V-mart Retail Ltd (NSE: VMART) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Lalit Agarwal — Managing Director
Anand Agarwal — Chief Financial Officer
Analysts:
Tejas Shah — Analyst
Unidentified Participant
Sameer Gupta — Analyst
Aditi Loharuka — Analyst
Bhargav — Analyst
Ankit Kedia — Analyst
Rahul Agarwal — Analyst
Rajiv Bharati — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the V-mart Retail Q1 FY ’26 Earnings Conference Call hosted by Avendus Park. 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 Tejas Shaha from Avendus Park. Thank you, and over to you.
Tejas Shah — Analyst
Thank you,. Good morning, everyone. On behalf of Spark, it’s our pleasure to host the 1Q FY ’26 earnings conference call of Retail Limited. Joining us today from the management team are Mr Lalit Agarwal, Managing Director; Mr Anand Agarwal, CFO.
I’ll now hand over the call to the management for the opening remarks, followed by the Q&A session. Thank you.
Lalit Agarwal — Managing Director
Thank you. Good morning, everyone. Good morning, Tejas. Thank you so much for introducing us and hosting us. Wonderful to hear you back and come back to you with our Q1 analysis. So nothing very different. But the business looks better, good. Customer sentiment in the market in Bharat looks okay. I would not Call-IT as a very, very-high customer sentiment in terms of consumption, but yes, it’s positive. It’s not too bullish as of now because the period and the seasonality is as such. But we expect it to grow during festival. This is definitely something we are seeing. The undercurrent is very strong. The consumption — the reasons for consumption have changed. The reasons for celebrations have changed. There are more occasions that the consumers are celebrating.
There are more reasons why they are buying and this is what we are seeing as consumer sentiment accumulation of all of that is equal to consumer sentiment. So that is where we expect more spendings to be done could result into a lesser saving, which we are already seeing, the saving rates are going down and which could be a scenario. But yes, largely we expect because of the — because of the decisions or the way the government is behaving, the way we are seeing industrialization coming in, the way the macroeconomic conditions and the global moves are happening upon tariffs and all, we see — we expect all of this to get benefited for us, for our Indian consumer, for our Indian industries and that should lead into more per-capita income that should lead into more adoption or more consumption and most fashion — fashionism will creep into the market and that is what we believe.
Inflation definitely has been under control. That is definitely not creating any concern for the consumer because our consumers are really worried about that staple inflation, the basic vegetable fruits and the staple. So that inflation seems to be under control in-spite of MSPs growing, the — and which is leading into more money into the farmers pocket and the related parties pocket. So I think I think all of those are good news. Monsoon looks better. Yet till now, we have seen very excellent monsoon coming in there is no scar city. Certain territory like Bihar, we still see a little low on the monsoon, but otherwise most of the India looks good on the weather pattern. I agri crop, crop looks to be — the income from the crops should be good, that should drive the rural consumption that should upkeep the rural consumption.
So we are a little positive on all of those things. Definitely, consumers have their own seasonality when they buy and why they buy festivals. But the last quarter we saw some marriage dates coming in the month of May compared to last year, it was — we did not see — we did not see too many footfall growth, but yes, there was a growth. The marriages comparatively was more, but still we saw average consumption. We didn’t see a huge consumption. Yes, the footfalls have been good. It has been positive. We are seeing a little higher footfall also on the streets because of more stores getting opened up. So we are — we are getting a lot of good feedback.
We are taking a lot of feedback from the customers in terms of what do they consume, when do they consume, how would they buy, what are they looking like for the future or for the festivals. So we are seeing a good sentiment even in the consumer segment. We definitely have seen a lot of competitor aggressiveness coming in from all the sites, right, from the national competitors like Zudios and others and from the regional competitors or even the larger regional competitor like V2 is growing aggressively. So there’s been a lot of store openings. There has been definitely a lot of working, which has been happening in the in the competition space.
People are creating different strategies. Somebody is working towards very-high density and high variety and high debt kind of kind of proposition to the consumer. On the other side, there are retailers who are trying to create a little more experience by giving lesser assortment but catering to a particular niche. So there are those differentiated competition and differentiated consumer set that they’re targeting and which we are seeing in the market, which is creating more — the good news is that it is creating more footfall in the organized space, which is creating more belief for the consumers in the organized space. And that is — that is becoming very evident and that is something which is very, very good and that gives us a lot of confidence that people who can really deliver, people who can really work well towards giving that consumer segment that kind of experience, they will definitely get the benefits and we’ll get — we get the impact. So share of organized retail is growing and will continue to grow is what we see.
For us, we’ve been — we’ve been really focusing high on our back-ends on — even on agility because we believe there is lot of change which is coming in into the market. There’s a lot of change in the fashion as AI is penetrating into everybody’s thumb. So things are — things are moving little more dynamic, right, from the designing, the creatives, the kind of experience that the consumer wants, the kind of fashion the consumer wants, the number of times that the consumer wants to see differentiated fashion. So there is a dynamic or more agile decision-making that we are trying to get into. We’re trying to work on the processes.
