V2 Retail (V2RETAIL) Q4 09/10 earnings summary

Executive summary

• FY10 was marked by a 16.46% decline in turnover and a net loss of ₹4,147.2m, driven by weaker sales and a ₹3,417.2m inventory write-off; a further ₹507.9m warehouse-fire loss was recorded.

• Corrective actions included store and warehouse rationalization, closure of manufacturing operations, cost reductions and debt restructuring under the CDR mechanism.

Financial highlights

• Turnover was ₹11,054.6m versus ₹13,232.3m in FY09; other income rose to ₹130.3m from ₹94.8m.

• Net loss was ₹4,147.2m versus ₹944.9m in FY09; loss before extraordinary and prior-period items was ₹3,610.0m versus ₹917.1m.

• Cost of goods sold reached ₹12,585.2m, including the ₹3,417.2m inventory write-off; the ₹507.9m Gurgaon warehouse-fire loss was separately recognized as an extraordinary item.

• Administrative and other expenses fell 26.98% to ₹1,722.5m; employee costs declined 27.66% to ₹885.5m.

• Basic EPS was negative ₹162.47 before extraordinary items and negative ₹185.15 after them, versus negative ₹42.18 in FY09.

Outlook and guidance

• The focus for the ensuing year was minimizing losses and improving profitability; management expected benefits from restructuring measures to emerge in the following year.

• Plans included reducing debt and interest through CDR, expanding via franchise and revenue-sharing models, growing private labels, and closing nonviable stores and business lines.

• Management reported the business became EBITDA-positive in Q1 of the current year and cited positive working capital while pursuing a turnaround.