Spencers Retail Ltd (NSE: SPENCER) Q3 2025 Earnings Call dated Jan. 16, 2025
Corporate Participants:
Anuj Singh — Chief Executive Officer and Managing Director
Sandeep Banka — Chief Financial Officer
Analysts:
Akhil Parekh — Analyst
Prakikshit Gupta — Analyst
Varun Singh — Analyst
Ravi Jobanputra — Analyst
Naitik Mutha — Analyst
Rishikesh Oza — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Spencer’s Retail Limited Q3 FY ’25 Earnings Conference Call hosted by Batliwala and Karani Securities India Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Akhil Parekh from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Akhil Parekh — Analyst
Thank you. Securities. I welcome you all to Special Retail’s 3Q FY ’25 conference call. On behalf of management, we have with us Mr. Anuj Singh, CEO and MD; Mr. Saket Sah, Group Head, Investor Relations and ESG; Mr. Sandeep Banka, CFO; and Mr. Pankaj Kedia, Vice-President, Investor Relations.
Without taking much time, I would hand over the call to Anit Sir for his opening remarks, post which we’ll open the floor for Q&A session. Over to you, sir.
Anuj Singh — Chief Executive Officer and Managing Director
Thank you so much and good afternoon, everyone, and welcome to the quarter three earnings call. Thanks for taking the time-out to join this call. We’ve just announced our quarter three results and I would like to give you some color on the numbers since they are fresh off the block. But before I do that, I’d just like to set some context and rewind to the last two analyst calls, which we’ve had in the last two in-quarter one and quarter two. And that will give us a good context against which we look at what we have accomplished in-quarter three.
So if — for those of you who joined us in-quarter one or quarter two, if you would recall in our quarter one call on 25th July, we had announced the decision in terms of ramping down of our operations in certain stores. We did mention at that point of time that it will have a large impact on-top line, 49 stores accounting for roughly 22% of top-line. But we also did mention that these were one of our highest losses making stores. They accounted for roughly INR56 crores of regional EBITDA loss at an annual level. They were in areas where our competitive strengths were lower than some of the other areas.
We also did say that this will allow us to optimize all our support costs, whether it be regional offices, DCs, corporate office costs. And the ultimate guidance objective was to say that this would help us accelerate getting to a positive EBITDA, which is your operating pre-INDS EBITDA from an earlier stated timeline of 12 to 18 months-to saying as close as within four quarters, we should be able to do that. That was what we had mentioned in-quarter one in July.
When we met in-quarter two, which was around November 6, we gave you an update on the status of our store closure, which was a large-scale exercise involving 47 stores. Obviously, it has an impact on a large number of people. We did talk about the fact that we had finished all our cost optimization exercise at the corporate office RODC and we had said that we will see a full flow-through of all of these in-quarter three. We had also told you in-quarter two that we are looking at developing a 30-minute e-commerce proposition the — for which a lot of work on the tech and the upside was going to be executed in-quarter three.
But if you all recall, I had also given some kind of a shape of a model P&L for Spencer’s where we said ideally a Spencer’s P&L should look like margins of 19.5%, store opex at 13%, ending up with a store EBITDA of 6.5% and then keeping support cost less than 6.5% to reach a true operational pre-INDS EBITDA of breakeven. I’m very happy to state that we have made some good progress in-quarter three against each one of those guidelines or guidance which we had kind of set-out.
So let me start by giving you a commentary on quarter three and then against each of those three. Quarter three, if you look at it was a relatively soft festive quarter, I think for industry as well as us with respect to consumer spend. The performance was actually a quite different across the Spencer’s franchise and nature’s basket. But if I were to talk about Spencer’s, Spencer’s, we saw a like-for-like. So we are now talking about continuing regions, which is after exiting. Our like-for-like sales growth was minus 1%. Offline online, sorry, grew by 20%, though YTD, we are at a plus 2% as far as like-for-like sales growth is concerned in the continuing regions. But I think it was a quarter where we superbly executed all our efficiency and productivity and cost initiatives. Our margins were at a record 19.7% for the quarter. For reference, it was 18.9% in-quarter three last year and was around 15% in-quarter two, which was the impact of closures. So really good work-in terms of getting margins up at 19.7%.
Our operating expenses, operating costs, which is a combination of store plus support costs were INR32 crores lower than last year. Last year, quarter three, our operating cost was INR102 crores. This year it was INR70. Of course, it was on lesser number of stores. So therefore store opex was lower, but also on account of all the corporate support costs which were fully realized in-quarter three. Our sales per square-foot, which is a good indicator of productivity per store was 1,875 in-quarter three this year and a comparative figure for quarter three of last year was 1,550. So good productivity gains as far as sales per square-foot is concerned. Our store opex, though we don’t give this number, I would take the liberty of saying was, was in the model P&L shape, which I said, which was 13.5%, which is again 100 basis-point improvement over comparable period last year. Our store EBITDAs were 2x, 2x or double of what our store EBITDAs were last year.