We are trying to work on the kind of technology that we have, the way people are working. So we are trying to bring those input into the organization so that we are becoming a little more faster, they are becoming a little more agile, they’re becoming little more analytical and aware about what the consumer wants. So that is how we are driving our — our philosophy of serving the consumer, right, from forecasting to the product management and the product designing and that is where a lot of work has to be done and lot of work is being done, bringing in some technological tools to try and drive all of these things. Our gross margins definitely is something which is — which is which is we saw good gross margin coming in. But yeah, going-forward, we still focus that we will be — we should be focusing more on the rupee gross margin rather than the percentage gross margin.
That is how there would be certain product categories where the percentage gross margin could go down a little bit, but that’s the — that’s the plan going ahead. But largely, we would still want to maintain because if we do that, we believe that the full-price sell-through should also grow and full-price shell-through should be higher. Ultimately, all of those should result into positive EBITDA and that’s what we are believing. But we are expecting a healthy consistent growth rate from the same-store and we should be doing that as we have been performing in the past quarters. We should also open up stores. We are — there are store — big pipeline, which is getting built-in the team. There’s lot of store identification that has been done.
So we are — we are on the path to open at least 13% to 14% of our square feet area — additional square feet area in this year. So that is what we are on to and we are on-target. We are on-track as far as our expansion is concerned, there may be few closers that may come in, there are one or two closes that we did in the past. We could — we could still not — we will not hesitate closing down some of the stores where we don’t have an expectation or confidence where we can build business. So we may take call on seven or eight or 10 stores going-forward as well.
Other than that, I think we definitely have a clear strategy for our online digital business that digital business is becoming more omni, that is definitely only piece is getting integrated well. The costs are reduced, the efficiencies are being generated. There are — there is more that we are trying to generate with less. We don’t believe in just tracking the revenue growth. We are tracking the breakeven point and that is what we are all working towards so that we are able to breakeven or create a profitability index in our omni or in our online business. So that’s the path that we are taking.
We are not — we are not focusing too much of our attention on that while we are discussing on all this, but we definitely have that wing and there is a different wing which is working on it and they are very clear. But that team with the technology knowledge, with the analytical knowledge, with the kind of knowledge that they have over AI and stuff, they are helping the overall business to grow and become more analytical and more OI driven. So that’s the path that we are taking here. But ultimately, I really want to thank the entire team — our team who has been working so hard to bring in this kind of — this kind of growth, maintain the customer experience, we’ve got very good repeat rates, we’ve got very good feedback from our customers in the NPS scores. So we have — we have seen good consistent feedback from employees. So we believe our governance principles are good. We will want to continue that. We will definitely want to motivate our people. We definitely have a great ecosystem with our great winter base and everyone.
So I think we definitely believe that the confidence that the team has, the confidence that our processes has, we are very clear that we should be able to act in the right spirit. We should be able to use the growth story of India with those story of Bharat. And that is how we will — we will want to penetrate more into the smaller town or more into the new towns or existing cities where we feel there is more potential and we are definitely growing more-and-more in those cities, which are largely state capitals and bigger cities of the state. So we will definitely keep working on those.
We are on — largely on-track. July seems a little slow, but it should immediately come back-in August and September when the festival starts coming in right from. So we are expecting a better Q2 because the festival will move-in a little bit. The Pujo, the Puja season is little preponed or seven to eight or 10 days. We should expect a little better September month or the second-half of the 5th of September month. And then we definitely are preparing for the entire festival as well as the winter range of the kind of products has to be launched. There is lot of innovation which is happening around fabric, lot of inversion which is happening around designs. So all of those innovations are being used.
There is lot of integration which is happening with meal owners, meal, vendors, the design team. So some good activity is happening on that side for the preparation of the current — coming of festival period and the winter period. So that is where we all are. We’ll keep you updated.
I’ll just pass this to Anand so that he can take you through the numbers and then we’ll be open there for the questions. Thank you so much.
Anand Agarwal — Chief Financial Officer
Thank you, Lahit, and good morning, everyone. Thank you, everyone. Let me walk you through our quarter one performance and the key developments and then we can open the floor for questions for questions. So starting with sales, despite the shift of ease in the previous quarter, we saw encouraging traction in this quarter. Revenue grew by 13% year-on-year with clocking actually 14% and unlimited 12%. The growth was driven largely by continued increase in footfalls and memo count as well, aided by a very good wedding season, but slightly impacted due to the conflict in select areas in North India and also the early onset of monsoon in June.
Our assortment has become much younger and more relevant and the pricing is much sharper. The total apparel AFCs grew by 1% with 2% growth in BMAT and a conscious decline of 3% in Unlimited due to the ongoing shift towards more value-led offerings, offerings. Adjusting for the preponement of ED, which fell in-quarter four this year instead of quarter one like last year, the normalized FSG came at 5% with both V-Mart and Unlimited contributing equally. From a regional standpoint, the North states of, Utra Khan performed much better, while the eastern region continued to face some amount of challenges, particularly around the Bangladesh border areas.
Moving to margins, our gross margins excluding Lindroad.
Operator
Sorry to interrupt you, Mr Anand. Actually, your voice is echoing. Can you please check your device
Anand Agarwal — Chief Financial Officer
Is it okay now,
Operator
It’s still going.
