After two torturous quarters, value-focused fashion and general merchandise retailer V-Mart reported an 81% like-to-like sales recovery for the Oct-Dec quarter.
The number indicates that modern retail, with its air-conditioned showrooms, is still struggling to attract visitors unlike several other retail segments.
Some of the other segments, such as automobiles, consumer durables and even some industrials, have seen record-breaking sales during the Oct-Dec quarter due to the unleashing of demand that remained suppressed for six-seven months due to pandemic fears.
Automakers such as Hero Honda and Bajaj have reported all-time record sales during the quarter, while companies like Havells, whose fortunes are tied to the level of construction activity in the economy, too saw sales grow by 25-40% on year.
However, for V-Mart, Oct-Dec revenue was still down 16% compared to the year ago. This is despite the fact that this year, some of the festival season shifted forward into the Oct-Dec quarter at the expense of the Jul-Sep quarter.
“In Q3, the company’s revenue recovered to 84% of Q3, FY20, while like-to-like (LTL) sales stood at 81% of last year,” it said.
“The strong recovery in revenue’ was despite the slower recovery in customer footfalls, which stood at 72% level YoY, partial curfews and restrictions on public movement in some markets, and the prevailing fear of pandemic among the general public.”
V-Mart reported revenue of Rs 470 cr versus Rs 563 cr during the same three months of 2019 and Rs 176 cr in the Jul-Sep period.
“The combined effect of festive season, marriage-related, and winter shopping and thel ifting of the lock-down bode well for an uptick in discretionary consumption, which is well reflected in the company’s strong quarter on-quarter recovery momentum,” V-Mart said.
The two largest markets of the company, Uttar Pradesh and Bihar, led the recovery, accounting for 66% of sales in the third quarter.
On the profitability front, the company reported operating profit (EBITDA) of Rs. 104 Cr, which is 89% of what it reported for the same quarter last year.
“The strong recovery in the top line, well supported by an effective cost reduction mechanism and proactive inventory management measures, has significantly cushioned the pandemic’s impact on the company’s profitability, bringing it to a net cash positive status,” it said.
The company also launched 11 new stores during the quarter, taking the tally of new launches for the year to 13.
The majority of these stores were launched in Uttar Pradesh and Bihar, the company’s two largest markets, while Rajasthan, Assam, Madhya Pradesh, and Jharkhand accounted for the rest.
In line with the trend seen in Q1 and Q2, the average basket size (ABS), apparel average selling price (ASP), and conversion stood 9%, 2%, and 7% higher YoY, respectively.
These trends have remained consistent during the year and establish that post-pandemic, possibly because customers want to reduce the number of visits to shops and buy as much as possible during each visit.
On the product front, sweatshirts, jackets, cardigans, and pullovers were the highest-selling categories for both men and women, with customers starting their winter shopping relatively early in the quarter, the company said.
“Trendy casual wear and street wear made a strong comeback,as the aspirational youth combined need-based shopping with replenishing the fashion collection in their wardrobe,” it added.
V-Mart had liquidated its inventories aggressively in Q2, and put in a moratorium on new stock purchases soon after a nationwide lock down was announced in March.
During Oct-Dec, the company purchased inventory worth Rs 231 cr and also drew upon 67 cr of past inventory to meet its trading needs.
Overall expenses were down at Rs 407 cr versus Rs 486 cr in the previous year, while revenue was down at Rs 470 cr vs Rs 563 cr during the same period of the previous year.
Due to the restocking, the company was able to offer fresh merchandise to its customers in the third quarter.
“Further, the company came up with innovative marketing campaigns and promotional offers that resonated well with its customers, driving footfalls and sales during festive and marriage-related shopping, as well as giving an impetus to winter merchandise sales.”
All these steps aided higher footfalls and conversions,resulting into a higher sell-through rate for both existing and fresh merchandise, it claimed.
Chairman and MD Lalit Agarwal credited his company for having managed a “tough balancing act” between defending its cash flow and profitability, keeping a lean inventory and delivering greater value to customers, while ensuring that its partners and suppliers did not suffer irreparable damage from the pandemic shut-downs.
“We have emerged stronger and more resilient from the crisis,” he said. “I am ever more confident in my team, and our organizational capacity and capability to pursue accelerated growth and reach greater heights.”