there have been very good two resources that we have found and very experts in marketing and in human resources subject or even technology. So some of those pieces, we thought had a gap in our board, and that is where we wanted some more expertise. So we have broadened that. And, you know, your company has been very highly focused on bringing up the governance level, really taking it to the next level, next standard, and then trying to be very authentic and very compliant in nature. So those are some of the fundamental areas. Anand will take you into the details of the results. And then we'll begin to ask the questions about this. Anand, please.
Thank you so much, Lalit. Good afternoon, everybody. It's been a good quarter with a good start to the festive period, both, for Holi and, as Lalit mentioned, I think April also went quite well. So we're quite excited about the opportunity ahead. But first, let me take you through some of the key highlights from the last quarter, and then we can open the session for questions. So for the quarter, sales grew by 13% with a L2L of 6%. This is probably the second or third, consecutive, you know, quarter with a good L2L growth, with both V-Mart stores and UL, firing quite well.
In fact, last 3-4 months in particular, since almost since Diwali, I think we've, we've been seeing a quite sort of revival, especially in the smaller towns, in the Tier 3, Tier 4 towns, and especially in segments in, in geographies where last couple of years have been very, very stressed, particularly in UP and also in parts of UP, in, in East India, we've been seeing, seeing some very good growth. V-Mart grew by 12% along with a volume increase of 12% and with ASPs remaining flat. We have improved or rather strategically reduced our apparel ASPs in the last one year by almost 5% to make the pricing more attractive for the lower-end entry point customer. The strategy has started to show results. This is something that we had discussed almost one, one and a half years back also. We've executed now to where we wanted.
The correction is almost over now. There is, the prices now today are very stable. And this is where we would want to keep our growth now to build from here. Together with the improved merchandising and pricing, we have seen improved footfalls also in smaller towns, which is also helping us build back the sales per square feet. The sales per square feet also grew by 2%-3%, while per store inventory came down by -10% despite a festive buildup for upcoming Eid, at the end of March. The traditionally strong markets of UP and East India led the growth for V-Mart with new stores open during the quarter also delivering on planned revenues.
Similarly, in Unlimited, where we had been doing a lot of correction on the inventory cleanup, and also improving the merchandising in line with what the customer requirement is for South India, and also after having reduced our average selling prices by more than 20% in the last one to one and a half years, volumes have started to grow quite well. They had been growing, but the same is now also started to reflect in value growth with a strong 13% like-to-like for this quarter. Definitely, the base, we had a significant impact in the base, but definitely, the growth is very promising. Not just this, the new stores that we have opened during the year in South India under Unlimited brand have also been performing better than the legacy stores, which is very encouraging and allowing us to focus on expanding our presence in South even more.
The closure of 10 stores in V-Mart and nine in Unlimited during the quarter will further improve the overall performance going forward as most of these stores got closed in March. As such, the benefit on account of the expense reduction shall start flowing in from April onwards. So more than the expense reduction, I think it's more of allocation of the right capital towards the more, you know, improving stores. That is the focus that we want to create and also send a messaging in the entire ecosystem that we are very, very focused on profitability. Any store which does not, you know, meet the benchmark or our thresholds will come up for correction. That is something that we are driving with a lot of effort.
Coming to gross margins, the total gross margin at 31.7% was 20 basis points lower than last year due to higher old inventory liquidation and also marginally higher, you know, inventory provisioning, as Lalit mentioned, due to, you know, more stringent and more conservative norms. The norms remain consistent for the last at least 10 years, and we are very particular of maintaining them. There was also a delayed winter this year, which also meant, you know, some amount of inventory that we could have sold in December, we were forced to sell it at slightly higher discount in January, but not a big impact but very marginal impact. Inventory remains in good shape and very healthy. The sell-throughs that we are receiving for the summer season are a testimony that the inventory health is quite good.
