V-Mart Retail Ltd’s shares have put up a stellar show, more than doubling over the past year (up about 120%). Sure, it helped that the stock was beaten down around a year ago, hovering near its 52-week low of ₹1,741.70 on 13 December 2024. Moreover, investors seem pleased with the signs of recovery in the company’s recent results and its improved outlook for the second half of FY25 (H2FY25).
V-Mart is a value fashion retailer that focuses on tier 2 and tier 3 cities. “While demand in the urban Indian market is experiencing a slowdown, rural demand is on a comparatively better footing. This is expected to aid sales of V-Mart, which is mainly concentrated in smaller towns,” said Preeyam Tolia, analyst at Axis Securities. Also, reducing losses in online marketplace LimeRoad is a positive, he added.
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The September quarter (Q2FY25) marked the sixth consecutive drop in LimeRoad’s Ebitda loss to ₹7.3 crore, down 29% sequentially and 63% year-on-year. V-Mart expects LimeRoad’s losses to keep falling quarter-on-quarter. The company aims to build a sustainable business model for LimeRoad that could improve the omni-channel capabilities of the entire V-Mart group.
Lower LimeRoad losses, better sales growth, and reduced marketing spends helped V-Mart post better-than-expected Ebitda performance in H1FY25. Footfall rose sharply, aiding 18% revenue growth and 13% same-store sales growth (SSSG), which isn’t bad at all.
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V-Mart remains focused on opening more stores and plans to add 55-60 in FY25. The company said closures of most underperforming stores is now complete. V-Mart opened 21 new stores in Q2FY25 and closed two underperforming ones, taking its total store count to 467 at the end of September.
Is growth priced in?
The company’s good run may well continue. “Management said robust growth would continue in H2FY25, led by strong traction in footfall in the core markets and double-digit SSSG; providing better designs in the affordable segment; efficient supply-chain management; and its omni-channel strategy through LimeRoad,” Centrum Broking’s analysts wrote in a report on 9 December after speaking with V-Mart’s management.
Even so, the stock’s sharp rally suggests investors have factored in the positives adequately, thus limiting sharp near-term gains. Investors will closely watch trends in demand recovery and LimeRoad’s profitability from here. Notwithstanding the growth potential in the value fashion segment, V-Mart’s ability to fight the competition will be in focus in the medium-to-long term.
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