Apparel retail chain V2 Retail plans to make a capital expenditure of Rs 50-60 crore on opening 40-50 new stores this financial year buoyed by strong demand and rising footfalls, a senior company official told Moneycontrol.
“We are seeing footfalls rise in high double-digits and expect the trend to continue even when there is no marriage season during May,” said Akash Agarwal, director, V2 Retail.
Driven by rising footfalls, the company reported a 40 percent growth in Same-Store Sales growth (SSG) in Q4 FY24. It witnessed a healthy SSG of 47 percent in Q3 FY24 and 29 percent for the nine-month period ended December 2023.
Expansion plans
V2 Retail has opened 7 stores in this fiscal so far and is seeing a good response in all of them, as they are being set up in clusters where the company is already present.
“The next year's projections will depend on the performance of these new stores. If certain business metrics are met and profitability is maintained we aim to open another 50-60 stores next year,” said Agarwal.
As of December 31, 2023, V2 Retail runs 107 stores covering approximately 11.4 lakh square feet of retail space. In the April-December 2023 period, the company launched 14 new stores and shut down 9 unprofitable ones, aiming to enhance overall store productivity metrics.
Agarwal noted that V2 Retail hasn't been affected much by the sluggish demand due to internal improvements and enhanced product offerings. The company is attracting more customers to its stores, likely drawing them away from competitors, he said.
He said that the company’s ability to design and manufacture products in-house has helped it offer a variety of products at different prices and stand out from competitors.
Online business
Due to the strong performance of its offline channel, V2 Retail doesn't want to burn money on e-commerce and intends to use it as an additional channel for existing customers, without heavy spending on customer acquisition. Agarwal noted the initial goal for the online business is to limit spending to 2-5 percent, focusing on organic traffic, growth, and customers. However, this will depend on the traction and service level provided.
V2 Retail aims to go live with its online business in two months, he added.
The retail company’s target for Earnings before Interest, Depreciation, Taxes, and Amortisation (EBITDA) per square foot going forward is to achieve a pre-Ind AS (Indian Accounting Standards) EBITDA percentage of 8-10 percent. This target applies to both this quarter and the entire year.
For the nine months ended December 2023, V2 Retail's consolidated revenue increased by 35 percent to Rs 868.7 crore. Operating profit jumped by 67 percent, and the company turned a net profit of Rs 24.1 crore, compared to a loss of Rs 5.1 crore in the previous year.
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