So I think overall, this was really, if I were to summarize the quarter-for-quarter three for Spencer’s, I would say it’s an efficiency led and productivity-led EBITDA transformation quarter. It has helped us deliver a 46% year-on-year EBITDA increase. So this is the financial EBITDA, which is post INDS. We recorded a financial EBITDA of INR17.5 crores this quarter versus INR12 crores in the same quarter last year. But I think the more important thing is that the operational EBITDA, which is pre-INDS was positive, was INR0.18 crores, which is a true indicator of the operation, which means essentially that our cash losses from operations for this quarter on Spencer’s was — was absolutely taken out.
This is the first time in the last 22 quarters that at an operational EBITDA level, we have broken even expenses. So I think a strong validation of our decision in-quarter two to focus on core regions, exit from loss-making regions and drive improvement across all operational parameters. This also means that we are ahead of our earlier guidance of achieving positive operational EBITDA pre-INDS by — we had said quarter two of financial year ’25, ’26. So I think we’ve demonstrated that we have done that before that. The challenge would be or I would say that the endeavor would be to ensure that we sustain this over the next couple of quarters because that really establishes the sustainability of the model and therefore, whatever strategic choices we’ve made.
The other thing on Spencer’s was that we mentioned that we will work on development of an e-commerce proposition. We already have an e-commerce proposition, which is what we call an express delivery, which is in Calcutta and a few cities where we operate where the fulfillment happens from the store. And we made significant investments and a lot of development work has gone on to develop a new tech backbone, which enhances the user experience, user interface, so things like discovery is much more intuitive, much more user-friendly. It is also something which is suitable for colloquial search. So for example, today on the new app, if I type-in things like Posh, it will show-me all the items. If I put in under, it will show-me eggs. So I think we made it a little bit more user-friendly, user experience is much better. Each of the products and the overall think basket shows your ETA. So that’s what the industry norm is.
So a lot of work has gone in terms of enhancing it. We’ve also pressure tested this in terms of our capabilities. We are expanding the footprint from where we service in a city. So for example, in Calcutta, in the past, we used to service from eight of our large stores. We should have a coverage over 99% of the PIN code, but the fulfillment radius would be anywhere from or up to eight kilometers from a store because there were eight stores servicing. Now as we aspire to move to a less than 30 minute delivery proposition, we have reduced the area of fulfillment from the earlier eight kilometers to two to three, which means that we have increased the footprint of our fulfillment centers, which is still going to be from our stores.
So we will have — today we have 28 and by the end-of-the quarter, we’ll have all 42 stores in Calcutta being acting like fulfillment centers, which will help us deliver in 30 minutes. We’ve also, like I said, we pressure tested this on — in December in terms of what is our capacity of delivery. We moved to a 100% self-managed fleet of riders, which means that we’re not relying on third-party aggregators to provide because the reliability of that, especially during peak times is not guaranteed. In December, on December 31st specifically, so we received 10,000 plus orders and we were able to deliver 9,500 orders. Our AOV was close to INR1 crore that day, which gives us tremendous confidence that this proposition is something which will have a strong resonance in areas where we operate, as well as gives us strong confidence that we can execute to that scale.
Just to give you a simple kind of extrapolation, the endeavor will be on the back of this new proposition, new app, new fulfillment capabilities. You know, the vision could be or the ambition could be that we could look at a steady-state where we do 10,000 orders a day, INR1 crore a day run-rate, which is — which translates into, you can do the math, the INR365 crore business. And that is not an outlandish ambition. We’ve done this in 31st. The size of the e-grocery market, you guys all know it better than me. So INR365 crores coming from the commerce proposition for us is something which we believe is quite achievable. We are also doing this by — it’s not just a new app with a new tech backbone and fulfillment, but we are giving it a new identity and we will launch this tomorrow in Calcutta this proposition is called Jiffy delivery quick delivery powered by Spencer’s.
Again, the promise here is you know anything from lentils to liquor, meat to makeup, cherries to cheese, you get groceries delivered in a jiffy. That’s the whole proposition for Jiffy. We are, you know like I said, launching this tomorrow in Calcutta and we expect that our consumers will respond with the same level of enthusiasm as we have and we are quite sure that this will be a strong growth driver for us and further build our omnichannel proposition to the next level. So that’s a bit about what we’re doing.
So the two strong or the two highlights from quarter three for Spencer’s is the efficiency and productivity-linked EBITDA turnaround, 46% Y-on-Y increase and the launch of Jiffy, our 30 minute proposition in Calcutta, which will then be rolled-out in the other cities where we operate. As far as nature basil is concerned, I said it was a bit of a mixed quarter. So Spencer’s had an efficiency led EBITDA transformation. Nature’s basket was slightly soft for the quarter, though there was 2% growth Y-on-Y for quarter three, YTD growth is 3%, margins were flat. But again, there is an EBITDA correction — correction, which needs to be actioned in-quarter four.
We did add two new stores of nature basket. One was the Artisan pantry format in MG Road in Bangalore and the other was in Ahmedabad at the Palladium mall. Both these stores are doing well. They are profitable from month one. So I think that is the thing. The key point, I would say priority for us in-quarter four would be to ensure that we bring back NB to the same level of productivity, which is sales per square-foot. Margins is not an issue over here. It is driving your top-line and a lot of initiatives are going on there, which we’ll see playing out in-quarter four.