Anand Agarwal — Chief Financial Officer
I can’t let me go out of and move into another room or else you can use your — is this better now?
Operator
Yeah. This is okay.
Anand Agarwal — Chief Financial Officer
Okay. Yes. Okay.
Operator
Yeah.
Anand Agarwal — Chief Financial Officer
So I was talking about margins. So moving on to margins, our gross margins excluding LimeRoad improved by 60 bps to 34.8% on the back of better full-price sell-throughs and liquidation of old inventory which released provisions. Our total gross margins, however, improved marginally by-10 bps to 35.3% due to the 48% decline in revenue contribution, which flows entirely into the gross margin line. We are working on implementing a sharper margin strategy, which will help reinforce our value positioning and ensure even fresher inventory through higher turns.
And coming to expenses, we continue to see the benefits of tight cost-control. Operating expenses were 160 bps lower compared to last year. This was largely due to significantly lower online marketing spends on LimeRoad were partially replaced through higher sourcing of online-only orders through the image stores. Manpower costs rose by 13% in-line with new-store openings and variable incentives and ESOP related costs. Other expenses declined by 2.6% year-on-year, thanks to the lower marketing in offline business also along with lower logistics and marketing costs from online business in-line together with a few other structural efficiency measures. Due to the changes made in India’s accounting policy last quarter, the go-forward depreciation on fixed assets should now come at around INR28 crores per quarter versus the erstwhile INR19 crores, while the depreciation on ROU assets will be around INR40 crores, which shall keep getting adjusted with new-store additions and retirement cycle as the business goes.
Similarly, the finance cost, which has two components, actual interest cost and the accounting finance cost on ROU liability will also transition. While these changes happened in the previous quarter, but I think in the interest of all the analysts in financial modeling, I just thought it might be better to, you know, discuss this point right here. Similarly, the actual interest cost outgo shall vary as per the working capital deployment, but should remain bound at around INR3 crores to INR5 crores per quarter. The most finance cost on the ROU liability should come down from INR32 crores to approximately INR11 crores on the current scale going-forward.
Again, for the interest of all the analysts, in case we require any help with the financial modeling, we’ll be happy to set-up a separate one-on-one call on the changes made in the accounting separately. Please get-in touch with the IR team or me separately on this. Coming to EBITDA, excluding, we delivered an EBITDA margin of 14.9%, which is 80 bps higher year-on-year driven by operational efficiencies. Including LimeRoad, where the EBITDA losses reduced by 56% year-on-year, our total EBITDA grew by 27% and margin improved by 170 bps to 14.3%. Coming to inventory, we closed the quarter with inventory of INR818 crores, translating to 93 days, which is a 5% improvement over last year. Per store inventory increased marginally, but remained healthy.
The provision for aged inventory came down significantly from 1.7% last year to 0.7% this year this quarter, reflecting better inventory held. This has been enabled by liquidation of old inventory during the quarter, along with technology-led improvements across design, sourcing, quality-control and replenishment cycle leading to better sell-throughs and thereby lesser leftovers.
Our YTD CapEx stood at INR30 crores, primarily towards new-store openings and refurbishments. We continue to invest in expanding the store base and refurbishing existing older stores and the results are visible through sustained footfall and sales momentum. On the liquidity side, working capital utilization, which had temporarily spiked in-quarter four is now back to INR35 crores, while this may go up in-quarter two due to seasonal stocking, but we expect it to remain within a comfortable range of average around INR90 crore to INR100 crores for the entire year.
We generated INR109 crores in free-cash flow this quarter, largely due to efficient inventory management. There is no long-term debt as we have always maintained and we are well-positioned to fund future growth through internal accruals. On the new-store openings outlook, we added 15 stores this quarter and close two.
Our guidance remains unchanged. We are targeting 12% to 15% net area addition annually with 1% to 2% closures, which will be normal closures in any year. This year, we should see a net addition therefore of around at least 65 new stores. All the major store corrections have already been done in the last two years. So going-forward, we expect only small need-based exits. So that was all from my side.
I now request the moderator to open the house for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Participants present on the audio bridge who wish to ask a question may press star and one on the touchstone telephone. Telephone. If you wish to remove yourself from the question queue, you may press star and 2. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr Param from Australia Managers. Please go-ahead.
Unidentified Participant
Congratulations, sir, for a great quarter. So what I wanted to ask was the company added 50 new stores in-quarter one of financial year ’26, so bringing the total to 510 stores. So what is the target number of new-store additions for the full financial year? And what are the specific criteria for selecting new locations, particularly in year two, three and four cities.
Lalit Agarwal
Hi. So the full-year target for the next year,
Operator
Sir, Mr, there is an echo from your line. Can you please check it?
Lalit Agarwal
Yeah
Operator
But it is still like going, sorry.
Lalit Agarwal
Yeah, can you call me back on my mobile number?
Operator
Yeah, sure. I’ll call you back. I’ll call you back.
Anand Agarwal
Let me answer the question in the interim. So the full-year forecast for the new-store addition should be around 65 net-new stores. Are looking at adding slightly more, but there may also be some amount of store corrections. So net-net, we should definitely look at 65 new-store additions for this year.
