MUMBAI: The retail sector has been one of the worst hit by the coronavirus pandemic. Consumers spent more time indoors to prevent contracting infection, which ultimately led to lower demand for products such as apparels. Value fashion retailer, V-Mart Retail Ltd wasn’t spared this pain either. In the December quarter, the company had swung to profit after having reported a loss in the first half of the FY21. But the recovery took a pause thanks to the impact of the second covid-19 wave, which meant V-Mart’s earnings took a beating yet again. The upshot: for the March quarter, net loss stood at Rs1.5 crore.
Overall, V-Mart ended the financial year 2021 with a loss. “Reflecting the covid impacted performance and the added impact of IndAS 116 induced lease rent accounting, the company reported its first-ever yearly loss at Rs6 crore in its 19-year history,” said V-Mart.
Unfortunately for investors, the near-term path remains challenging with the June quarter expected to be a washout. “We revise down our FY22 revenue/Ebitda estimates by 31%/33% due to the impact of the second wave, but maintain FY23 revenue/Ebitda estimates given the expectation of swift recovery,” said analysts from Motilal Oswal Financial Services Ltd in a report on 31 May. Ebitda is earnings before interest, tax, depreciation and amortization.
To be sure, V-Mart’s March quarter results were broadly in line with analysts’ expectations. Revenues increased nearly 6% year-on-year to Rs352 crore. Footfalls declined 8% year-on-year. However, an increase of 8% in the basket size and higher customer conversions helped revenue growth. According to Motilal Oswal analysts, “Over the last 3–4 quarters, V-Mart has consistently performed better than other retail apparel peers. This is attributable to a lower impact in Tier II/III regions and downtrading by consumers in line with our channel checks.”
In FY21, V-Mart opened 20 new stores taking the total store count to 279. In FY22, the company is looking to open around 40 stores.
Meanwhile, shares of V-Mart are about 7% away from its 52-week highs seen in February. Even as the near-term remains tough, it would be interesting watch the pace of recovery once the adverse impact of the pandemic begins to subside. Some analysts believe that the company would be placed well once normalcy returns. “V-Mart’s debt free and cash rich balance sheet (post QIP) along with the launch of its new formats will see the pace of store expansion continue and also imparts higher growth visibility,” said analysts from Edelweiss Securities Ltd in a report on 31 May.
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