This includes the revamped app of Nature’s basket also being relaunched. It includes the introductory — introduction of a membership program called, which will build you know, greater loyalty, greater repeat amongst the connoisseurre segment of the loyal consumers of NB. So NB is something which is, I would say, a case where we will accelerate growth, accelerate productivity and bring it back. We are confident. And Spencer’s, it’s about continuing this efficiency-led EBITDA transformation, but now looking at how do we build-in the growth driver. And for us, clearly, the growth driver is the omnichannel e-commerce, quick commerce proposition Jiffy, which we are launching. We will launch this in Calcutta, but we will soon take it to the other two cities where we operate and where we have a good footprint of stores, which is Latnau and.
So that was a bit of commentary on quarter three and I’ll take a pause and open it up for questions.
Questions and Answers:
Operator
Thank you, sir. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen we will wait for a moment while the question queue assembles the first question is from the line of Prakikshit Gupta from Fair Value Capital. Please go-ahead.
Prakikshit Gupta
Hi, am I audible?
Anuj Singh
Yes.
Prakikshit Gupta
All right. Thank you for the opportunity. I have a quick question — a few quick questions. First would be on basket. I just want one clarity first, please. You mentioned that there are two new stores that have been opened, one in Ahmedabad and one in Bangalore. However, the presentation mentions that from Q2 to Q3, the store count has increased from 33 to 34. So have you also closed one store as well or…
Anuj Singh
Yes. Yes. We have closed one on scope. Okay. And for the Bombay. Yeah.
Prakikshit Gupta
Understood. So basically, the nature’s basket top-line growth has been a little lower. However, the premium segments in the consumer market have been doing comparatively well. Do you attribute this low-growth to the store closure or is it something else?
Anuj Singh
No, I think so. It’s not store additions do help in terms of driving top-line, but even on an SSSG basis, the sales has been muted in NB. I think it’s a combination of both internal and external. So I will just attribute it to the fact that we’ve closed one store, but we’ve also opened two stores in the region. So it’s not because of that. On NB, the challenge was the festive period is generally is a high spike, which is there. This time we didn’t see that spike in festive. And actually that is to be fair, that has also been the case on Spencer. In Spencer’s in-quarter three, we didn’t see the spike which normally happens in the festive.
We did benefit in October because in October in the East, you both — you have — you have Fujo and Diwali both in the same month. So October was a big month for us. December was a slightly better month for us in Spencer’s because of the year-end and the fact that we have liquor is a key part of our mix. NB did not get that tailwind as far as October and December was concerned. But I think this is, I would Call-IT a minor blip and the teams are all kind of geared up to do an intensive marketing. I talked about a loyalty program, which is a membership program, which will be rolled-out and driving our same-store growth.
I think some of the phenomena which has happened in terms of convenience-led consumers ordering on online. Some of it did play-out on the NB segment as well, which is why the team is going to look at revamping the nature basket app and driving a lot more of the out-of-store as well in cities like Bombay. What we are doing with Jiffy in Spencer’s in, that’s something which can be easily replicable in nature’s basket in Bombay. We have 20-plus stores in Bombay and the same model can be used to deliver gourmet groceries in quick time as far as NB is concerned. So the team — you will see the team are unleashing that in-quarter four and we are quite confident that this is a temporary blip and we will see improvement on the NB NBE top-line coming from same-store growth and therefore having that whole fall-through as far as your RGM and therefore your EBITDA is concerned.
Prakikshit Gupta
Okay. That’s very helpful. Thank you for the elaborate answer. Just one more question on Spencer’s. In the last call, you mentioned that there were a couple of new stores in pipeline. I think was one of the locations. Can you help us with an update on any progress on that end?
Anuj Singh
No. So I don’t recollect making on. We said there are new stores in the pipeline. So we have — but that’s not come through in-quarter three. We are opening one more store tomorrow in — or later, I think earlier in next week-in Narendarpur, which is a suburb in Calcutta and we have relocated one of our stores in Lucknow. So we moved from one part of the mall to the other part. So yeah, there are no store additions in Spencer’s last quarter. This quarter, you would see one more coming in.
But as far as store expansion is concerned, look, we will take a very calibrated approach to store expansion as far as Spencer’s is concerned. And the reason is because we obviously don’t want — not all stores make money from month one. So we don’t want to have done the hard work-in terms of moving to a position where we are at a store-level, improving our store EBITDA and then we saddle with new stores, which don’t necessarily perform at the peak output from month one. Plus it’s also setting up a store is also an investment. It costs close to INR2.5 crores to do it. We want to see whether this investment for us at this point of time can be fueled into e-commerce, which for us is fulfilled from stores.
So again, in — to cut a long-story short, store expansion in Spencer’s will be calibrated. We are not saying we’ll not do it. We will definitely do it, but it will be very, very carefully evaluated. We will do it only in our core geographies, which means Calcutta city, up-country, Chiliguri and Soul can take one more store. So let’s say five or six stores coming up in the next 12 month horizon in East. Lucknow, there is — we see a lot of potential for us to look at what we call combination stores, gray stores, which is bright and dark stores put together. So I think overall, if I were to give some kind of an outlook look between the two formats for the next three to four quarters, probably not more than eight to 10 stores is what we look at. Yes.
Operator
Thank you. The next question is from the line of Varun Singh from AlfAccurate Advisors. Please go-ahead.
Varun Singh
Am I audible?