The Unlimited gross margins improved marginally while the VM gross margin went down by 0.5% due to higher provisioning, as you know, in relation to last year. On the expense side, while the revenues grew by 13%, the expenses grew by 4% for the quarter with tighter cost control in all parts of the business. For the offline business, the revenues grew by 12.12% while the expenses grew by 8%, largely contributed by the increase in power cost, particularly in South. For LimeRoad, the revenues grew by 29%, and the expenses reduced by 18% over last year. We've been strategically reducing the expenses at LimeRoad without significantly impacting the top line by increasing the synergies in customer acquisition through the omni model being propagated through V-Mart offline stores. Lalit had talked about the One Click initiative.
That's a new tool that the LimeRoad team had developed in the last six-odd months. That has been rolled out across 100% of the V-Mart stores with very encouraging results. I think the team, the combined team of Limeroad as well as the V-Mart offline store team, is very optimistic on building this up as the next vehicle of growth for both the businesses. The omnification of V-Mart is what we will therefore continue to build and drive through the Limeroad platform. On a go-forward basis, Limeroad expenses should further rationalize to deliver better productivity resulting in a healthier balance sheet. You would have noticed that the Limeroad burn, as well as the EBITDA losses, have been, you know, coming down by almost, you know, double digits for the last three quarters consecutively. And that's a direction that we continue to build on.
As a result of all these initiatives, the quarter four EBITDA grew by 76% year on year, while the LR EBITDA losses came down by 44%. We closed 12 underperforming stores in South, which will further help improve the EBITDA in the coming years. We also closed 13 nonperforming stores in the rest of India. Again, the same impact. We should see the large impact of these benefits coming in only next year because all of these most of these closures happened in quarter four or even, you know, a large part happened only towards the end of March. On the CapEx side, our CapEx incurred for the year was INR 137 crores, with net CapEx of roughly around INR 120 crores. Almost 50% of this was on the new warehouse, which already got operational in June.
We spent around out of this around INR 40 crore on the 46 new stores, around INR 26 crore on renovation of the existing stores, which is something that we took up, with a with a lot of planning this year and which has also started to yield some good results. Overall, inventory levels reduced by 6% year-on-year. The per-store inventory improved, from INR 2.1 crore to, you know, INR 1.8 crore at the end of the year. Base of inventory while it remained similar year-on-year due to low base of last year. But otherwise, at a overall level, the health of the inventory, the freshness of the inventory, and, the, you know, the overall, health is definitely far better than what, it was at least in the last two years. We also generated free cash this year of INR 44 crore with very good inventory management.
On the cash side, I think we have already done with large investments. Time has now come to recoup the benefits in the coming years. So, I think that is largely on the P&L and the balance sheet side. On the new stores, as I mentioned, we opened 46 stores and closed 25. And for the next year, we still would plan to open roughly around 40-50 stores with possibly some five to 10 stores closure not identified but depending on their performance and improvement in the current year. So that's largely from my side. We remain very committed to make sure that the Limeroad journey remains very strong and fruitful. Omnichannel, omni is something that we really want to build and that we will keep focusing on. So that's all on the P&L and balance sheet. Now, let's open the house for questions.
Thank you so much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Tejas Shah from Avendus Spark. Please go ahead.
Hi, Lalit. Hi, Anand. Thanks for the opportunity. So we seem to be now working very aggressively on benchmarking our stores in terms of certain parameters. So I was just curious what specific parameters or criteria we are using to decide whether a store will continue or shut down? And just, if we have to kind of reflect on all the store shutdowns, are there any common threads which kind of tell you that these were the common mistakes that we made in terms of perhaps regional or operational or location or merchandising, which we won't repeat as we expand because this is just a part of the correction because, again, we'll have to open that many stores as we go along.
So what we carry along as a or we'll institutionalize in our DNA so that we don't repeat in our next batch of expansion?
Yeah, Tejas, for us, yes. So definitely, every store closure, there are a lot of learnings which we have captured. And, clearly, when we do a large-scale closure, you do take those learnings before also and after also. And some of the learnings are largely that, you know, certain stores which we acquired or which we leased out, which were at a higher rentals, and we thought that those stores can bring in good results and will give us good sales per square feet, higher sales per square feet. So some of those calculations didn't work. So our anticipation and our working on finalizing a store location, we thought, was not getting gelled up with our thought process.
