V-mart Retail Ltd (NSE: VMART) Q3 2025 Earnings Call dated Feb. 05, 2025
Corporate Participants:
Lalit Agarwal — Managing Director
Anand Agarwal — Chief Financial Officer
Analysts:
Sameer Gupta — Analyst
Tejash Shah — Analyst
Rishi Mody — Analyst
Aditi Loharuka — Analyst
Aliasgar Shakir — Analyst
Lokesh Manik — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Retail Limited Q3 FY ’25 Earnings Conference Call hosted by IIFL Capital Services 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 for pressing the star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Sameer Gupta from IIFL Capital Services Limited. Thank you and over to you.
Sameer Gupta — Analyst
Hi, good morning, everyone, and welcome everyone to conference call. Without taking more time, let me hand it over to the senior management for their initial comments and we can take Q&A after that. Over to you, sir.
Lalit Agarwal — Managing Director
Good morning. Thank you, Suneer. Thank you for hosting us. Thank you once again to every participant who is there in the call. But the run continues. We — we definitely see a little betterment in the market. The festivals has been quite good. I would not say it has been very good because the way we expected it didn’t perform as good as that in the last few days of the festival. But yes, post the festival, things were very good. We saw overall demand spurting up because of the merise seasons as well as the winter sale which got generated winter definitely got a little delayed in the month of November and then it was peak in the month of December. December was very good in terms of winter period. But yeah, the overall sentiment in terms of the semi-urban rural population, the overall sentiment in terms of the lower Strata consumer segmentation that we saw in the industry, in the market, in the — at our stores has been quite — has been quite promising, has been good. We do — I mean, the commentary that I’m saying is not resonating with some of the other brands and some of the other companies that we have been — we have been speaking with and we have been knowing that. But yeah, we are definitely seeing some betterment here. It could be also an outcome of we are seeing is an outcome of also maybe unorganized share reducing a little more organized — moving into more of organized share and that is helping lot of value retailers and especially valued retailers who are quite nearer to the consumer demand, nearer to the consumer taste, nearer to what the consumer wants in that particular market and is able to provide the real value, real quality products. So I think most of the — most of the industry players in value retails are getting good responses and that is heartening to know. And that definitely also is telling us that there are — there is definitely a lot of shift which is happening from unorganized to organized and it is becoming a good news, it is becoming good news to the overall industry. Everyone is — everyone is getting the benefit. So I think performance during festivals has been good. The performance during winter period has been good in the last quarter. Definitely some spending concerns were there from the government side, some real liquidity concerns were there at the consumption which we realized. But still I see there are change of hence which has happened because the consumers who were consuming earlier has now shifted a little bit. Youth, somewhere we have seen that youth have got little more liberty, little more empowerment, little more ability to spend in the market and we also acted in that spirit in the — in the last year itself and which has given us some benefit. So we have thoroughly watched ourselves as well. The youth share of our business has literally gone up because our — that share used to be somewhere around 22% earlier, now has gone up to 27%. So we — our focus towards the Gen Z population and Gen Z population itself becoming larger and then becoming much more empowered is giving us those kind of betterment. So I think these particular spree that we have taken-up or this particular strategy that you have taken-up to attract that particular kind of audience and be relevant to that particular audience with all those initiatives is definitely is the right move that we feel and we’ll continue doing that as well. And we feel that definitely all these focus towards the lower-income or the middle-income group segment, which is especially more in urban cities, which is by the government by even reducing the taxation and rising the limit. All of those — all of this should definitely further help us to sustain that and maybe grow that. So I think largely the fabric prices, the material prices have been almost constant. There has been some movement in the material prices, in cotton prices and yarn prices, but I don’t think — I don’t see a lot of risk because the government’s focus is also very largely on the textile sector. The government is ensuring that the cotton prices don’t go up and there is enough production in the cotton prices. So all of those move by the government also towards the textile industry is definitely something which is — which will add — which will add more resources, which will add more benefits in the overall manufacturing side. But yes, definitely, it will also bring in lot of innovation because whatever PLI schemes that is giving — given — being given in the textile sector is also bringing in lot of innovation in India, lot of new development of fabrics, lot of new development of those kind of product lines is getting developed. And also a another good news that we’re seeing is a lot of factories are getting set-up even in apparel factories in garment. So I think some of these pieces, we are very conscious of all of these pieces. We are regularly participating in industry meetings and industries areas. So we do — we do get updated on all of these areas. We try to motivate vendors to try and grow into those levels, get on to those segments. A lot of states are offering a lot of incentives and better benefits in terms of apparel manufacturing units, giving them labor subsidy, giving them capital subsidy. So all of those definitely is a better area so that organized production, large-scale productions can happen in India. Last scale’s production will definitely help retailers like us who is — who are growing and who are definitely wanting to have better supply-chain, better mind to-market speed, better fashion designing, better-quality. So — and definitely reducing the prices, which is an important part. So all of those things is definitely making the whole value retail segment or value apparel fashion retail segment little more stronger and that can give a little more pressure to the brands, to the ones who are selling it at a higher price or are targeting the higher middle segment of the consumer. So there are some constraints I have been seeing and that continues even in this quarter. So — but largely for us, we have been focusing and we have been really strengthening our quality we have strengthened our design piece. We have worked a lot on our store experiences in terms of ambience, in terms of the look and feel, in terms of the visual merchandise, in terms of the product displays, in terms of the cleanliness of the store, clutterness reducing the clutterness in the store, trying to work on the density of inventory at the store-level. So some of these pieces are also giving us some benefits. We are definitely focusing a lot on sourcing, focusing lot on reducing the prices, focusing on keeping the prices sharper aligned. We definitely haven’t reduced our margin yet. That