Anuj Singh
Yes, you are, sir. Go-ahead.
Varun Singh
Sure. Thank you very much, sir, for the opportunity. Sir, my first question is which are the — and please — pardon my Lauren, sir, I’m tracking this company after a long-time. So if you would have already highlighted, I mean with my questions, I just wanted to know that which are the geographies that we exited and what are the key lessons that we have learned from that?
Anuj Singh
Yeah, I think welcome to tracking expenses. So I’ll just reiterate. So earlier, at the beginning of this fiscal year, we were operating in I would say three broad clusters. We had not, which had NCR, Northern Capital region, which had Delhi, of Faridabad, Noida, stores in and we had stores in Eastern UP. So that was one cluster. We had a cluster in South, which was largely Hyderabad and Telangana. And then we had the cluster in East, which was West Bengal. In-quarter two or end-of-quarter one, we decided to exit from NCR and South. And like I had mentioned in the beginning of the call, that reason was twofold. One was looking at store-level profitability and seeing that as a region, which was our regions which were kind of highest loss contributing. And unfortunately, we had South and NCR, which are kind of stuck out as two clusters where our store-level profitability was much, much lower and was a drag on the overall store profitability.
The other lens with which we looked at this was looking at it where our competitive strengths were higher. And if you look at geography like South, we were in Hyderabad and Telangana, which is a pretty competitive market with a strong city-based retailers of like — sorry, just of name. So there were strong city-based retailers as well as you had Dmart, which is a value discount of which is present there. And in NCR, you again had strong city-based retailers like modern food, modern stores and sodi as well as you had a very-high penetration of quick commerce. So we felt that these were the two regions where we were — our competitive intensity would not — was higher and our competitive strength would be lower.
So based on this, we took a decision to exit this and focus in areas where our brand and our proposition has a strength where we are able to compete much more effectively and therefore operate there. And also we looked at the fact that there is — it’s not that there are not opportunities over here. There is more opportunities.
If you look at East and East UP, you know, they account for close to INR20 crores of population. So that’s a large consumption base, which is over for us. And we believe that given the financial position, we are better-off operating in areas where we have strength in order to really drive operational performance further in these areas and influence the whole P&L. And I think that result though 1/4, one data point does not make it a trend, but we’ve been able to demonstrate it quickly in 1/4 that by doing this, by focusing on these core geographies by driving operational EBITDA, all our operating metrics are up in the core operating regions and we are able to have a swing. I mean, if you look at it, the swing is almost a INR20 crore EBITDA swing in this quarter.
So from a minus INR20 crore operational EBITDA, last year quarter three, we are at a breakeven, we are at positive INR18 lakh. So I think this strategy was — it was a tough one, but it is well thought through and well-executed and we are seeing the fruits of it. Now going from here, it doesn’t mean that we have to operate at the same scale. Obviously, we will operate at a higher scale, but continuing in these regions and building on areas of our strength as opposed to trying to be everything everywhere. Yeah. I hope I’ve answered your question.
Varun Singh
And yes, sir, very much. But regarding the EBITDA point, I think my understanding was given 40% decline in the overall retail area year-on-year and so maybe a lot of loss-making stores would have exited in the numerator this quarter and which would also have an impact on the overall improvement, which is kind of positive for the company. So that understanding would be largely correct, right, sir?
Anuj Singh
No, no, sir, it’s a combination. So again, look, yes, you had loss-making stores which are not there. So what happens is obviously your — your losses go down, but also your top-line has gone down. So all your other costs have to be absorbed over a lower turnover. So yeah, I mean, it’s not just simply that you remove your loss-making stores and you come into profitability. So I think in the same continuing regions, also we have demonstrated a store-level improvement. But overall, our support cost and because we’ve optimize the organization also to a scale which is now there is the scale, it’s a combination of those two. It’s not just removing loss-making stores and improving the EBITDA. Yeah.
Varun Singh
Fair point. Understood, sir. And second question wanted to understand that what is the ultimate change in our overall strategy from the lesson that we have learnt from the geographies where there was a strong competition from maybe D-mart CP retailers and other players. So I mean, if you could highlight top of your mind three, four strategic intervention changes other than the geography or geographical expansion or change in stance, if you can highlight some things that would be helpful.
Anuj Singh
No, I think there is — there is — the lesson learned is that you have to be strong as far as your operating metrics are concerned to justify viability in a particular market and therefore in a region. So that was very clear. So if stores — at a store-level, if you don’t make money and continuously you don’t do it and then in a region, all stores are not doing it, you’re not — you’re not building up a viable property. You don’t have the luxury of sustaining losses in a region just because you want to have a pan-India footprint. I think every store has to have the right to kind of, if I may say exist and then get the investments to thrive. So I think that was one clear lesson.
I think the other lesson was to say that, look, we are not — we can’t be oblivious to where the consumer trends are going. And so the consumer trends are going towards convenience, which is why you start seeing. So therefore, you know, we have worked — we’ve conserved capital instead of burning through losses in two other regions. We have cut-down the cash loss from operations by — by operating in a fewer regions and used some of the resources to invest behind building a strong e-commerce proposition because the way forward is going to be omnichannel. Consumers are omnichannel. Consumers come to our stores three times a month, but they also buy their grocery online two to three, if not more times in a month.
