V-Mart Signals weak sales for the June quarter

New Delhi: V-Mart Retail Ltd. could see a slowdown in its sales in the first quarter of the financial year 2023. The value fashion retailer has the largest concentration of stores – nearly 47% - in UP and Bihar, and these states contribute nearly 65-70% of the topline. The management said in an analyst meeting to BOB Capital Markets that during Q1, these two states have been witnessing major unrest and communal disputes which have resulted into sale loss. UP is facing partial disturbance due to the strong BJP government. But Bihar is witnessing a major unrest, which has forced 80% of the stores to get impacted about 60% of the time, the management added.

During the quarter, the company also took a price hike of 20% due to an increase in cotton prices. Though these price hikes completely pass on the rise in yarn prices, the same will impact volumes. Further, the consumer spending on fashion wear has overall taken a hit due to rising interest rate, which is a significant part of overall business. The higher inflation has impacted the household budget of common man. Thus, the company is witnessing a toning down of spends in the value fashion.

Despite these concerns, the company maintained its store expansion plans – 55-60 stores in FY23. The company will have major store concentration in Andhra Pradesh and Telangana in the South apart from UP & Bihar. The capex per store will be about Rs 1.3-1.4 crore, totaling Rs 80-85 crore. The capex will be largely funded through internal accruals.

On rental cost – which is one of the major costs – is expected to further rise in FY23 and FY24. During covid, the company had the benefit of a rental concession which will not continue henceforth. In Q1, the rent stood at Rs 40 per square foot which is expected to be Rs 42-43 per square foot in FY23. As per the management, in FY24 the rental rate will further increase by another 6-7%.