also we may — we may experiment few of the items, few of the products where we would want to generate a little more higher-volume and try to try to see what is the market possibility demand, which can get accrued. So some of these things have happened. We are definitely working a lot on the futuristic need in terms of the technology, in terms of the integration of technology, because there are various processes which got — which needs to get automated, which needs to get little more sharper, which needs to get scale — scaled-up and there we are using some of those technology pieces. We are talking to lot of technology companies to integrate further processes as well and enhancing our digital experience even in the store-level in terms of — in terms of those lost sales or in terms of endless aisle and our one-click proposition through LimeRoad is really working very well. We’ve seen a lot of lot of app downloads at our stores. So we’ve seen almost more than 3 million ad downloads happening at our stores. So some of these pieces are for the futuristic understanding futuristic needs and then some of these pieces are now coming into good thought process. And we also we have focused very highly on about keeping our inventory levels at the base or reduce our inventory levels, days of inventory going down, better freshness of the inventory at the store-level, how do we increase our freshness, how do we — how do we really better on the new designs and new philosophy of product lines which is required by the consumer. So some of these things are well and we will — we will continue doing that. Manpower cost has been a little bit of challenge because manpower minimum wages have grown in certain markets, grown by very-high degree. So that also initially it could look like a bigger, better or higher-cost to the organization. But later on, we believe that all of these minimum wages will also bring up the GDP of that particular state, the per-capita income will go up. The consumption further will come up and that will further offset all of these costs. So definitely, yes, states like saw almost 29% minimum wage is high, like saw a 22% minimum wage is high. So some of these states which went for election in the last few years, maybe in the last year have seen a good growth in the minimum wages side. So that is increasing a little bit — putting a little bit of pressure on the labor bill on the power bill, even the high — huge competition, which is splitting up, everyone wants to open up more stores, lot of money has been raised in the market through private-equity and IPOs. Some of these pieces definitely brings more dynamism in the market. There’s more number of stores getting opened. Everyone wants to target a higher — higher-growth. So I think some of those pieces also is trying to where there is higher competition amongst employees. So that is also something that we are watching and we do know, but there could be some pressure. But yes, we are trying to nullify all of these pressures to bringing in automation, bringing in digitalization and trying to trying to provide similar or better solutions in those similar number of people that we have. So there’s lot that is being worked at the V-Mart level in the back-end side, a lot of analytics, lot of work on the data, data management, some work on AI. Some of those things are also happening. I mean, we will keep updating you, but let me hand over to Anand and so that he can give you a little more detail about the about the results that we have announced this time. Thank you.
Anand Agarwal — Chief Financial Officer
Thank you,, and good morning, everybody. Let me take you through some of the key financial and operations highlights from the quarter and then we can open the session for questions. This has been a reasonably good quarter with like-for-like sales growing at 10% in aggregate with unlimited LTL also growing at 11%. There was a bit of a delay in the winter onset after Diwali, which impacted the winter merchandise sale briefly. But however, it picked-up in late November. I think overall temperatures have generally been hotter in this current year than the previous years, reflecting an increasing impact of climate change, which was also reflected in the lower peak winter days during Q3. However, efficient planning did not lead to any adverse impact on the inventory due to this. But despite the winter challenges, the sales grew at a healthy 17% in the offline business with footfalls also growing by almost 40% in this quarter. Sales grew by 19% while Unlimited had a lower 6% growth despite a 11% L2L increase due to the adverse sales base impact of 12 unprofitable unlimited stores getting closed in last year. So on a comparative basis, the base quarter of Q3 of last year included the sales of these subsequently closed stores, resulting in an optical lower-growth rate for Unlimited in the current quarter in this year. Looking at the sales per square feet, the total sales per square feet increased by 10% for the quarter, which was in-line with the growth. The SPSF growth for increased to 927 and for Unlimited was at INR676, which was also 10% higher than previous year. The average selling price remained flat for V-Mart, while it degrew by 5% for Unlimited due to changes in merchandise mix. The ASP should remain in similar range going-forward, but for any seasonal or mix variations. The LTL sales growth was similar across all tiers with Southern India stores doing marginally better in Tier-3, Tier-4 markets vis-a-vis the Tier-1 and Tier-2, reflecting the success of replicating the Vmart strategy of getting into smaller towns also in unlimited. For stores under V-Mart brand, the like-to-like sales growth was similar across almost all tiers. At an overall level, the festive period went off quite well. Substantial part of Burga Puja sales shifted to the previous quarter, thereby implicating a relatively softer growth in the East zone in this quarter. However, all other regions had double-digit L2L growth. We opened 21 new stores during the quarter with 19 in Vmart and two under Unlimited, taking the tally to 488 stores pan-India, out of which 85 now are in South. All the new stores opened this year, including in South have been performing well and in-line with the established business model. So moving on to gross margins. The total gross margin was at 35.8%. It was 30 bps higher than last year despite a 38% lower revenue contribution from LineRoad Marketplace business, which flows in 100% into total gross margins. So the improvement in gross margins came in at the back of better fresh merchandise sell-throughs of new winter merchandise. However, on a go-forward basis, we shall be prepared to compromise on product margins to make the value proposition even more sharper for consumers and improve on inventory freshness through higher inventory turns. Coming to expenses, at an overall level, total expenses were almost 3% lower than last year, in-line with the 3% reduction in Q2 as well. The continued reduction is due to the sustained significant reduction in LimeRoad online marketing expenditure, along with favorable impact of closure of the unprofitable unlimited stores in the last one year. The manpower cost was up by 24% on the back of increased incentives, increased higher minimum wages and also the increase in the variable component of the ESOP liability, which is in-line with the sales growth. There is a higher focus on employee reward and motivation to positively influence efficiency, which should further drive overall profitability and growth. Other expenses declined by 15% year-on-year