So if you have to be relevant, if we have to be competitive, we need to build an omnichannel offering and the omnichannel offering cannot be a slotted delivery or delivery into art. It has to be delivery. And therefore, we are building a strong e-commerce proposition. We are — no way we’re not running away from competition, but I would say we are focusing on getting stronger and establish, as I would say, competitive moats in areas where we operate and grow in those areas. So growth is not going to come from adding on more regions, but growth is going to come from being strong, establishing competitive moats in the regions which we operate and grow within these regions. There is — so I think very helpful.
Varun Singh
Yeah. Yeah, yeah. Sir. Just one last question, if I may. What is the revenue contribution for us from liquor, meat and fresh if you can call-out that number, sir. That’s it from my side. Thank you very much.
Anuj Singh
We don’t normally give a mix guidance, but you know, but if you want to say liquor fresh, fresh means FNV and meat right put together your contribution would CE. Around 25% is coming from Dicker plus fresh.
Varun Singh
Okay. Okay, super sir. Thank you very much and wish you all the best
Anuj Singh
Spencer’s. I’m just calling out. This was Spencer standard.
Varun Singh
Yes, yes. Yes, yes. Understood. Noted, sir. Thank you.
Operator
Thank you. As a reminder to all participants, please press star and want to ask a question. The next question is from the line of Mr. Akhil Parekh from Batlivala & Karani Securities India Private Limited. Please go-ahead.
Akhil Parekh
Thanks for the opportunity and congratulations to the management for improving — for improvement in the operational metrics. Sir, my first question is, are we completely done now with the store closures as of 90 stores what give-and-take we have and we are saying we’ll add few 45, we’ll add four to five stores for next 12 months initially. So maybe take 100 stores will have probably a year down the line. Is it fair to assume?
Anuj Singh
Yes, absolutely. I think we are done with the large-scale closures or exit from region. We are — obviously we are not. Having said that, we will keep looking at stores which are loss-making and looking at either ways of improving the situation there or relocating to some other stores because very often in a city, the city also evolves into a different geographic area. So some — there could be pockets of growth in that city. So overall, we are not looking at any planned large-scale exit of — from any regions and store closures. In fact, the endeavor is to add-on stores in the existing clusters. Obviously, like I said, it’s going to be calibrated and it has to be weighed against the return on that investment and alternate uses of that capital, whether it be e-commerce or anything else. So yeah, that’s the.
Akhil Parekh
Sure. And then it implies that our larger part of the growth that has to come from the improvement in the sales per square basically, where we have seen improvement where we have, as you alluded, have already reached around INR18,000 expenses. So is there for the scope of improvement? Because what I understand is from operational — from an operating cost perspective, we are largely done, I believe. So hence the improvement has to come now from the sales throughput side for both the sales to grow as well as for operating profits to grow. So is my understanding correct?
Anuj Singh
Oh, sorry, so, yes, I mean in the sense that growth has to come from — like I said, you’re right, it has to come from either adding on more growth options like online as a channel or from increasing productivity in-store. The averages hides a lot of you know variance. So number which I said was INR1,800 a square-foot. So that’s an average. So there will be stores, which will be at 3,000 and there will be stored, which will be at 1,000. There are regions which are higher, there’ll be regions are lower. So the idea is how do we bring everyone up and that’s a combination of what you’re doing. So for example, in small stores in Lucknow, there is a huge opportunity for us to boost our SPSF by having a very focused program on fresh because fresh is what drives daily repeat.
So we’ve done things like reestablish our fresh supply-chain, looking at loyalty membership programs around subscription around fresh. These small stores or dailies could also be a springboard for us to do e-commerce fulfillment in the neighborhood. So a combination of, you know, getting the categories right of doing some targeted neighborhood activation and driving online will drive our SPSF, you Call-IT same-store growth. But yeah, I think we believe that is going to be a large vector for our growth. Having said that, if there are opportunities for us to add stores and which we will do. So I think the guideline was we’re looking at eight to 10 stores in the next 12 months in across the two regions which we operate, which is UP and in Western. Yeah.
Akhil Parekh
Okay. And on the operating cost, yeah.
Anuj Singh
On operating costs, are you saying that is that the — have we reached the level where…
Akhil Parekh
Yeah, like we — yeah. Like we have INR20 crore-plus in employee cost per quarter and other expenses roughly around INR50 crore was INR50 crores per quarter. So this number — is there a scope for improvement from here on or we — it’s fairly sustainable year?
Anuj Singh
Well, I think the way I’d answer this question is that, look, there is never — you never reach, there’s always, you can always — optimization is an ongoing exercise. But I think we have looked at both at the corporate office and at the stores, we’ve looked at what’s the right-size of an organization for the scale of business. And we believe that we have — we have come to the right-size. Now as I think costs don’t look at-cost as an absolute for the P&L to evolve.
I think as we get to a higher scale with the same level of cost, so absolute cost, I mean, your percentages will come down and I think that is where the whole magic starts happening. With the same level of store cost, support cost, if you’re able to drive 15% higher top-line, you can do the math in terms of how your percentage will start flowing. So I think that’s what the endeavor is. It is to drive growth productivity, but we had to do this to set the baseline in terms of which stores we operate in, what’s the support cost.
