Concall Summary: V Mart Retail Ltd Q4FY20

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Participants

  • ICICI Prudential
  • Spark Capital
  • Edelweiss
  • Invesco Mutual Fund
  • Motilal Oswal
  • Phillip Capital
  • HDFC Securities
  • Nirmal Bang

Concall Highlights

  • V-Mart has a strong presence in Bihar, Uttar Pradesh, Jharkhand, Orissa, and Bengal. Migrant laborers in these states are returning from cities. They used to send money to their families which will come down
  • The company has paid the salary till date and will not drive out employees. V-Mart will pay for upcoming months but maybe there will be some deferment or some reduction
  • Customers who buy from V-Mart are customers who only buy their basic requirements. So, they are all lead base buying, nothing aspirational and discretionary
  • Company has lost almost Rs 75 crores of sales in March; same-store sales growth for the quarter was -18%
  • During the quarter, the company added nine new stores, while five locations, which were to be opened during the quarter, had to be put on hold due to the pandemic
  • Uttar Pradesh crossed its milestone of opening the 100 stores
  • Rental cost increased as a percentage of sales as new stores couldn’t contribute to the top-line that much
  • Gross margins declined 50 bps during the quarter due to an ad hoc provision. On a normalized basis, gross margins would have been 30 bps higher
  • Company is negotiating with landlords to waive off rentals for the lockdown period and reduce rentals further for at least the next three to six months; almost 1/3rd landlords already agreed on that
  • V-Mart has opened a total of 55 stores in the year, which is highest in any year
  • The company was debt-free as of 31st March 2020
  • Roughly 50% of stores are open though the company has received permission for almost 70% stores
  • Electricity expenses have been negligible as few states announced no fixed charges for the lockdown period
  • Company is working on, to reduce the fixed cost to 50% – 60%
  • V-Mart will increase the FMCG offerings in some additional stores. Currently, 45 stores sell FMCG products
  • The app is already live on Apple Store and Google Play Store; more than 10,000 products have been photographed and cataloged
  • Almost 95% inventory is apparel, out of which almost 45% is core inventory, which is non-seasonal
  • Full-year rental expenditure is roughly around Rs 90 crore
  • Company will not add any warehouse in the current year and for the next one-year
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Image source: Company website

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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