due to decline in the imroad business and consequent logistics cost apart from few other efficiency improvement measures. Coming to EBITDA, for the VMart core business, EBITDA for the quarter came in at 17.9%, which was 130 bps higher than last year and unlimited at 15.4% due to the beneficial impact of closure of the loss-making unlimited stores in the last year. For total V-Mart, including the 54% reduction in losses from the business, the total EBITDA for the company came in at — came in 43% higher at 16.7% for the quarter. Coming to inventory, the quarter closed at INR818 crores of inventory, which was at 92 days. There’s a lot of good work which has been happening on the product side, which includes a lot of technology-led improvements in designing, sourcing, quality-control and replenishment cycles, leading to overall improved sell-throughs and thereby better inventory health. This is still work-in progress. I think Lajit also alluded to this, and we will be — we are undergoing a lot of projects, lot of work-in this area and this has been our core focus of how to improve the product side and thereby reflect even better inventory cycles going-forward. YTD capex has been at INR83 crores, which includes spend on the 49 new stores and refurbishing of old stores. The new warehouse, which has had a few initial operating challenges in the last year is fully stabilized and is helping improve the overall supply-chain turnaround times. The working capital limit utilization has reduced by 70% since the start of the year and remains in a very comfortable range. Better profitability and improved working capital led to a positive net free-cash flow of INR59 crores YTD. There is no long-term debt on the books and we remain comfortable on the cash front with ample working capital limits available to leverage future growth, which will be financed mainly through internal accruals. Coming to store expansions, we opened 21 stores this quarter and 49 year-to-date with five closures. The pipeline for quarter-four looks reasonably strong and we should end the year with 50 plus net store additions for the full-year. There may be three, four store closures in the current quarter, which is a normal practice as we will budget for 1% or 2% mistakes that we will — that will need closures every year. All the major corrections — onetime corrections have already been done in the last year and going-forward, we should see minor 1% or 2% closures on a need-to-do basis only going-forward. Okay. Coming to, the marketplace business remains in improvement mode. EBITDA losses already reduced by 54% in this quarter year-on-year. This is the seventh straight quarter of reduction in losses at LimeRoad. The strategy on LineRoad remains the same, which is to extend LineRoad as the fashion-forward only arm of VMART and facilitate very easy order placement process by customers through the LineRoad app, initially for missing sizes or missing colors in the offline stores, but eventually extending it to offering a bigger catalog of products which can be offered beyond the brick-and-mortar stores. Before I conclude, I also wanted to mention that Lalit’s elder son, Warren has joined the company recently. Warren has completed his education from New York Stern School of Business and have also done stints with Karni and US telecom and strategy in the US before shifting back to India in December. Has joined us in the operations team and is helping co-execute the future expansion strategy for the company along with Vineet and Vineet’s team. The company has also recently been awarded with the prestigious 2024 Institute of Company Secretaries of India Award for Excellence in corporate governance during the quarter, recognizing our commitment to the best governance standards. This recognition comes as a follow-up to winning the Golden Peacock Award for Corporate governance in 2022 and also the 2022 certificate of Appreciation at the Institute of Company Secretary’s National Awards for Excellence in Corporate Governance. So that was all from my side on the operations and the business update. I now request the moderator to open the house for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin 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 handset 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 Tejas Shah from Avendus Spark. Please go-ahead.
Tejash Shah
Hi, Lalerji. Hi, Anand. Thanks for the opportunity and congrats on good numbers. Sir, just wanted to know like, for example, last 12 to 15 months, clearly policymakers are trying to — they have first recognized and then they are now trying to solve the problem at the mass end. And you also spoke and on positive sentiments. So just wanted to know the sustainability of the same, A? And B, when we look at our recovery in our numbers, which is — which is on standalone basis, quite good, but now many of our peers also being listed and when we compare, over there, there seems to be some — we are tracking below the medium growth rate. So if you can comment on both on these points on growth.
Lalit Agarwal
So, I think I’ve already mentioned about this and we believe that there is nothing which should distort the aspirations or the consumer spree that we are able to see and we should get little more positive news going-forward and then we should see more disposable income in the hands of consumers. Consumers should feel more confident going-forward as we see. And more-and-more initialization, more-and-more manufacturing capabilities has to come into India and will get appreciated here. So I think we definitely have a good plans going-forward. We continue thinking because we’ve always seen that in especially in our markets, it do not behave as to the global markets. It’s not going to behave also as to the national urban market, but it does behave in with — and once the consumption spree start coming in at least three, four years if the monsoons are good, we continue having a good demand pattern coming in. So we are positive. We are hopeful we will continue targeting similar kind of growth and maybe not exactly this one, but maybe mid to-high single-digit number. So that’s what that’s what we are targeting. And then I think everyone who is able to focus a little more complexity has got developed in terms of fashion business because there is a lot of change in terms of the fashion wearings and the kind of product lines which are getting launched, the kind of fits which are getting launched and which are being accepted. And there’s a lot of complexity in terms of understanding the consumer versus the fashion because there are the tiers and within the tiers, there are stores which will behave in a different manner versus a store which will behave in a different manner. So there are different consumer persona, which has to be identified and the product has line has to be magged with it. And it involves a lot of complexity in terms of forecasting, allocation, understanding the consumer and understanding the behavior pattern of buying and then allocating such kind of product because the range has become little more wider and they are customers who still believe in the classic designs and there are customers who now want some model design. So how do you differentiate between the two and both the customers are important. So that’s how you have to pass-through this transition journey and that becomes very complex for some of the retailers and retailers who are able to cater to that are then able to provide better growth. And these will be testing times for retailers, fashion retailers especially, especially in the next one year.