So yeah, we have to be fit to then get to a higher-level of growth. And I think we’ve reached a certain level of, I would say, fitness in terms of not having excess weight or carrying you know baggage. So we’ve become. You can’t keep cutting endlessly because you’ve got to be careful that once you cut too close to the bones, you also cut capabilities. So I believe we are at that stage where we have become fitter than what we used to be. And I think that fitness will help us to flex other muscles, which will be the muscles for driving growth. Yeah.
Akhil Parekh
Sure. This is helpful. I’ll get back-in queue and best wishes for coming quarters.
Anuj Singh
Thank you.
Operator
Thank you, sir. The next question is from the line of Ravi Jobanputra from Nuvama. Please go-ahead.
Ravi Jobanputra
Good evening, sir. I just wanted to ask you, is there a difference in the way we are building our merchandise mix given we are having a better view of a more omnichannel and consumer today? And is there a category that we need to rationalize brands that we stock on other categories where we need to add brands? Any view on this?
Anuj Singh
Sorry, can you just repeat your question, please?
Ravi Jobanputra
Basically, I’m asking you to understand if there is a difference in the merchandise mix between brick-and-mortar and Quay commerce.
Anuj Singh
In terms of range or in terms of — well, look, mean, you know, this is also something which we are learning as we are scaling up. From a width point-of-view, and I think that is where our USP of our model is. You know, Spencer’s has always stood for a wider assortment. A wider assortment means that within a particular product category, we give more choices in terms of number of brands, number of flavors, et-cetera. And that is possible in a large you know offline kind of a store.
When it comes to online, most people start online with a smaller assortment because it’s about how you effect efficiently fulfill from the dark stores, which typically a dark store is not more than 3,000 square feet. Our hypers are 15,000 square feet. But they do this by learning. They start with 2,000 SKUs and then they start going up to 15,000 SKUs. The advantage of our model is that we’re starting with 15,000 SKUs because our fulfillment is from our stores. I think from a stock-keeping point-of-view, so we’ll start with the widest assortment, which is there.
What your question is that, look, what are the learnings and is the omnichannel consumer, which is a consumer walking into the store, buying something different than what they buy when they’re online? Absolutely. I think you know so-far the evidence has been that shopping missions, whether it be to a convenience store or to online, tends to be more of a top-up kind of a shopping mission as opposed to a month beginning basket filling. But — and therefore, that will get reflected in how we highlight our SKUs on the discovery platform of the app.
So put simply, if you look at an app and you look at a category like, let’s say, detergence, would you show a 4 plus 2KG pack as your first pack online or would you show more of a 1KG pack, which is more of a top-up? I think those are the things which need to get fine-tuned in an offline versus an online. The broad assortment for us will be the same. Currently, even on pricing, we don’t intend to have give our omnichannel consumers the same price. So I think that’s something which is our approach. There’s a lot of learning, which we will obviously go through the learning curve.
Today, we are not at that INR1 crore a day kind of a number which we aspire to get to in the short-term. As we do that 10,000 orders a day, there’s a lot of learning and the whole tech stack is made in a way that you know things like your last bought items, frequently bought, smart baskets, all of this can be created. So I think that will automatically drive how we showcase a different merchandising assortment. So we’re not going to have a different assortment per se because it’s the fulfillment from the store itself, but we could showcase the assortment in a very different manner in online versus what we do in offline.
Ravi Jobanputra
Okay. Thank you, sir.
Operator
Thank you. The next question is from the line of Naitik from NV Alpha Fund. Please go-ahead.
Naitik Mutha
Hi, sir. My first question is regarding our current debt position, if you could share the number with us?
Anuj Singh
So let that you yeah. Yeah. I just ask our CFO, Sandeep Mankar, to comment on that.
Naitik Mutha
Sure. Meanwhile, my second question is on nature’s basket. So what level of revenue per square feet you think you know would be — we would be breakeven on EBITDA level for nature. So asking. Definitely not good.
Sandeep Banka
Hi, this is Sandeep so debt position is INR883 crore consol level. Over to you.
Anuj Singh
Yeah. So your second question was what is — so look, again, we don’t diverge, but let me tell you broadly for — for the — for the right shape of the P&L, I mean nature’s basket makes 30% gross margins. For it to kind of deliver at, I would say minimum 12% store EBITDA and therefore get to 6% to 7% business EBITDA. The SPSS have to be in the range of INR3,300, INR3,400 per square-foot. Now don’t ask me a follow-up question on what it is today because I can’t divert that. But I mean that’s the level of SPS everything now.
Naitik Mutha
Right, right. Got it. Also, sir, my one more question I had is, sorry, I joined a little late. If you could share your strategy on the online — online or omnichannel business, that would be really helpful.
Anuj Singh
Sorry, your question on what the standard? On the.
Naitik Mutha
Yeah, yeah, yeah.
Anuj Singh
Okay. So I think I kind of covered it in some ways in terms of saying that, look, we want to strengthen our e-commerce proposition. So it’s not that we are getting into for the first time into e-commerce. We made some evolution of our e-commerce proposition. Last year, September, our proposition used to be what was called a slotted delivery. So you would go to the app or to the website and you order and you choose delivery slots, which is what the big basket model was started delivery. Last year in October, we transitioned from a slotted delivery to an express delivery proposition, which was to say that, look, now we will deliver. You have the option if you have a larger card size or you choose because there’s still some people who choose a delivery to happen at certain times.
