Delhi-based V-Mart Retail has lowered its revenue growth outlook for fiscal year 2025-26 to 15-18% from its earlier estimate of 17-20% after festive-season sales failed to meet expectations. The small-sized hypermarket chain operator cited weaker-than-anticipated festive momentum despite seeing steady underlying demand.

Revised Growth Targets and Performance

Managing Director Anand Agarwal confirmed the company achieved 16.00% growth in the first nine months of the fiscal year. The revised full-year guidance reflects the impact of subdued festive sales, though management maintains confidence in the long-term growth trajectory.

Agarwal emphasized the company's focus on profitable growth rather than pursuing headline sales numbers, noting that margins are expected to continue improving gradually despite the seasonally soft fourth quarter.

Margin Performance and Outlook

The company reported significant margin improvements in the first nine months, with EBITDA margins reaching 14.50%, representing a nearly 200 basis points improvement. While the fourth quarter typically remains the weakest period for profitability due to January and February being slower months, management expects continued margin enhancement over the previous year.

Unlimited, the company's premium format, showed strong performance with EBITDA growth exceeding 40.00% and margins matching the V-Mart business. However, Agarwal noted that pre-Ind AS calculations still show higher rental costs impacting Unlimited's profitability compared to V-Mart stores.

Store Expansion Strategy

V-Mart Retail plans to maintain its aggressive expansion strategy with 13-15% annual store network growth. The company expects to add approximately 75 stores in FY26 and 80-85 stores in FY27, building on its base of 500-plus stores.

Market Competition and Growth Potential

Addressing concerns about increasing competition in tier-II and smaller towns, Agarwal highlighted that rising competition validates rather than threatens the business model. He noted that only 30% of India's apparel retail market is organized, leaving approximately 70% still to shift from unorganized to organized players.

The management views the entry of new players as validation of the market opportunity, with significant headroom for growth driven by both market organization and overall consumption growth. Success factors will depend on customer understanding, regional relevance, discipline, and long-term commitment to the market.

Financial Performance Context

Despite the revised guidance, V-Mart Retail maintains its position as a key player in India's organized retail sector. The company's shares have declined over 21% in the past year, reflecting broader market challenges and competitive pressures. However, the focus on profitable growth and margin improvement demonstrates management's commitment to sustainable business expansion rather than growth at any cost.

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