Tejash Shah
And, on relative growth, how do you — how should we interpret the gap between us and median growth rate that we are seeing in this space.
Lalit Agarwal
I mean, I mean, Pejas, I may not be able to help you a lot. I told you this complexity is there. So I — I mean, comparison is very difficult. But yes, it is it is also a function of their own market, it is a function of their consumer segment. It’s a function of how do they anticipate the fashion, anticipate the growth and then how do they actually perform? There are hundreds of lever, which we say between the cup and the. So it say hotel until the time the reaches the customer at the right time. So a lot of things has to get synchronized so that you actually deliver those outcomes. So I think if some retailers have delivered a little lower unless and until they are targeting a different segment of consumer, unless until they are targeting a different price point in the market, they definitely should be able to get the benefits which is coming out of this market. So we believe, I mean, I can’t — I don’t want to mention anyone who is doing bad, maybe in certain phase of time, they might have not performed, but they will once again come and come back and perform. There are retailers who are retailer and each-based retailer because the Pujo sales have gone a little bit in the Q2 market also. So each based retailer has shown because even our East June as mentioned, has shown a little lesser growth compared to Gather Jones because there the market — the festival period has shifted to the quarter two. That is why maybe you are seeing some differentiated growth.
Tejash Shah
Got it. Sir, second, how the new stores have done because we corrected a lot of COVID phase store shutdowns and then — and then we actually kind of recalibrated in last two years. So how they are doing? And any guidance looking at the consumer sentiment you would like to give for FY ’26 on-store opening?
Lalit Agarwal
No, I think for us, we have been very, very conscious because we have closed a lot of stores. So a lot of learning has finally got plowed back into the — into the decision-making processes on the new-store finalization or new-store search and new-store opening. So all of those learnings are now being getting accounted. So as of now, most of the stores that we have opened in this particular year and the last year has really given us one of the best sales per square feet-in new-store for the last five years that we have opened. So these stores which we have opened have given little better sales per square feet and more than the company average that we have clocked. So I think we definitely are very conscious. We don’t want to go out and open up any store at any kind of rental because there is a lot of even cry in the market to acquire property. So people are going out to give any kind of prices because the money is becoming cheaper as the multiple in the share market has gone up. So people are trying to raise funds at a lower-cost and the cost-of-capital is becoming lower, people are taking those kind of decisions also, which we are very, very clear that we don’t want to go out in any kind of those three. We’ll be very conscious in terms of our rentals, we’ll be very conscious in terms of the location that we open up. And then we just not — not chase number, but we’ll definitely change the profitable number of growth that we are able to do with stores.
Tejash Shah
Got it. And sir, last one, inventory days have come down significantly and inventory looks very healthy. Should we expect that — assuming that there won’t be any discounting pressure next year, would you use that tailwind to expand margins or you will pass it on to consumer to drive SSG next year? And any guidance on any target that we are running for inventory days as well on improvement?.
Lalit Agarwal
So just these are all incremental areas, Mirabha,,, but it generally doesn’t happen like that. So it is all — there are lot of efforts, as I said, a lot of efforts has to get synchronized and everything has to fall right given the seasonality like this year, the January month has not been great because the winter was subsidiary, our winter was subsidiary, we did plan for an inventory. When you don’t — when you don’t get a great season, maybe you need to — you need to discount a little more, you need to liquidate your inventory or maybe you get a little leftover of the inventory. So these are synchronicity. We can put our efforts. We will definitely want to bring in all those kind of automation, digitalization analytics which is required. But still there could be an outcome which may be in our hand and which can become positive. We would definitely want to better our days of inventory cover by reducing it by at least another 5% more coming down to 97 days or 88 days. That’s where we would definitely want to target. And but yeah, the margins also on the other side, we would want to become a little more attractive in terms of value providing to the customer because that is what will work. And because there is lot of — there are a lot of players across the road in the same street which is providing and trying to provide the same customer with value, you will definitely have to be much more sharper in terms of the price. So margin leverage or margin escalation is not possible. You may have to take-down a little bit of — little bit of cut in the margin also, but provide more value to the consumer to retain the consumer and also attract more consumer, consumers because the organized segment has got more consumer segment — more consumers in the market. Now it is about us, how do we attract them and retain them and give them the right and the best-value which is possible. The value is not only about price, we are not chasing price, but it is more about quality as well as the product, which is important.
Tejash Shah
That’s all from my side and sir, all the best for coming quarters.
Operator
Thank you. The next question is from the line of Rishi Modi from Investment Managers. Please go-ahead.
Rishi Mody
Yeah. Hi,, am I audible?
Lalit Agarwal
Yes. You’re audible.
Rishi Mody
Yeah. So, just picking-up on Tejis when you responded on the rental piece from competition, right? Other retailers have also pointed out that rentals have escalated. So are we probably going to go for properties with lower rentals and maintain our store count guidance or are we going to reduce our store count guidance, store count addition guidance and wait for the good properties to come back once say, some stores fail.
Lalit Agarwal
So I think that’s the skill that we have and that’s the skill that we are going to apply. We definitely don’t intend to reduce our store count. We would continue to open similar percentage of new-store addition or percentage of square feet addition that you would want to do. But yes, we just don’t want to chase those numbers. We will be very conscious on trying to open up the stores which are profitable and it gives us a great return on investment. So that is the underlying factor and that is the underlying message which has been passed on to the team and that is what we would relate and we would want to. Maybe if there is a difficult period where you don’t get a great property, but you don’t get a great price, you may not want to open up. You’d rather want to focus more on increasing the same-store sales growth rather than opening up new stores. So but we always keep this stand and we always have been — have been telling this to the market and telling it to everyone that our growth will only come from our possibility of rental being at below 6.5% to 7%, it cannot go above that.