Too, definitely, we identified as we had told earlier also, there were few stores that were already performing low when we acquired, like Unlimited. Or there were few stores that, the moment we opened up, it after one month or two months or three months, the COVID scenario happened, and a lot of those stores got fixated in those particular area where they didn't get the first few maturity periods. And that made the whole change. And, you know, slowly, the inventory gets dead, and inventory becomes older, and the store footfall doesn't come in. You know, it's more about, it's more about word of mouth publicity, and their customer comes from word of mouth. And that's how customers look at the customer, and then they come in. So some of those things.
And then definitely, a few areas where we clearly identified that there are those seasonal factors or there are those particular kind of merchandise which is required in those particular area, where maybe at those times in those part of time of the season, we were a little not, not very aggressive or we were not we didn't plan it very well. Or there were some, some challenges that we found even in the team management of stock. So some of those things, some learnings have come in. A lot of those learnings have been captured as a change in the SOPs, change in the processes. And some of those learnings are coming in in terms of the checklist that we have to prepare in terms of they don't fall into those brackets. So some of those things are coming in. Thank you so much.
Sure. And second and last question, after many years, we are entering a new fiscal with a very positive sentiment. So just wanted to know, your sense on ground-level sentiment, that is giving us this hope. Or you are also excited to regain the market share that we would have lost in the last two, three years in, in our retail space?
Well, it's both, Tejas. Definitely, only if you try, it doesn't come out. It also to be fueled by the, the consumer aspiration, by the demand, by the by the positivity in the market. So we believe both, both the things are happening. Even if you have demand and if you are not performing in the right way, in the right direction, which the consumer wants because it is no more a one-man land. It is a it is a street of competitor. It is a street of, multiple players which are operating on the same, same road. So you've got you've got options. Customer is the one of the options. So if you don't perform, if you don't produce, if you are not efficient enough, if you are not compliant enough, you may lose the customer. So that's how the result is going to turn up into you.
So the confidence is coming more from the internal parameters and the internal levers and the internal excitement that the team has and the team, the way team operates, the culture in which the V-Mart works at. And that's, that's something which brings the confidence. And definitely, aided with the right timing, which is where I think now the consumer has to come back. Even elections are going to bring in a lot of money. So we have been watching all of those. Some of those, we've seen that wherever the elections have got over and after seven days or after 10 days, we start seeing good growth coming in from that market. So some of those pieces are also being witnessed and are very clearly being seen.
So, I think some of these things definitely will fuel the whole economy because the economy was in a bad shape. It was little dumb. It was little dull, post-COVID and since then, the inflation and stuff. So they never got excited. Now, I think, things are coming back, and we should see some growth coming in from this.
Perfect. If I may ask one more, Lalit, all the store shutdowns that we did, was there any element of any national fast-fashion retailers, Zudio in specific, being around in most of the store locations, or it was, it was it had nothing to do with any of this?
As per our analysis, we keep a very close watch on competitor and competitor-wise store performance and stuff. So we have been very clear. Wherever we have seen the brand name that you mentioned, those stores opening up, we have not got any impact. Only in South India, there are a few markets where we had seen impact one year back, one and a half years back. But that impact has also nullified in this particular year wherever they had store because they are now encroaching and embarking on their own store sales because they are opening and then cannibalizing more stores in the same territory. So what we have found out is very few impact in North India, almost no impact. In the South India, there is definitely some impact that we was witnessed earlier.
But not, I don't think maybe three to four stores in South India. Could be because the profitability or the losses become a little more sharper or a little more than what it used to be when we acquired. So we've taken a call because of maybe also because of certain stores like Style Union or Zudio or some Max which got opened or which are performing better. So some of those pieces happen in those particular territories. But other than that, no.
Thanks. That's all from my side, and all the best for FY 2025.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address the questions from all the participants, please limit your questions to two per participant. Thank you. The next question is from the line of Rishi Mody from Marcellus Investment Managers. Please go ahead.
