North India-focused fashion retailer V2 Retail Ltd reported an 82% fall in its sales for the Apr-Jun quarter, as the COVID-19 pandemic hurt consumer sentiments and frequent lock-downs disrupted store operations.
Revenue from operations fell to Rs 37 cr from Rs 202.3 cr in the year-ago period and Rs 129.2 cr in the March quarter.
The company had already started seeing the negative fallout of the COVID-19 pandemic in the March quarter, but the full extent of the damage was visible in the Apr-Jun quarter.
As a retailer that is primarily focused on garments, the company has been among the worst hit among the listed players.
Against the 82% year-on-year dip seen in V2, for example, bigger competitor D-Mart saw a revenue decline of only 33%. D-Mart gets most of its revenue from the sales of daily essentials.
Despite the sharp fall in revenue, V2 was able to cushion some of the negative impact on its bottom line by recognizing rent concessions by some of its landlords as a one-off income of Rs 6.75 cr.
Because of this, its loss before tax actually narrowed to Rs 11.78 cr during the Apr-Jun period compared to Rs 15.47 cr during the Jan-Mar period. This is all the more striking since the company’s revenue fell by a whopping 71% in Apr-Jun compared to the March quarter.
In the corresponding quarter of the previous year, V2’s pretax income was Rs 7.72 cr.
On a net basis, the company liquidated inventory worth Rs 11.55 cr in the quarter and purchased stocks worth Rs 14.44 cr, indicating that it was focusing on clearing inventory. In the March quarter, it had added inventory worth Rs 16.47 cr.
Nevertheless, it took a provision of Rs 4.06 cr during the quarter related to inventories.
Chairman and Managing Director Ram Chandra Agarwal said there has been a “severe economic disruption and demand contraction” since the last quarter of FY20.
“The consumer sentiment has changed from positive to cautious and will take some time to return to normalcy. The entire economy is facing a slowdown, retail sector being one of the most impacted sectors as people shift their consumption to only essential,” he said.
Agarwal said V2 Retail is witnessing “a gradual pickup” at stores where operations have resumed fully.
“However, due to the various amended guidelines issued by local authorities including phasing/re-imposition of lockdowns to combat the spread of COVID 19, the store level activities have been impacted,” he said.
The company shut two of its outlets permanently during the quarter, bringing the total down to 74.
Bihar continues to account for the highest number of stores at 17, followed by Uttar Pradesh at 13, Odisha at 8 and Jharkhand at 7.
Most of these places are seeing a sharp week-on-week increase in the number of COVID-19 cases, and could see the situation deteriorate in coming months. The company, not surprisingly, warned that it expects an uptick only in the Oct-Dec quarter, with Diwali possibly heralding the beginning of a turnaround.
“The trajectory of recovery from this pause would depend on the playout of the Covid pandemic and its effect on consumer sentiment and confidence,” Agarwal said.
“We anticipate the situation to stabilise and start turning positive from quarter 3 of this fiscal year. We believe that there would be serious uptick in consumer demand with the onset of festive season starting from Durga Puja and Diwali.”
The company said its long-term prospects remain undiminished.
“We are confident that following this pause, our growth and profitability will continue to accelerate on the back of sustained focus on customer experience, merchandise selection, strong brand recall and our omnichannel presence,” Agarwal said.
V2 Retail said it is taking measures to keep its costs under control, including rental renegotiation, engaging with suppliers and control over variable costs.
It also launched e-commerce www.v2kart.com during the quarter, which it said has received an exciting initial response.