Rishi Mody
Right. So I’ll tell you where I’m coming from, right? So we’ve guided for, say, 60 store count additions over the next year. In the past as well, we’ve had an accelerated store count addition, albeit some stores which maybe pre-COVID weren’t coming to the same throughput, but we maintain the store count addition. So just trying to understand, are we changing that stance going-forward that we won’t open stores and locations, which won’t give us the minimum throughput?
Lalit Agarwal
I’m not saying that I’m changing the stand. We are saying that we continue having the same growth rate. You may calculate that to 60 or 65 or 55, I don’t know-how is the calculation working. We will continue to have similar target, similar goal which we have passed on to the team and we would definitely want to open up and get the analytics because it is just not about city or it is just not about town. It is also the location in the city, it is also about the frontage of the store. It is also about the size of the store, it is also about the floors that you have in the store. It is also about the rental prop that you are paying to the store. It is about various terms and conditions. So it definitely has lot of involvement, but yes, the team is aligned, team is very much skilled. This is the whole team. This is the strength of and we would continue to leverage that strength.
Rishi Mody
All right. And where the competition is setting up stores, right? Whether viable, non-viable, I’m assuming the store count addition rate of competition has increased on the back of the fresh funding that we have received. Are we seeing any temporary market-share loss in at say any catchment level or region level, we might regain it, but in the nearer-term, are we seeing that impact hitting us?.
Lalit Agarwal
So I think as a over — if you look at the overall retail market, I’m not seeing that happening. But yes, if you see at the organized share of market, see what is my percentage of market-share in the organized share? Definitely because the organized share — the number of competitors have grown. There are more than 12 13 competitors or 15 competitors which are trying to open similarly. So you can’t compete with all of them. So market-share may go down within the organize share. But on the overall spree, yes, the market-share is continued or is increasing.
Rishi Mody
Okay, got it. Understood. And finally on the minimum wage increase, right, you called it out that Orissa going into the state election increased the minimum wages by 25% 30%. Are we also seeing like we have BR elections this year, we’ll have UP elections couple of years down the line. Are we hearing any minimum wage revisions coming in for these states?
Lalit Agarwal
I mean see, it also depends because these states also have lot of people who are unemployed. These states also provide manpower to most of the Indian states. So these states need their manpower to work-in their state, but that won’t happen if their minimum wages are not attractive, the industries won’t come in. So they won’t also to bring in industry. It depends. It depends upon the state-of-the affair of that particular market. And also what is the minimum wages? And were at a lower minimum wages compared to the other states. They increased sharply and there is lot of activity which is happening in in terms of mining and stuff. But I don’t expect similar to happen in UP, but yes, something may happen in, but because they are also at the, but that will continue and therefore the risk that I have told and merited that this is a risk, which is in a short-term risk pain, but ultimately it should lead to a higher GDP and higher per-capita income, which would once again come back to the consumptions.
Rishi Mody
Understood, sir. All right. Thank you. That’s it from my end. Thank you, Adity.
Operator
Thank you. Thank you. The next question is from the line of Adity Lohatkar from CD Equi Research. Please go-ahead
Aditi Loharuka
Hello, am I audible?
Operator
Yes, ma’am.
Aditi Loharuka
Okay. Sir, my first question is that what happens like the sales to go up?
Anand Agarwal
I’m sorry, can you repeat that question?
Aditi Loharuka
My question is what factors led the sales to go up?
Anand Agarwal
So it’s a mix of multiple factors. It’s not a one factor. So one is quarter three usually is a very strong quarter for us and we’ve been doing a lot of projects, a lot of work around improving our own efficiency in terms of the product mix, the product quality, the product design, the — what we source, how we source from where we source at what price we source and making the customer proposition even more stronger. It’s been a continuous excise for the last one, 1.5 years and thereby, you will see, you would have seen the sales improvement has happened for the last one, 1.5 years consistently. So this is probably the fifth quarter straight where we have delivered good same-store sales growth and we believe that the — that the work that has been going on is sustainable and is helping us build the momentum for even better growth in the quarters to come.
Aditi Loharuka
Okay. And sir, what is — like how do you think ASP of will move over-time?
Anand Agarwal
I think we are very comfortable with the ASP where we are. There may be some changes because of the festival mix or the climatic mix, which happens from month-to month or quarter-to-quarter, but at the level where we are, I think we are fairly comfortable.
Aditi Loharuka
And is there any inflation trend in raw-material or in consumer spending, can you see that?
Anand Agarwal
So there is a bit of inflation pressure that we see on the expenses side. But as far as the raw materials are concerned, I think cotton prices have in fact a little bit softened, but they have remained in a very narrow range throughout the year and we are not anticipating big changes in the cotton pricing going-forward. Oil has also remained pretty much very much in a controlled range. So we’re not anticipating any pressure on the raw-material front. But yes, on the expenses side, on the manpower cost, on the rental cost, there will be inflationary trends and it has been there also in the past. So nothing unusual, but yes, it will continue. It should continue.
Aditi Loharuka
So will those increase in expenses be passed on to customers
Anand Agarwal
We will try not to. We will try our best efforts not to because our customer segment is extremely cost-conscious and we will want to therefore mitigate any normal inflationary trend through efficiency improvements and volume-led improvements, we will try not to pass-on any more surprises to the customer.