Hello. I'm Lalit Agarwal. Can you hear me?
Yes. Hi, Rishi. Lalit.
Hi. Hi. A couple of questions from my end. The first one being the number of stores that we shut down, right? How much of annual savings in the bottom line are we going to see from these shutdowns in FY 2025? And, how many more stores are we planning to shut down in FY 2025?
So Rishi, the annual savings which have not got factored in the last year's financials would be to the tune of roughly around INR 4 crore-INR5 crore. I think, large part of the closures actually happened only towards the end of the year and very, very focused, you know, concentrated around March itself. So, the savings should not exceed that. But more importantly, as I mentioned during the opening remarks, the focus is to ensure that we have the right, capital allocation. So we focus the energies towards more profitable and more growing stores rather than, you know, laggards. In terms of the closures for next year, there is no fixed number identified as yet.
But, because we are on a cleanup spree and we had closed some stores the year before and also in the last year, we will want to make sure that anything which is not meeting the threshold norms, which is not meeting our standards, gets to, you know, pull up its pants and start performing, or we, you know, sort of, make it to exit. So I think not more than five to seven, but there is no number or names identified as yet.
Understood. How many new stores are we planning to open up in the coming year?
I think we should be looking at between 40-50. We would definitely want to open more, but let's see how it goes.
Okay. Fine. That's it. Anand, thank you.
Thank you. The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Yeah. Hi, good afternoon, Anand and Lalit Agarwal. My question was, you know, just going back, if we see 2018 was the peak performance year on all metrics for V-Mart. And then since then, we have gone through a lot of ups and downs on the macro side and internally as well in terms of the reorganization of the company and, you know, institutionalization of a lot of departments. So my question was, do you see yourself going back to those metrics, hitting those metrics in the next two to three years, whether it be ad rent, your expenses, or store metrics for that matter? That's my first question.
Lokesh, I really want to see those.
Yeah. Definitely, we want to reach to those numbers which are our dream numbers. But yes, we required a lot of a lot of other things also in our on our marketing, whether it is Unlimited stores or the stores that or the online retail that we have acquired. So not everything could reap in same results. And the market is also not the same because there are definitely a lot of more players who have come into the market. So the overall, you know, the percentage that you could save or the sales per sq ft that you could generate will take some time. Definitely, the path has to be taken up, and we are taking those paths. Maybe I mean, that time, we had clocked around maybe 790 sq ft. So we may not reach that tier immediately.
It may take for us maybe around two years so that we surpass the 725 number and come to 750. So that's the idea that we have, and that's what we will do. But yes, hope for good. If you guys predict and you guys feel that the market is really going to boom and the currency is going to be better, maybe we plan a little more higher growth in sales and then draw some more inventory and then achieve those.
Great. Great. Lalit, my second question was on the gross margins.
You know, given that, you said that, you know, you have Unlimited in your city and you have Limeroad, so your business model has, you know, somewhat also changed in terms of moving from low price point to high price point product. Do you then see that you need to improve a lot on your gross margins given that your corporate structure has also, you know, changed from what it was in 2018 to what it is now, to accommodate those, you know, changes, and not really deviating from your, you know, policy of fair pricing or honest pricing?
No, Lokesh, I don't agree with you. We have never been in this side of the game where we have tried to surpass our overheads through our gross margins. Our overhead should be catered by our volume and our expansion or our rate of growth or our number of stores, that result into more profitability. So I don't think we have done anything such which is resulting into a higher overhead for us. Definitely, there are a few initiatives that we have taken. We are also being very, very conservative, and we are being very, very efficient trying to become efficient on those areas where we had those extra slippages which were coming in.
So we are trying to be very, very focused on aligned with our customer's requirement where we, we've understood that they don't want us to charge more. They can't pay more. We can't increase the ASP. So we can't increase the gross margin also. We will have to definitely deliver better and better quality. We have to deliver the best fashion at the prices which are most, most effective and most, the best prices in the market. So, so definitely, percentage in, of gross margin cannot go up, and we will not target that. We will definitely want to target huge higher volume and more, more rupee rupee gross margin from the same store. That's our approach, and that is what we should try and do, which is sustainable also.