So we kept that slotted delivery, but we also evolved it into an express delivery, which was delivery within one-half. So what we’re doing now is evolving the express delivery into a quick delivery proposition, which is delivered in less than 30 minutes. So again, that is the evolution of our e-commerce offering. What is the — what’s the strategy behind it? Look, we are following where consumers are moving. We are following where consumers’ expectation are. And we are doing that in a — in a fulfillment model which works for our model. We are not going to break our bank by trying to, you know, build new dark stores. We will do this by fulfilling from our stores. We will also be a, I would say, calibrated in terms and smart in terms of how do we do our customer acquisition. It’s not going to be money burnt and doing very expensive customer acquisition.
We have a very strong loyal base of offline customers and our primary objective of our e-commerce proposition is to get that offline customer who comes to my store three times a month, giving him a seamless, convenient quick delivery option to make him or her shop three more times in a month online. So that’s my core proposition. I am not going to be chasing share gains from a well-established, well-funded quick commerce players. I’m going to offer this as a proposition for my offline customers who already have experience with the brand, who have trust in the brand and I’m giving them a convenient option of having delivery grocery delivered to them within 13 minutes in the city. That’s my proposition and that’s the approach. Yeah.
Naitik Mutha
Got it, sir. That’s very helpful. And just one last question. So what was our sales for nine months for sort of the extra delivery that we used to offer?
Anuj Singh
Sales for nine months. Look, let me give you — I gave you a sense of, you know, we don’t break-out numbers, but I’ll give you a sense. I mean, we do about 50 lakhs a day with 5,000 orders. That’s an average exit run-rate in December.
Naitik Mutha
Got it. That’s reason. Sure. Thank you.
Operator
Thank you. The next question is from the line of Rishikesh from RoboCapital. Please go-ahead.
Rishikesh Oza
Yeah, hi, am I audible?
Anuj Singh
Yes.
Rishikesh Oza
Thank you for the opportunity. Sir, what was retail store after we have closed down approximately 30 to 40 stores or our sales per square feet looks to have gone up if I just try to back looks around INR5,500 for Q3, which was lower last few quarters. Do you think this number is sustainable or there is more headroom for this number to go up.
Anuj Singh
So I mean just to repeat your question, you were saying that the number of stores, what are the number of — what’s the store count for Spencer as of quarter three, right? That was your first part of your question?
Rishikesh Oza
No, no. So I was asking, after we have closed down the stores, our sales per square feet number has — is looking to go up. It was — it used to be around 38 3,900, 4,000. Now it’s looking around 5,500 if I see for Q3. So is this a sustainable number or do you think there is a headroom to — for this number to go up from?
Anuj Singh
No, sir, I don’t know where you’re picking-up this number. We have our sales number if I divide. We have 90 stores exit quarter three, right? We did a sales of INR431 crores on a trade trading area of 780,000 square feet, right?
Rishikesh Oza
Yeah.
Anuj Singh
So I do the math, the number is what the number which you’re talking about 5,500, that’s for a quarter, which means it is around 70. So it’s 1,700, 1,800, which is what I mentioned in my call. Yeah. So that’s right. I mean you’ve done — you’ve done the math to double-check the number which I gave you. The number is INR1,800 per square-foot, which is up from INR1,500 which is last quarter and you know that’s certainly not the ceiling as far as productivity sales per square-foot is concerned. There are players in the market which do INR2,500 to INR2,600 a square-foot. So clearly, there is — the scope is to keep improving this SPSF. And not too far back, Spencer’s used to do an SPSF of INR2,000 rupees a square-foot per month when we used to have a trading area of 1 million square feet. Yeah. This is the pre-COVID days. So yeah, there is a — there is scope to keep improving the SPSF. We are nowhere close to, I would say the industry benchmark also.
Rishikesh Oza
Do we have any internal target to get to INR2,000 per month, say by FY ’26 or by FY ’27?
Anuj Singh
Absolutely. I mean, like I said, look, somebody asked the question, we are not giving a guidance for — or we’re not giving an outlook saying I’m going to be going to add a huge number of stores. So a lot of growth is going to come from SSSG. SSSG growth means that from the same base of stores, we are driving a higher absolute amount, which means your SPSF will go up. So I definitely see this SPSF going up. Now what is — we’re not giving an external guidance for this, but yeah, internally, the benchmarks are high.
And again, like I said, it’s 2,200 and whatever 2,000 odd number which you’re saying, which is an average. So you would have stores which are less than 1,000, you would have stores which are 1,000 to 1,500. You have stores which are 1,500 to 2000, you have stores. So you have to look at the distribution of the stores and the endeavor is to make the stores which are below 2,000 come up to that level. And that is how you will see the average moving up.
Rishikesh Oza
Yeah. Okay. Also, my second question is with respect to the debt. Are we looking to pay-off some debt maybe by doing the fundraise? I believe last year we had approved a fundraise also?