Aditi Loharuka
Okay. So what is — what do you think is the — more of your priority like retaining the customers or retaining the margin —
Anand Agarwal
Absolutely retaining the customer. We are absolutely very, very customer-centric. Profits are important, profitability is the reason why we do our business. So every store, everything that we do is centered around profitability, but we will not want the customer to move-out because of you know, compromising on profitability a little bit. But yes, we don’t want to get into a loss-making situation. Our focus always is to make sure that any location any store that we run is profitable and continues to remain profitable.
Aditi Loharuka
If the expenses are going up, can we see any decrease in margins going ahead.
Lalit Agarwal
So Adity, this is — you have to understand this business and understand its mathematics a little more deep detail, let me explain you. Even if your cost goes up, the whole — the whole process of getting the margin is — has to be through higher-volume and has to be through better same-store sales growth because there is some element of cost, which is to always keep going up like rentals. Every year you have got an increment or every three years an increment, which is bound to grow. So now you have to see — see — and there is a labor — manpower, which is bound to grow. Every year there is inflation which is happening, there is some amount of cost which is going to. So that is the reason that we always anticipate a same-store sales growth. And you need to beat those numbers in terms of your same-store sales growth. All of these cost increment if we do a same-store sales growth of around 4%, all of these cost gets mitigated. Anything in delta 4% same-store sales growth always gives you add betterment into your bottom-line, if your gross margins are constant. But if you now become a little more sharper in terms in terms of pricing, if you are not able to sell-through at a full-price and get quantity, your margins get compromised, your gross margins. So you may finally get into the bottom-line. So don’t worry. I mean, we definitely believe that the margins should be constant or should be growing. But as long as we are able to keep getting this whole same-store sales growth phenomena?
Aditi Loharuka
Okay thank you.
Operator
Thank you. The next question is from the line of Ali Askar Sakeir from Motilal Oswal. Please go-ahead. Hello, Mr Ali, your line has been unmuted. Please go-ahead with your question?
Aliasgar Shakir
Yeah, sorry, I was on-mute. Thanks so much for the opportunity. Hi,. Hi,. Sir, question is on basically margins. So you mentioned that from a gross margin point-of-view would want to be a little more sharper to improve the value of orientation. But I just want to understand from a EBITDA margin point-of-view, now when I look at it compare from a level, the current quarter margin would be still somewhere close to give or take around 400, 500 bps lower than what you were doing probably pre-COVID. And I’m just saying Q3 number, of course might be different, but I’m just given the fact that we are improving the numbers every quarter, I’m taking this quarter number. So still 400, 500 bps lower. So just want to understand, I mean, the point that you mentioned that improvement in throughput will continuously improve your margin, what level of increase from the current throughput you think should allow you to kind of reach your stable state margin that you were doing pre-COVID level from a full-year point-of-view? Any understanding over there will help? I was just thinking from the point-of-view that level, this company can do somewhere about 8% kind of margin in terms of EBITDA and probably 4.5%, 5% margin, then how much further throughput improvement is required to be able to achieve that?
Lalit Agarwal
So Ali, I mean, I don’t think I know maths better than you. So you are an expert in math, it is a mathematical question and you should be able to answer that. I don’t think I need to answer it.
Aliasgar Shakir
My point was more from qualitatively, more from the point-of-view that you know, looking at that situation on-the-ground you know-how much you think levers you have that will help you probably reach
Lalit Agarwal
These are all — these are all perspectives, these are all subjective perspectives. So we need to keep working on all of those. We need to always keep focusing because there is definitely a higher — higher trust that the consumers are demonstrating on organized retail. And this movement from unorganized to organized is making things much, much better. And that is what India is all about. That is what — and if their per-capita income once again grows and they start consuming a little more and their — their disposable income is a little better. The share of urbanization increases, the share of consumers coming into organized price increases. Everything all of these will fold up into our basket and then definitely is our own efforts in our own proposition, our own ability to understand them, provide them with the right assortment, mix and merchandise and give them those kind of quality which creates a trust with them. So all of those will finally add-up into the into the same-store sales growth and that same-store sales finally will bring in the margins. So we definitely believe we will want to be constant, but still as you all understand and we all know that there has been multiple number of competitors which have got evolved. There are higher — higher-ticket sized competitors of rates, which are driving value retail. So definitely there is going to be some pressure which is going to come in terms of value providence because what consumer wants and what are you offering and what kind of designs are you offering. So we are very realistic. We are very relatively — we are talking about that. We are just not talking about prices. We are also talking about product, fashion, quality because even that do cost even bringing a new design, good design, bringing in a better-quality, bringing in a better look and feel at the store, better service standards at the store. All of those do cost you. So all of those are always also a caution, there has to be some differentiator. And that differentiator also gives — the cost. So we will balance most of them. But don’t — please don’t — I would just want to remind you, don’t start still chasing those pre-COVID numbers. The days were different, this age is different. So only stone is CEH, digital age come up compared zero. So it will be better that we do compare in the year-on-year methodology only. So those were times when you were alone in your market, a lot of markets were there where you had a monopoly. Now is not the time where you had those complete straight as well. But anyway, I think if our same-store sales growth continues, we definitely would not want to surpass any double-digit margin numbers. We will definitely want to retain that number, but pass-on all of those value benefits to the consumer, so that the consumer keeps trusting us and keep coming — coming back to us because you will see — because even now we see because even there are seven to eight stores opened up in a lane, customer comes in at V-Mart, looks at V-mart product, goes back to a competitor, looks at the competitor, comes back once again to Vmart and then buys it. And that’s what we want. They should compare, they should understand, they should understand and look at the entire market, but they will do it one or two times once they have a trust that Vmart is always better and is always better in quality also, then they will not start — they will stop checking also with other competitors. So that’s what we want in the future course.