Great. Great. All that's it from my side, Lalit Agarwal. Thank you so much.
Thanks.
Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah. Good afternoon, team, and thank you for the opportunity. So my first question is that, obviously, in FY 2024, we've taken price corrective actions, and we've seen declines in ASP, starting FY 2025, do you think there is still any need to see any further price corrections, or we are done away with that?
So, Bhargav, we have already commented that we are done away with all of that. We don't want to do any price correction now. But definitely, there is a choice that the customer has. And as I said in my opening remarks also, the consumer is choosing a little lower price point product more versus a higher price point product. So the mix between the product purchase or the product purchased by the customer can get a little tempered, and that may effectively result in, you may see a little lesser ASP. But I don't think there should be a lot of shift. We are very, very clear on this. We have already done our part.
Now, we have to only put more effort, and we are doing it, on quality and fashion parameters so that we are able to convert the customer more and more.
Secondly, sir, we've seen a significant jump in terms of footfalls. So in your opinion, is the price cut, a reason why the footfalls have been coming in, or is the merchandise change here which is leading to higher footfalls?
So I think there are two, three factors. The biggest factor of it is actually, there I mean, we have been doing it for multiple, multiple months, but still, there were regions which were still not recording the right footfall. And the way of recording the right footfall is manual. So there are times a lot of mistakes which happen. So there is some part of correction which is there, there which has resulted into some number which is going which is being seen. But other than that, definitely, as you know, that there are there are more number of stores on the same road. The customer always keeps researching their products. So they want to try all the stores, look at all the stores so that the cumulative footfall becomes lower, but the but the individual store do receive a higher footfall.
So some of those footfalls do come in. And definitely, when you have a little new style of merchandise or new designs of merchandise, we do see some, you know, some customers who are who may buy after some time, but they do want to come and visit and see the product, because the youth normally do that more, more and more often. Because if they don't have money in their pocket, they'll come and see the store, research the product, and then ask my store guy, "Please, this one size [Foreign language] " and will come back and, and buy it again. So there are those pieces that also have started happening, as I said. The youth is becoming more active, and it is becoming more mobile.
So my last question is that we've seen the contribution of V-Mart rising in Limeroad's overall revenues. It's now at around 25%. Where do you think this can settle maybe in the next couple of years?
We don't know. But anyway, I mean, our goal is to increase only. We would definitely want to have at least one-third share coming in from V-Mart revenue in Limeroad business. So that's definitely. But yeah, as V-Mart ASP is also very low, it becomes very difficult to drive profitability out of that kind of ASP. So we are being very conscious in trying to balance with those also.
Fair to say there's no extra discounting being offered, right, on that channel, meaning of?
Zero. Zero. Zero.
Great. Thank you. Thank you for the opportunity.
Thank you.
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, sir. Thanks for taking my question, and congrats on a good set of numbers. So, I have two questions. Firstly, on the Unlimited part, so out of the 74 stores that you had acquired in Unlimited, how many are still there, and how many have you closed? And, sub-question to this is, what is the margin profile of the new stores that you are opening in Unlimited right now? And this is pre-Ind AS, I'm talking. And what is the margin profile of the legacy stores that are remaining, that are still functioning?
So hi, Sameer. So out of the 74 stores that we had acquired, 58 stores, we are still running. And this is after multiple rounds of assessment, multiple rounds of closures. So it's not that only the closures have happened in the last quarter or last year. We opened we closed a few stores in the last year as well. We closed a few stores this year. So the objective is not to, you know, you know, close everything, but the objective is to make sure that we are running the most optimal and the, you know, the, most growth-oriented stores. So, the new stores that we have opened as I have been speaking for the last couple of quarters, the new stores that we have opened are giving definitely a much better sales per square feet even than the legacy stores.