Unidentified Participant
Okay. And sir, what are the specific criteria you look out for when you are exploring new locations in Tier-2, 3 and 4 cities?
Anand Agarwal
So there is an established playbook that we have been using for the last at least 20 years. So we look at multiple criteria. We look at the population density, we look at the demographics, we look at the growth of that particular city or town, the nearness to an existing Vmart store. There are multiple things that we look at. There are at least 500 checkpoints that we have to take before we select a site. But at least in the last five, seven, 10 years, I think the job has become slightly more easier with the advent of technology and as also more competition selects a lot of new sites, so it becomes more democratic and more easily — easy for all of us to assert but at the same time, there are also challenges in terms of real-estate cost and same-site being selected by multiple people.
Unidentified Participant
Okay, okay. Thank you, sir.
Operator
Thank you. The next question is from the line of Sameer Gupta from India Infoline, please go-ahead.
Sameer Gupta
Hi, everyone, and thanks for taking my question. Sir, first of all, congrats on a good set of numbers. Second, on the same-store sales, while this has moderated, even on a normalized level, if I look at, it is still lower than the previous quarters, which we were clocking in 2Q and 3Q and it is not only V-Mart. I see the other players who are into value retail in Tier-2, Tier-3 mostly. There also there has been a decent slowdown, again, adjusted even if you look at the normalized numbers. So just wanted to understand, I mean, what is going on-the-ground? Is it the base catching-up primarily or this is change in some competitive dynamics or the unorganized channel coming back suddenly? Any color on this will be helpful, sir?
Lalit Agarwal
No, I don’t think there is any such movement happening in the market. This is a normal routine. Definitely because the monsoons have got a little preponed, most of the festivals are getting more preponed. So there could be a little bit of that impact which is getting there because once again normalized Karan EBITDA, but we don’t know whether that yield normalization for us is right or the right way to look at it. So there is some amount of that kind of movement, but otherwise, we don’t see, as I said, there may be a little bit of sluggishness in the consumer set also, which we could realize because it is happening across the market. But ultimately, it is more, more period-to-period shift which is happening. So I don’t think there is lot that we can drive from this.
Sameer Gupta
Got it. But you will still be looking at a mid to-high single-digit SSG for the full-year?
Lalit Agarwal
Yeah. Yeah, I think we are looking at. See, there is an impact that we can see in our one because also there is a large consumption, which also happens from Bangladesh and that’s one consumer set, which has stopped coming completely. So in the eastern part of India especially, we see a lot of those consumers also are an active consumer to some of a lot of our stores. So we’ve seen some drastic downfall in their footfall and then leading to sudden degrowth in that those particular territories. So that is also creating a big impact in this particular outcome.
Sameer Gupta
And when does that anniversarize? Because I believe the disruption happened more than a year-ago.
Lalit Agarwal
No, it happened only three to six, six months back, major disruption started — it started right in the October, November last year also, but it was not major. The majority happened in this particular calendar year.
Sameer Gupta
Okay. Got it, sir. This is very helpful. Secondly, sir, on the margins. Now we have clocked — if I look at on a basis, we have clocked around 7% this quarter. And if I exclude the losses of LimeRoad, it would go up to 7.5%. Historically, your full-year is very close to what you do in 1Q. I understand there is seasonality in 2Q and 4Q, but 3Q is always higher. But 1Q normally mimics the full-year for you. If I look at historical trends, now with LimeRoad losses expected to moderate further from here on. FY ’26 EBITDA margin on a basis for VMART as a whole should be at least 7% now what — I mean, is this a wrong logic to look at
Anand Agarwal
Your logic is entirely correct, but let me just try to be slightly more conservative. I don’t want to give a guidance or high guidance. We are definitely — right now, as you rightly said in the beginning, quarter one has not really been a very good start in terms of the FSG, while we are hoping that quarter two, quarter three, we should get better results. But at the same time, we are also trying to rework our product strategy and our margin strategy and we are looking at higher rupee margins rather than percentage margins. So while at a rupee EBITDA margin level, rupee gross margin level, we should definitely see more robust growth, but I will not be so bullish on the percentage growth. So while I take your optimism, but at the same time, I will still want to be slightly more conservative and be more constrained in how we build our numbers.
Sameer Gupta
Okay. I understand, sir. But let’s say you’re doing lower-value products that should technically then lead to higher SSS growth and finally, the leverage should kick-in to give you a better margin in any case.
Anand Agarwal
No, you’re absolutely right, but till the time that happens, I don’t want to give out a guidance. We will want to do that. But right now, I can’t see that this is something that we should build-in for the entire year.
Sameer Gupta
Got it, sir. I’ll come back-in the queue for any follow-ups. Thanks.
Operator
Thank you. The next question is from the line of Adity Loharuka from CD Private Limited. Please go-ahead.
Aditi Loharuka
Good morning, sir. My question is what is your competitive advantage in vendor consolidation.
Lalit Agarwal
Can you explain what do you mean by vendor consolidation?
Aditi Loharuka
You said that due to vendor consolidations, you have been able to to increase your sales and get — and we are getting better margins and your cost is also low.
