Retail stocks are in focus - Avenue Supermarts (D-Mart) hit a record high yesterday, Amazon recently bought 5 percent stake in Shoppers Stop and other triggers like the festive and marriage season as well as post goods and services tax (GST) recovery lie ahead.
In an interview to CNBC-TV18, Lalit Agarwal, CMD of V-Mart Retail spoke about the latest happenings in the company and sector and also shared his outlook for FY18.
Have seen sales come back and festive season has improved sentiment, said Agarwal.
"We have plans to open up new stores every year and even this year we are planning to open at least 25 new stores," he added.
Below is the transcript of the interview.
Surabhi: I want to talk about your company first because you had some very solid same store sales numbers, in the 20s in the first quarter. Now as we are looking at these triggers, the festive season buying, is that number going to get even better?
A: The bull run continues and the consumption is there. We have seen some shift in the festival in the quarter so yes, obviously, as a quarter we will see a good same store sales growth. But maybe we may not be able to replicate the first quarter same store sales growth. But yes, it is going to be good because we have also seen Durga Pooja and Navratri coming in before in this quarter which is normally in the third quarter. So yes, we will see a good healthy same store sales growth.
Post GST, there was a dip in the sales for the first one and a half month and now we are looking at the sales and coming back. So in this particular month in September we have seen the sales coming back. So there is a lot of enthusiasm in the consumer. The aspirations to consumer more is there. So they want to look fashionable.
Varinder: I have two questions for you. One is that in the last five years, if I track your profit and revenue, they have grown up by 29 percent compounded growth rate and the margins have been maintained around 8.29 percent market. Tell us on the backdrop of what you have already said that in the next 2-3 years, is it possible to grow at 30 percent compounded annual growth rate (CAGR) V-Mart and also to improve margins from current run rate of nearly 8.8 percent to how much?
A: This is obviously a scenario of consistency and economy being good. So yes, we still feel that the glass is half filled and we have been able to maintain a CAGR of almost 30 percent for the last 8-9 years. So we have seen that happening and there are no reasons that that should not happen. It is all about the same story sales growth and the new store that we need to open up. So we have plans to open up new stores every year. Even this year, we are planning to open up at least 25 new stores.
And we would continue increasing that also besides trying to address the existing sales from the existing stores. And yes, on the margin side, if the new stores or the same store sales growth continues which is around 10 percent also, there will be an operational leverage that we will get. We have a lot of fixed costs and whatever new sales that we derive from the existing space, that will straight away go to the bottomline.
Varinder: Last quarter also you expected to open 25-30 stores but you were able to open only 8 stores. Why was that? And again, my thinking is that a lot of talks are happening in order of this consumption theme and a lot of stores opening up, but actually on the ground they are not getting converted.
A: We always had a target of opening 25 stores in the whole year, not in the first quarter. So we were on target of eight stores that we opened up in the last quarter. And we are there. So what you are saying is perfectly right that people on the ground has not got enough money now. Their income level has not got up. So primarily the consumption is coming purely from aspiration and less of saving, so the youth is driving the consumption right now because he believe in spending, he believe in looking good, he believes in getting what he wants. So that is driving consumption right now.