The difference is almost to the tune of around 15%-20%. Now, it's been just 1 year or 1.5 years since the time these new stores have opened. So we would definitely want to wait and watch the sustainability of this delta, sales per square feet. But whatever we are seeing so far is giving us a lot of hope and optimism that this is something that we would want to build further on. The big difference also is that the new stores that we have opened in South are largely in Tier 3, Tier 4 locations versus the legacy stores which were in Tier 1, Tier 2 locations. Tier 3, Tier 4 format is something that we have always specialized in and is also giving us good results in South.
In terms of the margin profile, just because of the delta 15%-20% sales per sq ft difference, the EBITDA margins or the store-level EBITDA margins in the new stores is almost at par with V-Mart, in fact, even better than V-Mart stores, in general because the rental that we are also taking in these stores is exactly, you know, in line with what the V-Mart model is, which is roughly around 5%-6% of revenue versus for the legacy Unlimited stores where the rental is almost 12%-15% of revenue. So that's the big difference.
So this 58 stores this whole mass of 58 stores is still at an EBITDA loss, at a pre-Ind AS level?
No. They are not at a EBITDA loss. They are, in black.
Marginal profit, I would assume?
Yeah, roughly around 4%-5%, profitability EBITDA level.
Oh. Oh. They have improved so much. Cool. That's helpful, sir. Secondly, sir, on the gross margin bit now, on a year-over-year basis, if you look at this, this quarter's gross margin, it is kind of flat. But, even if you compare with 2Q, generally, 2Q to 4Q, the gross margins don't change much. And this part of inventory correction, provisioning, etc., and ASP reductions, that has kind of continued since 2Q. So just wanted to understand this, in decrease in gross margin, like a 200-300 basis points decrease here. Just wanted some color on this.
See, largely, you have to also understand the base impact. See, last year, the provisioning that was required to be done probably would have been done on the stocks that we would have purchased during COVID times, so one season, you know, one year back or one and a half, two years back. Now, at that point of time, the level of inventory that we were carrying because of the omni situations was slightly lower, our inventory levels were much lower. And therefore, the provisioning required last year or the liquidation also that was required was slightly lower versus what was required this year. It's not a very big difference. This is, as I mentioned in my opening remarks, the inventory is quite healthy, and we remain very much in control of, you know, how we want to drive the inventory.
The freshness of the goods we are getting is extremely good, and that is reflected in the same store sales growth that we are getting. So not too much of a concern. I think provisioning is also, you know, transitory. So, it always comes back once we liquidate these stocks. So that's not a big issue for us.
The extended winter in the northern and eastern regions, that didn't help.
Sorry to interrupt you, sir. I request you to come back for a follow-up question. Thank you.
Sure, yeah. Thank you.
The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Sir, three questions from my side. First is on the Unlimited inventory. You know, in your opening remarks, Lalit, you mentioned you experimented with lower-priced inventory in South, and you have got very good response. Our checks suggest that these are Unlimited branded inventory which you have done, and with only a handful of stores. And if the response is good, do you think, you know, in the coming season, you will roll it out across that 70 stores of Unlimited, and that could further bring the ASP down for Unlimited?
So it is just not that inventory, Kedia, Aniket. So, definitely, that is one inventory that we have experimented, as I said, about the Gen Z collection. That's the Gen Z collection that we have launched and also some labeled where Unlimited is being labeled. But there are also other stuff which is in terms of, you know, the entry-price point inventories, some promotional products, which are those lower-ticket items which we used to do in V-Mart. But when we started earlier, we thought that this South India customer is a little different. They are more premium. We want to give them a little more premium product, which didn't work for us in the first year. So that is why we changed our strategy, and we brought in some more inventory lined up with the similar cost of V-Mart and which is now clicked.
And we are able to see a lot of customers coming back from those inventories. So I think we there also, we have, we have done our ASP piece. But still, it may go a little bit down, but we are definitely getting those responses by increasing the volume. And this is what we wanted. And there's a good volumetric growth that we have seen in this quarter also in Unlimited markets.