Lalit Agarwal
So I think see, we are working with the vendor in trying to create a seamless processes where we integrate with the meals we integrate with fabric manufacturers, we also look into their costing mechanisms, create a more transparent cost-based relationship, bring in efficiency in their manufacturing processes. For the sake of saying that vendor consolidation, I mean, definitely there was lot of work that we did, but in this particular quarter now, we are once again trying to become a little more open on this particular front. There’s lot of styling, designing, a lot of new innovations which are kicking-in. And there are not lot of new type of vendors also which are coming up, which are startup vendors, which are new vendors, which are young vendors, which are also creating a good impact in the process. So we — I would not really call-out for vendor consolidation in this particular year, but yes, we’ll definitely work more on the cost philosophy in this particular year.
Aditi Loharuka
How is that different from the — what other players are doing? Aren’t the vendor consolidation or is it just to be aware what others are doing, net some other two.
Lalit Agarwal
So don’t try to compare with me and ask questions around that, but I can tell what are we doing and what is the change in our philosophy and purposes that we are doing.
Aditi Loharuka
Okay. So vendor consolidation initiative of yours, have it like to reach to an optimum level or the work is still left to back to India?
Lalit Agarwal
So there is definitely a lot of work which can be done. But we are — we saw a risk in also larger vendors and bigger vendors. We don’t want to rely on lot of bigger vendors because the exports also seems to get opened up, market the tariff — the tariff policies of US have really shaped the market. So we saw some risk coming in, which I also highlighted in the last call and after. So we don’t want to really bank too much on key vendors and top vendors. We want to spread-out that vendor base as well.
Aditi Loharuka
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Tejas Shah from Avendus Spark. Please go-ahead.
Tejas Shah
Hi,, for a while, we have been talking about working on our product side on product as a pillar for strategic intervention. So where are we in that journey? And as an outsider, how should I assess, will it be higher throughput or better gross margin, how would — how should I kind of validate that is happening?
Lalit Agarwal
No, I mean, see, ultimately, we all work towards that. There are — there are those leading indicators that you work on so that you are able to finally deliver a higher throughput and that’s the key thought process that we are driving, not very clearly, higher-margin is also an outcome of your full-price sell to and then how better can you drive a full-price? How lesser do you have a stale inventory or a leftover inventory and discounted inventories and discounted sales. So all of those are the — our calculation arithmetic based on the guts, based on the skills, based on the learnings, based on the capabilities and the alignment of things that we are doing. So all of that is happening. How do you assess it? Definitely you can assess it when you visit our stores, when you look at our stores, when you go and talk to a customer, when you try and gauge the market, that is the best thing that to do. Otherwise, it is very difficult for us to really understand, you very well.
Tejas Shah
Fair enough. And second,, we are picking-up for many retailers, not only on value side, but across metro to Tier-2, Tier-3, that rentals have actually become very costly because the space has become very crowded retail and general. So any read-through there?
Lalit Agarwal
No, I think, see, we have been always saying that rentals is a game, which is always a negotiation power negotiation skill game and the kind of property that you look-forward to. It is also an expectation that the brand has and the kind of space that the brand gives forward. Not that every property couldn’t be consumed by few retailers. There are lot of properties which are getting built also because as the market is growing, as the consumers of the properties are growing or the retailers are growing. Similarly, the developers and the small-time developers are also growing and the land is getting consolidated to build those kind of properties, which could be let out for the to the retailers. So I think it is ultimately a demand and supply gain and it is always going to be whenever the demand is higher, the supply is also going, will become higher. So it is a temporary phenomenon. There is definitely a rise in rental that we could see. We have seen that there is a rise in rental of our existing stores also whenever we are going for the level. So that is definitely happening. And similarly, we need to expect the market to also grow. So we are not raising our bar too much. We definitely work towards our IRR mechanism. We don’t want to go beyond what we could queue and it. So we are very conscious of that fact. We will not grow too much if that becomes a bottleneck.
Tejas Shah
Okay. And, I’m not sure how reliant this question is to you, but now could commerce guys are stating that we are seeing some proof of the concept in Tier-1, Tier-2 also. Wherever we are doing grocery, are we impacted or there is any overlap where quick commerce has started and we are seeing some impact on our numbers.
Lalit Agarwal
Exactly, I would not call-out that for 80% of the location, but yeah, maybe 20% of the location, I could see some discussions happening. There is some muted growth or degrowth as well in certain towns where we are seeing an aggressive penetration of these pre-commerce, especially in this particular food and non-food segment. But that’s not too big and for us also that area is not too big. So we don’t mind it as that. And I don’t see other items creating an impact, that are impacting clearly.
Tejas Shah
Got it. Thanks. I’ll come back-in queue if there are more questions. Thank you.
Operator
Thank you. The next question is from the line of Ashish from Leo Capital. Please go-ahead.
Unidentified Participant
Yeah, congratulations on the good set of numbers. I had one question. How does our price point compare versus, let’s say, Style Union, Usta and other competitors in the market.