Anuj Singh
Yes, we have looked at we have taken a Board resolution last calendar year and since then, if you look at the consistent communication which we have been given in our earnings call every quarter is the fact that we are looking at the breakeven scenario before we really get into that bandwagon. And in the last two, 3/4, specifically the focus from our Board has been, as Anuj articulated to achieve a breakeven, which is led by efficiency and productivity. And now having demonstrated a number in-quarter three, which is a target range of 19.5% gross margin with a 13.5% opex resulting into store at EBITDA of 6%, which gives us a breakeven scenario now. For us, now we believe that we will be able to demonstrate this a number and when we talk to potential investors, we’ll have a much better plan of sight in the next few months-to come back and talk to you about any such plan. And whenever we do that, we’ll first intimate the stock exchange and we’ll come to know about that.
Rishikesh Oza
Got it. Thank you very much.
Operator
Thank you. The next question is from the line of Parikshit Gupta from Fair Value Capital. Please go-ahead.
Prakikshit Gupta
Hi, I’m sorry, my line got dropped earlier. So most of my questions have been answered. Just two of them, please. In terms of expenses, can you share a little bit of a — of information about the average bill value or the number of bills even directionally if which one of them was lower which resulted to a lower year-on-year sales number? Yeah.
Anuj Singh
So on the terms I mean in the continuing regions, right?
Prakikshit Gupta
Yes, please.
Anuj Singh
Yeah. So look, our — I’ll give you a broad-line. If I look at our number of bills in online versus offline, our number of bills in online obviously are growing much faster, right? So year-on-year that growth is roughly 40%. And our offline NOB, absolute NOB is flat, right? So I think that gives a commentary. Overall, you can do the math yourself, but we do about in a quarter, we’re doing about 4.5 million bids in NOBs, right? As far as the average bill value is concerned for us, again, as you increase the — what we’ve been seeing is as you increase the share of online, online bills come at a lower ABV. So you know the ABV, obviously, as the mix of online starts going up, your overall AB will come down. But our ABVs at a an offline level are close to INR1,500 rupees per bill and our ABVs on online is actually higher than what most of the industry benchmark is. We have an ABV of close to INR900, INR950 as far as online is concerned. But as online starts going up, you will see, obviously the blended ABV is coming down and even the ABVs on online will be are not sustainable at INR1,000. Most of the quick commerce players are going from 300 to INR500. We are — we started with 1,000 and I think as we expand that number of bills go up, frequency goes up, that will probably come to the INR750 800 level. Yeah.
Prakikshit Gupta
I understand. So in terms of, you mentioned that you are going to rely on your own fleet, which is of the size of 100 odd people currently. But as you grow the Jiffy proposition, don’t you think having a third-party logistics provider would be better given the challenges of sustaining the operating EBITDAs and the uncertain outlook?
Anuj Singh
No. So you’re right. That’s always an option. But I don’t think I mentioned that we will do it with 100 riders. I said that we will do it with a 100% self-managed fleet, which means we will not rely on a load share or whatever XYZ provider of riders is. The reason why we’re doing it is because we want to have a good control on the experience and on our delivery proposition. We need to ensure that the average picking time, if you want to deliver in less than 30 minutes, our delivery radius is four to five kilometers. You need to pick the order in two minutes, assuming the order has six items. You need to hand it over to the rider and the rider will take anywhere in 15 to 20 minutes to deliver. We don’t want the situation where the order gets picked in two minutes and we are waiting for 15 minutes because some third-party rider has decided to drop us and go for a more order.
So we are doing this at this point of time to ensure that what we call the transition from order being picked to order being handed over to the rider is 95%, which means that the waiting time, it doesn’t go into a pigeon hole, the picker gives it straight to a rider. And the best-in-class metric for that is what most people operate is at 95%, which means 95% of the orders are directly handed over from a picker to a rider. To do that, you need to ensure that you have the right stable of kind of supply of riders which are there. So we will — we will manage it 100% on our own for the starting period, which is, let’s say, the two quarters, there will be tremendous learnings in terms of you know, which days of the week, which time of the day our orders peak. When we looked at 31st of December where we got 10,000 plus orders, we got 3,000 orders between 7,000 to 8, which we could not serve as peak. Now I mean, these are all the learnings which will then be incorporated into how we do it. So our book, it’s premature to say that, look, own versus you know, outsourced riders, which is better.
Right now, we are insourcing everything. I’m not saying all of them are on our payrolls, but we will have — we will manage them, which means we will have them dedicated or whatever mechanism it takes to ensure that they are not freelancing or they’re not in a platform, but they are dedicated to delivering. We’ll give them the required compensation and we’ll ensure that we deliver within 30 minutes. That’s the first task. Once we get to scale, obviously, there will be different optimization opportunities. We should be there.
Prakikshit Gupta
I understand. Thank you for the elaborate answer. Just one final clarity of the debt levels, you said 883. Is that on a gross level because it was similar — similarly reported last quarter or is it on the net level?
Sandeep Banka
It’s a net-debt.
Prakikshit Gupta
It did. It’s a net-debt.
Sandeep Banka
It’s a net-debt level. I understand. So last quarter — last quarter — just to clarify, hi, this is Sandeep here. So last quarter it was INR896 and this quarter this is INR883, so we have repaid around INR13 crore.
Prakikshit Gupta
Okay. Okay, but okay, that’s helpful. Thank you very much.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.