Sure. Sir, my second question is on the inventory. You know, even now, if I look at inventory on COGS or on sale, whichever method, it is still higher compared to pre-COVID levels. Now, we are invested in the warehouse also. So there are supply chain efficiencies, and inventory over the medium term, you know, reduces. You have spoken a lot in your opening remark on inventory being fresh, healthy at the store-level correction. Now, to go back to pre-COVID levels and lower, do you think in the next one and a half to two years, we can aim for that, or it will take longer now given the current demand environment?
So, Aniket, we will definitely want to do it. One thing to be very, very clear that before COVID, we never used to have this partner brand inventory at our Unlimited stores, which has taken up because there, we are a little liberal because those inventories are primarily agreement is that you will return back those inventories. The inventory don't sell back. So we do have a little higher stock of those inventory because the average size of the store in Unlimited is also a little larger. And we want to keep those inventories. Those inventories form almost 15% or, of, of the total inventories. Yeah. So, so, so that is, one big chunk which makes it a little distorted. But other than that, also, I think it is more about sales per sq ft. It is not the inventory per sq ft which has grown.
The sales per square feet has to come in line with that. And on that, I think we are on the journey, and we are on the path. So if our same-store sales growth grows, and we are able to clock the same sales per square feet, I think it will the averages is going to come back because, see, when there is a store, it has to have a particular piece of inventory or a density of inventory. That is how we are aligning. But yeah, definitely, we are being very conservative. And you must have seen that we have improved our working capital and our inventory days also year-on-year. And we are improving it very sharply.
Sure. And sir, my last question is on Limeroad about loss guidance. You know, last year, you know, you have met the loss guidance, what you have. You know, it's been lower than that. For FY 2025, you know, while you are cutting losses at the cost of growth, now, so what should we model from a Limeroad losses perspective?
So I think definitely, see, we should model that we should not go beyond 40%-50% of the loss that we have this year. So we should not go that far. That's our maximum plan. And we will reach that also. So it should be relatively half or more less than half, the loss should be.
Thank you, sir. Thank you, and all the best, sir.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hi, Lalitji. Anandji, good evening. I'm just trying to read on slide 10, this, tier-wise number what we have given. It seems that Tier 1 and Tier 4 is doing better. But Tier 2 and Tier 3, we still have a problem, and it's growing 6% and 1%. So is the number of stores what we have closed is largely in this territory, or, there is some action which we are planning to take it further?
So, see, there is an improvement, as I said in my opening remark also. There is an improvement which has started coming. It is largely from Uttar Pradesh. You know that for Uttar Pradesh and Bihar, we had maximum number of Tier 3 towns. So these towns were not performing. And we were seeing a lot of competition also coming in this particular territory. And also, the markets were not performing in this particular area. So some growth has started being seen both in the last quarter as well as this in these months that we have seen after the quarter ends. So, I think, as the economy or as the consumption spree comes in, this is the first town which should go and give us those results. And when they come back, we should expect the consumer sentiment is back into the market.
So the reason why I'm asking, if assume that the season has started well, and I think if over a period of time, things improve, and if this business comes in a positive or much stronger, it's not difficult for us to report more than 15%-20% growth. Is the way we should look at it?
Ask it more . I don't want to name that. But definitely, we would love you if you make it happen.
No, because the largest chunk of stores are sitting in this territory. So that's why I'm wondering.
No, no. I do understand. I do understand. And that is very, very important for us. This is the most important territory. And this is where our focus is. And this is where we are working a lot. So we will definitely want to make it happen, but they think it's not there.
Okay. My last question is on, in the beginning slide, you have said that footfall has grown 25%. And, even, when I look at the same store, volume growth is around 5%. But Unlimited is very starkly much higher at 26%. But the same slide I'm reading, our conversion rate has now fallen steadily. I mean, it used to be +60%. It's now come down. And pre-COVID, it used to be higher of 60. Now, it is 49. So is there any worry because I'm seeing that your transaction size and average selling price, which we have already taken action by cutting the prices. So is there some metrics you can provide how we should monitor this number, or maybe is it a number you're very?