Lalit Agarwal
I hope analyst that with you and that they should be able to give us a good outsided information. But anyway, we believe, I mean the style Usta and all of those, they definitely a little more urbanish retailer. We definitely are a little more mass retailer and our price point of similar items should be at least 15% to 20% lower that’s our goal, that’s our expectation. There may be certain products where the prices are almost similar or the prices are even 5% or 7% higher for us. I don’t — we haven’t came across such, but there could be some entry price point that depends upon the strategy of a retailer where they want to layer with some product and keep their margins low on certain products could be — there could be some competition on a particular item, but otherwise on an average, we see the kind of retailers that you name, it is almost 14% 15% to 20% delta that their prices are versus ours.
Unidentified Participant
Got it, got it. Secondly, I think you partially answered this, but I wanted a better view. So how is the overall demand scenario for value retail and what kind of — what sort of SSG do you expect on a full-year basis?
Lalit Agarwal
Very difficult to give you a number-driven answer. But yes, we are positive. We are definitely building our business plan, our planning, our sourcing, our buying plan from the number that we had displayed in the last four quarters. So we definitely believe there should be a little higher single-digit same-store sales growth that we should be expecting in the next three, four quarters. So that’s the area. And that is how we are actually building our complete merchandise plan also.
Unidentified Participant
Got it, that’s all from my side. Thank you so much.
Operator
Thank you. The next question is from the line of Bharga from Ambit Asset Management. Please go-ahead.
Bhargav
Yeah, good morning, team and congratulations for a good number. So just wanted to have some clarification on your statement that our EBITDA margins may not go up, but EBITDA per may go up. Does that mean that we are trying to focus on increasing the ASP or increasing the average bill value?
Lalit Agarwal
So, it is not necessarily that ASP or bill value will drive that EBITDA or the growth in RGM. Yes, definitely, there is a focus during festival, the ASP should go up. And as we are seeing consumer becoming little more aware, digitally aware, socially aware, we are seeing the likings of better product a little more during festive period and during festival — the seasonal period. So we are expecting a little rise in the ASP should and that’s how we are trying to work on. But otherwise, it is more about trying to sell a little better product a little more if there is a constraints on certain price limitation of my customer and there’s some product which I may not be able to offer because of that constraint, there is where I want to apply a pricing principle with a little compromise on margin so that we are able to deliver those kind of product lines also to my consumer set who can afford in a particular price limit. So that is what the policy is.
Definitely that may incrementally give a little higher ASP. I’m not too sure about the average bill value, but yes, there should be a delta 3% to 4%, could be a delta 2% to 3% shift in the ASP that should drive it.
Bhargav
Secondly, sir, after a long-time, we are seeing some good manufacturing investments happening in the state of Bihar. Do you think with more-and-more manufacturing coming in and with employment opportunities rising in those industries, we will tend to sort of benefit or more given our presence over there?
Lalit Agarwal
Yeah, I mean, definitely that one of the poorest state, one of the poorest states that we are catering to right now and therefore capita income of that state is very low and we believe anything which is happening in that particular direction, which increases the per-capita income of that state and brings about more prosperity in the state will definitely result into a better outcome for us because we are almost present in all the districts in the air.
Bhargav
So sir, incrementally, are we looking at opening more stores in Bihar?
Lalit Agarwal
As of now, there is no — I mean, see definitely as that ground is, it has — it is a battleground for both the North Indian retailers and the East Indian retailers. So it’s a real battleground where most of the retailers also are penetrating a lot. But as of now, it is too early right now for us to say that there is industry which is coming in, employment which is getting generated. These are — there are those plans which are getting built, those new headlines that is getting made, but still the factory walls and the factory sheds are yet to be there.
Bhargav
Okay. And lastly, sir, last year we did a negative free-cash flow. Is it fair to say that this year we’ll possibly end-up making good FPS given that first-quarter has been fairly strong at more than INR100 crores.
Anand Agarwal
So, we would like to reinvest a large part of whatever cash that we generate into opening new stores. I’m not looking to accumulate cash, but at the same time, I will definitely want to have a positive cash-flow. But again, as I said, I would want to reinvest back into the business as much as possible.
Bhargav
Great, sir, thank you very much and all the very best for the quarter.
Operator
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go-ahead. Sir, two questions from my side. First is on the A&P expenses. This quarter, given that the yield was early, the A&P expenses were nearly 100 bps lower, which led to the margin expansion. For the remaining 3/4, given that festivities are there and hope for a better demand environment, will we maintain our 12.5% advertising expense for the full-year or the saving in this quarter will be saved and reinvested in-product and other places.
Anand Agarwal
So Ankit, from last two, 3/4, we have begun the downward trajectory on the advertisement and the marketing expense. Particularly on the Lineroad side, there is a significant reduction. But even on the offline business where we historically used to average around 2% in marketing spends, 2.5% in marketing spends, we are targeting to bring it down. So maybe not as drastic as what we have done in this quarter, but quarter two because quarter two is the buildup for the festive period. So there will be reduction, but not very, very drastic.
Ankit Kedia
Sure. My second question is on unlimited. You know, with most of the retailers in value fashion being more in the South, are we looking for a more product differentiation in South versus North now compared to when we acquired Unlimited and how much is the overlap between the products in South and North? And if there is a difference, how is the difference coming in from Southern or especially for the new stores we have opened because they are clocking much more compared to the older stores. So you know from an unlimited perspective, the journey towards high single-digit margins over the next two years, how confident are we with the product shift?