Aliasgar Shakir
Very useful, so very, very clear on this. Sir, just one last quick question is on the competition and your comparable performance. So of course, we have 500 stores across multiple markets. On-the-ground, can you tell me, sir, how is the performance like-to-like is — are we growing at par with the market, are we growing in certain markets higher or any markets lower? Just general sense in terms of how is the comparison on a like-to-like basis on-the-ground? Because obviously on an overall portfolio, things can be very different because of the presence of different players in different markets, but on a like-to-like basis, if you have any insights to share.
Lalit Agarwal
See, I mean, as Anand mentioned, because the quarter I saw Puja coming in the quarter two had gone into that. So we saw a little lesser like-for-like growth in the Eastern market — Eastern India market. We saw very good growth in the Northern India market because the base for us also is lower in the Northern Media market and some of our new initiatives, some of our fashion initiatives, some of those quality-led initiatives has really helped to grow that market a little better. We saw a good growth even in our unlimited market. South India has shown another good growth. Within South India, Tamilado has been a very good market. Telangana continues to struggle for us. Telangana is not giving us a great, great response. So there are markets which has really done well. There are markets which has been almost — almost on an average. UP was struggling until last quarter or large to last quarter, but UP has come back, UP has started growing. So I think UP is giving us because UP has a lot of — we have a big base in UP. So UP has shown up. From a competitor’s perspective, we have seen a — I mean, most of the major competitors we — in-spite of their good growth or their lot of new-store opening that we have seen, we still see a good growth coming in from those stores as well. So I think the stores which gets opened up even in the similar or same wall of our store, we see a lot of more customers coming into that market, more customers trying that stores. So I think it is a function of market becoming bigger that is ultimately leading into everybody’s growth. So that is what we are also seeing and that should continue. There could be some disturbance in a particular market, but otherwise most of the markets have really grown there.
Aliasgar Shakir
Got it, sir. Very helpful. Thank you so much.
Lalit Agarwal
Thank you.
Operator
Thank you. The next question is from the line of Sameer Gupta from IIFL Capital Services. Please go-ahead.
Sameer Gupta
Hi, good morning, everyone, and thanks for taking my question. Sir, firstly, just your comment on Unlimited. I noticed that sales per square feet-in Vmart is still 30% higher than unlimited. These are the numbers that you report in the presentation. Now in the media interview earlier today, I heard Anand say that margins in Unlimited are now at par with V-Mart. So was this comment meant only for the new stores that you have opened and unlimited? And can I just ask the EBITDA margin level, any particular range that you can give for the older store group that you had originally acquired? And I believe that number is less than 60 stores now. So just some color on this aspect, sir.
Anand Agarwal
Yeah. Yeah, Sameer, you are absolutely right. I think that comment was more in terms of the new stores that we are opening in South and that number is quite heartening and it is almost at par or even better than Vmart stores. This is the new stores that we are opening in South Under Unlimited and yes, the older stores are still tracking well below the norm, their sales per square feet is also slightly lower than the new stores that we are opening and the expenditure or the overhead share are also slightly more because of the higher square footage area. So the area size is slightly bigger. The catchment is more Tier-1 and thereby the three EBITDA still is lower than the planned average for the unlimited chain. But as I have said in the past as well, we continue to build-on new stores in South. The new stores have better sales per square feet and therefore better profitability. And as the proportion of new stores keep increasing, the overall profitability level for Unlimited as a segment will keep on getting better and keep getting improved or comparable to.
Sameer Gupta
And sir, just a follow-up here. So these older cohort of stores, let’s say — I mean what I remember is around 58%, you can correct me if I’m wrong, at, let’s say, less than 5% margin on a basis, their ROCE would profile of the store would still be less than or sub 10%. So do we keep — like beyond a point we keep these in the system because because now it’s been like three, four years and we’ve waited around for them to turn-around, but or is it an acceptable outcome that, okay, it’s a sub-10%, but still they are not making losses, so we’ll still keep them in the system.
Anand Agarwal
So Sameer, it’s been a journey. So it’s not like — see, there’s a lot of internal review around each of the stores that we run and especially for the unlimited stores that we took over, there were many, many hard calls that we have already taken in the last two years. We’ve already closed more than 20 stores in that chain. And whatever stores that we — that we felt required surgical action that has already been taken. The number of stores that we now continue to run are strategically important, are important from different perspectives and they are not loss-making. And we have faith and belief that we will be able to turn them around even better. So it’s just a matter of time, but we are not building in aspirations of INR1,000 sales per square feet-in these stores, but there are priorities, there are importances because of which these stores will continue to run, but they are not loss-making, they are profitable. Their profitability profile may be marginally be lower, but they will also come at past.
Sameer Gupta
Okay. Got it, sir. This is very, very helpful. One last question, sir, from me. There is one large retailer Reliance, which has been consolidating its store footprint, and I believe some of it might be in the apparel retail as well. So just wanted to understand from you, is there a meaningful difference between the set of stores where, let’s say Reliance used to be there and now it is not there versus where there is no reliance in the vicinity, just this aspect, sir
Lalit Agarwal
So for the matter, when we speak in the operation team they say relies is omnipresent. So is everywhere whether they perform or not perform is a different question. There is a lot of change in the strategy in terms of reliance. So we — the consumers are also confused, the store people are also confused. I feel reliance has gone out of our bracket because their average selling price is almost 60% 70% higher than our selling price. So it is not becoming too relevant anymore. But yes, definitely some of the reliance de-growth of store getting closed do add-up some number to our store and we see some betterment there.