As I told earlier, this is largely a little bit more about the recording piece as we are beginning to become a little more analytical, a little more into the discussion on why the footfall conversion is not happening or why the growth is not coming in. Then we are getting the number that is actually, we are not capturing the right footfall. The team is not capturing the right footfall. The process of capturing was a little different in a different region. So we've standardized some of those. So that is why some of those pieces are being seen. But other than that, I think there is also some change where we see higher, bigger family size coming in, bigger, I mean, even if they want to buy one T-shirt, they will have two people coming in.
So, so minimum rate of conversion cannot be more than 50% is what I see because sometimes these four, four, five people come. So you can't you can't expect that to be converted to 50%-65%. So I think this is a genuine conversion. It doesn't give me any other picture. But it always also tells me that very clearly we are having a good excellence over our process. And we are getting customers. And if we get customers, we will definitely convince them. As I told, the customer is becoming a little more research-oriented in their mindset also. They want to come and see and then buy later. So some of those activities are also being witnessed a little higher.
So the reason why I'm asking, Lalitji, is basically, earlier, you were focusing too much and spending a lot of time in UP, Bihar. Is that whatever actions and strategy you have implemented, will it be directly that you will spend more energy on the eastern market and the non-UP market?
Sorry to interrupt you, sir. I request you to come back for a follow-up question. Thank you. The next question is from the line of Tanmay Gupta from Motilal Oswal. Please go ahead.
Hi, sir. Good evening. Actually, sir, I just wanted to understand that what could be the magnitude we should need in SSSG growth, to reach at the pre-COVID level of, you know, it would be the margin of 8% versus currently, adjusting Limeroad, we could be having around the 3%-3%.
So, see, definitely, it is a tough ask. But yes, we need to grow at least 8%-10% for two consecutive years to reach to that level. So we should have that kind of growth. And then once we have that kind of growth, definitely, the costs have been constrained. There is a lot of work which has been done. So, around 8% SSSG growth for the next two years should bring us to that level.
Thank you. Sir, just to understand that the L2L SSSG has been very higher than the, you know, value retail. So what extra what they are doing? Just wanted to understand on that way and what we are like we will be doing for that.
Tanmay, it is definitely we are tracking our competitors. We understand there are a few good things that they have done. But yes, there are also a few, few things that which are non-scalable, non-sustainable, which also they are trying to do, which we may not be immediately able to do. But yes, we are trying to put our best in improving our own standards, our own benchmark. There are a lot of learnings that we do definitely have. And there are a lot of good things that we also want to continue with our own initiatives. Yes, I mean, there are certain, you know, short-term mindset initiative where if the products are being sold at a lesser price and, and giving a little better off, better offer to the customer, sometimes the customer do want to go for that.
but also, as I said, quality is going to be the sustainable parameter. We will want to focus a little more on those where the results may come a little slower. But yes, those are sustainable results. And we have always gone for sustainable results.
All right. Thank you very much for this.
Thank you.
Thank you. Ladies and gentlemen, we'll take this as a last question. I would now like to hand the conference over to the management for the closing comments.
Thank you, everyone. Thanks for asking a very relevant question. Your questions do motivate us and make us more interested and analytical in terms of our approach in looking at the business. These inputs are very important. Keep giving those inputs, both online and offline. So, these are very, very important. The times are definitely very exciting. A lot of opportunity being seen in the market. We are also geared up. There's a lot of change management in the organization. We definitely want to continue with some changes that we need to bring in, in our management, in our teams, in our ways of working, in our behavior. And those some of those things have led us to this positive result. And then some of those things will also give us a better positive result.
As the size of the organization has become larger, it is not the same pre-COVID kind of organization which used to operate now. So it has to definitely bring out its best and eyes for a higher rate of growth, but definitely not lose on certain grounds. So we are very careful of all of those. We continue to be governance-focused, ESG-focused. We want to have a very ethical and good business practices in our organization. Great. Thank you so much for being there and listening to us.
Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.