V2 Retail (V2RETAIL) Q4 07/08 earnings summary

Executive summary

• FY08 delivered strong expansion: reported total income rose 67.43% to ₹10,130.75m and net profit increased 62% to ₹406.4m.

• Store count reached 101 across 67 cities after 52 openings; daily footfalls rose 103% to 182,396 and conversion improved to 43.1% from 42.2%.

• Growth was funded through an IPO, higher borrowings and retained earnings; no dividend was recommended to support expansion.

Financial highlights

• Net sales were ₹9,529.7m and total income ₹9,607.4m, versus ₹5,713.1m and ₹5,737.0m in FY07; gross sales reached ₹10,053.1m.

• PBT rose to ₹631.9m from ₹393.8m; PAT increased to ₹406.4m from ₹250.7m.

• EBITDA increased 86% to ₹1,291.0m; reported EBITDA margin was 12.7%, up 120 bps, while net profit margin was reported at 4.03%, stable YoY.

• Cost of goods sold rose 62.2% to ₹5,616.1m; as a share of total revenue it declined to 55.9% from 57.5%.

• Personnel expense climbed 141% to ₹723.1m, reaching 7.2% of total revenue versus 5.0%, reflecting 7,371 hires.

Outlook and guidance

• Targeted 190 stores and 3.7m sq ft of retail space by FY09, then 500 stores and 10m sq ft by FY11; plans included entry into 172 new cities and 3 states.

• Private-label revenue contribution targeted at 25% in FY10 and 50% in FY13, from 15% currently; FMCG and non-apparel share targeted at 55%, versus 37% in FY08.

• Plans included 12 additional-state warehouses, 0.42m sq ft of added warehouse capacity, and trial expansion of HPCL forecourt retail to 20–25 stores.

• Growth strategy included new specialty formats, more FMCG and non-apparel products, and franchise stores to limit opening costs and risk.