Sameer Gupta
Got it. Got it, sir. That’s all from me. I’ll come back-in the queue for follow-ups.
Operator
The next question is from the line of Lokesh Manik from Capital. Please go-ahead.
Lokesh Manik
Hi, good morning, and. Am I audible?
Operator
Please go-ahead.
Lokesh Manik
Yeah, great., my first question was continuing from the previous participant. So the sales per square feet nine months Unlimited is somewhere around 500 versus V-Mart at 700.,
Lalit Agarwal
Are you speaking on a the speaker phone? You are equation. I’m not able.
Lokesh Manik
Is this better now?
Lalit Agarwal
Yeah.
Lokesh Manik
Yeah. So the sales per square feet unlimited is at 500 versus V-Mart at 700, whereas the ASP is almost doubled now the difference can be alluded to the volume. So just wanted to understand that is this more external where the consumer market is such that it’s not more volume-driven or is it more internal at our end where we need to make further changes to increase the volume throughput and your view on whether it can come to INR700, INR800 per square feet three to five years down the line.
Lalit Agarwal
So Prakesh, we all know that unlimited market, one, the per-capita income of the consumers in Southern India is also higher, number-one. Number two, the market there, we offer a differentiated product, which has a little higher-margin also. And three, we also house there some branded products, which is called partner brand business where some of the known brands in the market have been given some space in terms of top-in-shop kind of model, which brings in almost 18% to 19% of unlimited revenue, which is at a higher ASP. So that including all of those, the ASP level looks much higher. And definitely, if you see the last four quarters, you must be noticing there is a sharp drop-in ASP’s price — ASP of unlimited and that is the focus that we are bringing in. And how do we give more — the consumer the more share of our kind of product, which is a VMA kind of product and bring down the prices. So that is how we are trying to first get the little more mass audience, little more lower per-capita consumer segment and little more youth into the — into our store. And that is what we are trying to do. That is how we are also seeing some growth which is coming in even this quarter we reported 11% growth coming in from unlimited market. And we are seeing very good response from some such kind of store. So we believe the unlimited this particular quarter has almost given greater than INR650 per square feet of sales, we believe we should be able to bring it to that level of maybe in the next two years. So that is what we will want to do. But yes, the delta or the delta will be there. There will be — there will be a difference between both of them sales per square feet. Yes, but we are nearing to our proposition. Once the consumer there understands our proposition well, we will want to then slowly and gradually decrease the share of the bigger brands or the partner brands because anyway, our proposition also similar to the partner brand, but only the brand has a brand value where in the South, the consumers still value that particular product.
Lokesh Manik
Understood., the second question was on, in the past two years, we’ve been focusing a lot of merchandising. So on the sourcing front, we may have even partnered with some of the suppliers who are supplying to our competitors who are doing well at that period of time. How has been your experience from a quality perspective getting these new suppliers into the system and seeing how their quality is indexing with the past suppliers. How has that difference been in your view?
Lalit Agarwal
It is has been a very tough journey,. It has not been very easy to bring in change management in smaller entrepreneurs across India. And I think the toughest part of growing up and becoming organized is bringing them on the compliance, bringing them on sustainability, bringing them on the quality parameters, bringing them on the scalability part. So we’ve done a lot of workshop with the vendors across cities because as we speak, there is a workshop going on in. So we keep doing workshops across cities. I have participated myself also in two or three workshops because we keep giving them those instructions, keep teaching them our things. There is a complete big team, which is a quality team, which is a technical team, which helps them goes down to make — create better processes for them, create better-quality parameters for them. And then definitely, we have taken a little more stricter measure on the acceptance of quality norm and what quality can be accepted, how do we test, how do we tie out those products. So there has been a lot of shift, there was definitely a lot of resistance, there has been a lot of rejection. Last year, we faced a lot of shortages of inventory because the product got rejected and people were not able to supply us in time. So some of these problems were there. Our existing suppliers have really come up well and even we have brought in lot of new suppliers and we are seeing lot of betterment in all of those and that is what we want to give. Ultimately, our consumer trust Vmart and we should not be giving them anything which is substandard. That is our goal and that is our motor.
Lokesh Manik
No, fair enough,, because that correlates with the point that your customer comes back to you after experimenting everybody else. I was just trying to understand if these new suppliers, the quality was much lower to what they were supplying to the other competitors and are they facing difficulty matching standards and at the price point, you have more cost consciousness.
Lalit Agarwal
Everything is doable, it just requires better processes and better care. So that’s all. It is an intention issue and then discipline issue. So if that is — it doesn’t cost too much. It is only
Lokesh Manik
There have been — you have put some of them out-of-the system, the new ones if they did not match and they
Lalit Agarwal
Definitely almost 20% of the vendors have got a blackmail — blacklisted.
Lokesh Manik
Understood. Understood. That’s it from my side,. Thank you so much.
Lalit Agarwal
Thanks,. Yes.
Operator
Thank you. Ladies and gentlemen, due to time constraint, this was the last question for today’s conference call. I now hand the conference over to the management for closing comments.
Lalit Agarwal
Thank you. So thank you so much for being there. We have spoken enough and lot of inputs are being given. Not too many retailers come out and speak to all the analysts and speak and bring out the detailed data. We do — we do give them — I would appreciate if people have little more trust on us and we will continue definitely giving out more — being more transparent, being more, more agile in terms of providing the data. But yes, there may be a few things that we would want to now strategize and work, which every time is difficult to open up, but yes, we’ll continue doing that, being — thank you free for being patientful with us and we will continue delivering the best-value proposition to all our ecosystem and entire ecosystem. Thank you so much. Have a good day.
Anand Agarwal
Thank you.
Operator
On behalf of IIIFL Capital Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.