Lalit Agarwal
Three, definitely, there has been a little bit of convergence that we are trying to drive from the from the product perspective as well or the price range or the product quality or the product-type perspective, but still there is a differentiated behavior that Unlimited has. So almost 50% of the product, if I say, in a usual time is almost common. The usual time is largely the spring, summer, the just starting of the festival onset time, but during winter period, it changes a lot because of seasonality. So still, we see definitely good traction coming in on whatever new product introduction that we have done, which has brought in success at also, especially what you said of our new stores where we have done a little bit more — the new-store is more like a proposed store, which is lesser those brand — those partner brand businesses and then it is largely also focusing on Tier-3 and Tier-4 towns. So that is bringing us a good response on low ASP products, but the products which are largely for the consumer segment, which is masses. And then that is giving us a good response. So we believe that should give us a good journey toward growth and that should also lead and bring in more consumer segment and more consumer which is mark oriented and use oriented should come in.
Ankit Kedia
So overall the margin trajectory in Unlimited, will it start mirroring VMAT in couple of years now, given that incremental stores will start delivering the same numbers what demand does.
Lalit Agarwal
Mean see that’s the calculation. It should work better. It should bring in good results, not necessarily all the new stores have given us great numbers. There are 30% of the stores which are also pulling us down in the new-store list also. So there are some work which is happening around that as well. But yes, largely on the list of stores that we had acquired, we’ve also filtered out some of those stores where those stores which were not performing has gone down or gone away or have been closed and the stores which have been performing are giving us now have started as also giving good growth. So we should expect, but still you won’t — we will still have that delta of the margin as well as the sales per square feet compared to, which is always there as a lag.
Ankit Kedia
Sure, sure. That’s helpful. Thank you so much and all the best.
Lalit Agarwal
Thank you.
Operator
Thank you. The next question is from the line of Rahul Agarwal from Assets. Please go-ahead.
Rahul Agarwal
Hi, sir. Very good morning. Thank you for the opportunity. Sir, just a few clarifications on whatever so-far we’ve discussed on the call. On lease rental inflation, just to be very clear on this, let’s say whatever new stores you sign-up right now and if you have to compare those two square feet per month kind of rentals two years back, what are the inflation we are seeing for new stores? And for the renewals are the trend very different or they are — they are similar? That’s the first question.
Lalit Agarwal
I think we are signing-up on almost similar average. There may be at least maybe around 5% delta from our existing normal rate of the existing stores. So around — between that is the range that we are trying to focus on. So I think as a percentage also, we are targeting a similar percentage or even lower percentage because these investors should be generating better revenue in the first year of operation. It drops in the second year of operation, but average — on average, it should come and have the similar averages new stores are 5% higher than existing the renewals is what you’re saying. Yeah, yeah. So suppose 45 is my average rental, the new-store may be around INR45, that’s the average that we are expecting.
Rahul Agarwal
Okay. And that INR45 is two years back, what would that number.
Lalit Agarwal
So if I say five years, it has grown by almost INR10. We were averaging around INR36 at that period of time, and after unlimited the average went up, but now, yeah, this is definitely inching up every year-by 5%, 7%.
Rahul Agarwal
Got it, sir. Secondly, on the same-store sales growth, there’s been enough discussion around what you expect for the full-year. But just mathematically, if I look at what you delivered last year, looks like you had very-high double-digit growth, right, for the first-nine months of last year. And going into this year, you have festivals supporting you a bit of like 10, 15 days preponement. But when I look at numbers, last year second-quarter 16% for value growth, 10% for 3rd-quarter and 4th-quarter then it normalized to 7%. You still maintain on this base, you will be able to do mid to-high single-digit same-store sales growth on basis for. Is that correct.
Lalit Agarwal
Kerna push is we have to grow and we have to grow at our pace and we should do it. And there is an opportunity in the market. There is definitely a passion opportunity which is there. There is new water that customers trying to build. There are new set of consumers which are coming to the market. There is an opportunity. How much of the opportunity can be cash is all depending upon our actions and our resiliences actions. So let’s try and do it.
Rahul Agarwal
Got it. Fair point, fair point. And one more clarification on the margins. I think what was discussed was that 1Q margins should not be extrapolated for the full-year. So what you’re saying is EBITDA per unit or whatever piece you sell will be higher, but percentage-wise, maybe we’ll be like similar or maybe a bit lower than 1Q for the full-year is what you’ve said. Is that correct?
Lalit Agarwal
Yes. Yeah, that’s how you should expect and that’s what we are trying to because we are not working on the percentage margin. We’re trying to work on the rupee margin. Definitely it will result into percentage margin once the same-store sales growth grows up because the same-store sales growth, large part of our — large part of our cost is fixed in nature. So that definitely will result into the target.
Rahul Agarwal
Perfect, Nij. Thank you so much and best wishes for rest of the year.
Lalit Agarwal
Thank you.
Operator
Thank you. The next question is from the line of Patil from Envy Capital. Please go-ahead.
