Conference call takeaways
Extended store closures in Bihar and UP in Sep impacted footfalls. Currently, the company is
seeing good recovery in the core catchment area. Demand is higher in tier-3/4 stores compared
to the tier-1 market. The recovery in the north and west is slower compared to stores in east
India; however, VMart didn’t see complete recovery during the Durga Puja festival season.
Retailers with low liquidity are under pressure, while most of V-Mart competitors are doing well.
Winter has come a bit early this year and the company has already stocked winter merchandise in
its stores, which has resulted in good offtake. Pending marriages from summer are expected to
take place in the winter, which could increase sales, even if the number of customers attending
these would be significantly lower than in pre-pandemic times.
While VMart closed two stores in Q2FY21, it hasn’t planned store closures ahead. It opened 7 new
stores in October and plans to open more stores.
Gross margins were depressed due to higher provisions, and extended end-of-season sale in
September for liquidating inventory.
Inventory has reduced by Rs 1.1bn in the last six months as VMart liquidated old stock. It also
started buying winter inventory. It has lowest levels of summer inventory; a large portion of
current inventory is winter and core products. Trade payable reduced by Rs 1.1bn as vendor
payments due till August 2020 was cleared. VMart continues to support vendors in order to gain
preferential status.
Online revenues are less than 1% currently. VMart continues to focus on digitisation, as customer
adaption increases.
The company has taken an enabling resolution to raise Rs 5bn. Depending on the business
recovery and external opportunities, management will consider raising funds in the future.
Employee salary cuts have been rolled back from September; the company will spend aggressively
on advertising for increasing customer traction in the festive season.
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