Unidentified Participant
Yeah. Thanks. Thank you for the opportunity. So three questions. So first one was, so is it fair to assume that the reduction in advertising cost will be our major margin driver, given we’ll be maintaining our gross margins and since new-store additions will also kind of crop up our other expenses. What is the —
Anand Agarwal
That is not the margin driver. So basically the reason for the advertisement or the marketing cost-reduction is not to increase the margins, but to increase the productivity. We are employing more efficient ways of marketing, thereby reducing the cost, which was, in our view was not as beneficial. But there are multiple other margin drivers which are working more in our favor and which we would want to focus more on, like product improvement, like sharper pricing, like product display, like supply-chain efficiencies, like usage of technology and there are multiple other ways in which we are using a multiple tools to improve our offering to the customer, thereby increasing our sales and margins.
Unidentified Participant
Okay. And so another one was on Unlimited. So do you see any further decrease in average selling price since you mentioned earlier in the call that Unlimited focus will also shift towards offering more value products.
Anand Agarwal
So ASP, we are not looking at any increase in the ASP, especially in unlimited. We are committed to provide more value offering and while there may be some seasonal variations because of festivals, et-cetera, but at an overall level, the ASPs should not increase in unlimited, they should only come slightly more closer towards Vmart in the longer run.
Unidentified Participant
Okay. And on your core expansion plan, so are there any particular geographical clusters we will be focusing on for the span India so that we don’t —
Anand Agarwal
Pan India, we look at cluster-based expansion model. So we look at all the states, all the cities, all the towns where we are already at present and try to open nearby.
Unidentified Participant
Yeah, but any specific states or geographies?
Lalit Agarwal
No, no.
Unidentified Participant
Thank you.
Operator
Thank you. The next question is from the line of Rajiv from Nuvama. Please go-ahead.
Rajiv Bharati
Yeah,, sir. Thanks for the opportunity. On Slide 9, this Vmartment Unlimited advertising expense. How do we, let’s say, on a compound basis, how do we allocate the for modeling sake between the formats?
Anand Agarwal
So Rajeev, there is no allocation. These are actual specific costs that we incur for each of these stores or regions in respective territories, there is no allocation per se for any of the expenditure in any of the lines.
Rajiv Bharati
No, between — because this per sound have given the combined ad expense, right? Is it possible to split that by format?
Anand Agarwal
Oh, yeah, it is possible. I think I can share that it’s not very — normally 80% business is Fremart and typically the marketing strategy remains almost similar for both V-Mart as well as Unlimited. There are seasonal variations. So for example, Unlimited had a preview sale for 10 15 days in the month of June. So they might have had a slightly higher expenditure. But overall, at overall level, you can break the expenditure at a 80/20 ratio.
Rajiv Bharati
Sure. And gross margin the variation between unlimited and on a Y-o-Y basis to say how has the movement been between the two formats.
Anand Agarwal
Gross margin in both the formats should have remained at a very similar kind, unlimited a Jaba. So Unlimited usually has a slightly higher gross margin because we charge a 5% extra pricing in Unlimited for almost similar kind of products, that is because our higher operating costs. So at a V-Mart level, our gross margins this year would have been roughly around 34%, while for Unlimited, they would have been at around 39% 30%.
Rajiv Bharati
And the improvement on a Y-o-Y basis would be similar. I mean, why I’m asking this is because if you split that advertisement expense, right, we couldn’t reverse calculate the gross margin ourselves. So it’s not that —
Lalit Agarwal
You can have a separate discussion with Surat. I will — we don’t disclose it separately if the gross margin in the IR presentation. But I get your point, but I’m just trying to tell you is that whatever strategy that we implement is for both the regions, unlimited and unlimit — V-Mart are not very different for us in terms of market penetration, strategy and marketing strategy. So the expenses typically move-in tandem.
Rajiv Bharati
Sure. And lastly, on the film price comment, so one of the peer has commented that June, especially we have seen very-high level of discounting from value-add retailers. So have you also seen that in our portfolio?
Lalit Agarwal
No, not that I’m aware of. We have not started any early discounting. We have always been honest price-value retailer. So we have not seen any high-level of discounting.
Rajiv Bharati
Thanks a lot and all the best.
Operator
Thank you we will take this as a last question. I now hand the conference over to the management for closing comments.
Lalit Agarwal
Yeah. So thank you so much for being there. We are all ganged up towards building a great festival and we are all working very, very intensely to try and work with the zone team, with the store team, with the creative team, with the vendor base and trying to get the product on-time, try to meet the need, have the right supply-chain, build for the build for the customer new expectation and also have a differentiated brand proposition in terms of the presence in digital media. So we’re trying to bring in improvisation what the newer age consumer segment wants and the Gen Z wants and that is what we are trying to drive. So we all are focusing more on our work. So user sometimes lot of their requests around conference and stuff are not being catered to, but we believe we should be able to deliver a good healthy growth in the coming future. Thank you so much for being there and having the patience.
Anand Agarwal
Thank you.
Operator
Thank you. On behalf of Retail, that concludes this conference. Thank you for joining us and you may now disconnect your lines.