V-mart Retail Ltd (NSE:VMART) Q3 FY23 Earnings Concall dated Feb. 07, 2023.
Corporate Participants:
Lalit Agarwal — Managing Director
Anand Agarwal — Chief Financial Officer
Analysts:
Varun Singh — Analyst
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
Pankaj Tibrewal — Kotak Mutual Fund — Analyst
Percy Panthaki — IIFL Securities — Analyst
Shirish Pardeshi — Centrum Capital — Analyst
Resham Jain — DSP Investment Managers — Analyst
Mandar Pawar — Kotak Mahindra AMC — Analyst
Tejash Shah — Spark Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of V-Mart Retail Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Varun Singh from ICICI Securities. Thank you. And over to you, sir.
Varun Singh — Analyst
Yeah. Thank you, Michelle.
On behalf of ICICI Securities, I welcome everyone on the call to discuss third quarter results for V-Mart. We feel thankful to the top management of V-Mart for having provided us this opportunity to host the conference. On the call, we have Lalit sir, MD and CEO of V-Mart and Anand sir, the CFO.
So, with that, I request Lalit sir to please take over the call and proceed with the conference.
Lalit Agarwal — Managing Director
Hi. Good morning. Good morning, everyone. Once again, thank you so much for coming to this call early in the morning. I hope everything is fine. Right now, I’m speaking not from India. I’m speaking — I’m doing some executive management course and I’m really back [Phonetic] in some university, but anyway, good. I think this is a — good times are being seen. Sunshine is coming back.
We are now able to see inflation coming down. We are able to see consumer confidence inching back once again to the positive side. We are able to see the mass consumer also somewhere coming out of that shell a little bit. Still there are concerns, and still there are areas where this mass consumer is still worried about. Still the whole confidence level or the confidence index is still lower.
The jobs have started coming back. People who have migrated are once again back to the cities and towns, where they originally used to work. They are back in employment. So, all of those, I think there is some positive respite sign that we are able to see, which shows the path that things will get improved over the next quarters. And that’s what we expect and that’s what we hope. But yeah, definitely things have not been as good as we thought could have become, both from the — both from the consumer perspective, inflationary perspective, as well as the confidence index perspective or the seasonality perspective also.
So, we have seen all kinds of situation coming in. This complete year — this calendar year is going to be a little more dramatic year that we will witness because of the elections coming in the next year, the politics hovering around lot of areas, lot of scenes, stuffs — I mean, areas can get disturbed at times. We could see some political activities getting heightened up in certain states, which happens, right, just before election, because of the regional or what we call the religious-led things, which happens or maybe something related to farmers.
So, we are watching very closely on all of those. We believe India story is really doing good. Lot of lot of moves that India has brought in is bringing in lot of confidence on India and Indians — the Indian industries and Indian consumers, we are able to see their formality [Phonetic] getting changed. So, I think all of those looks good from the future perspective, from the long-term perspective and definitely at this moment in this short-term perspective, we are seeing some still, I mean, if you compare with pre-COVID, we’re still seeing some kind of low-sightedness on the actual recovery or growth over those recoveries.
But yeah, we are waiting for all of those, but now I think most of the industries in retail, most of the people in retail are — their upswing on numbers is now almost getting flattened. The rush at malls and rush at those branch stores, I think somewhere that has also got toned down a little bit, but still we are seeing a good swing still there in the Tier-1s, in the metros. We are still seeing the Tier-1s, the metro consumers consuming still better than the Tier-2, Tier-3s.
So on the competition side, I think most of the competitors have been positive on store openings. Had been very aggressive on the streams and promotions in the market. So the market has been quite charged up, I would say, and we are able to see lot of new good things. We are able to see some special SKUs in the market. So, things are — the activity is on, which is making things interesting both from the value retail perspective as well as the brand retail perspective.
So at the value retail perspective, I think good signs are being seen on the recovery from most of the retailers. Both, I mean, people have tried multiple things. Certain retailers have tried bringing down the prices to attract customers, but yeah, I think people who have been able to focus on processes, who have been able to focus on the customer pain are able to really get the benefits more out of it.
At V-Mart, we definitely continue with our thought process on our endeavor on integrating all the two businesses that we have got into. We are really very bullish about the LimeRoad business. Still, I mean, in the last quarter, we got maybe somewhere around 50 days of our operations. And within that, we are still on the integration mode. There are lot of change management that is coming up in terms of the main change that has happened in the company. So lot of those teething issues are still on. Still there are areas or there are partners where those agreements, name change agreements are still to happen, so like Facebooks and Googles and the AWSs. So there are those issues, which are still continuing.
But we are — the biggest positive news that you would see is, the team is very intact. They are really motivated, charged up and the business confidence index has improved. The confidence index amongst the vendors has improved. We are able to see good attraction. And once again lot of vendors who are on the marketplace, they are coming back on those marketplaces where lost vendors are also coming back.
We are able to see lot of new development happening on the technology. Definitely still lot and lot of work to be done. Still nothing — we haven’t focused highly on the — we haven’t focused highly on the footfall creations and then — and all of those. We still want to work on those. We are trying to stabilize all those stuff. Yeah — but integration between the V-Mart technology and the LimeRoad technology, the work is on. Some part of that has been completed. We should be — we have started doing pilot on the omnichannel pieces as well. They are away from the stores. We have started doing pilots on those.
I think lot of those areas are tiered, but there are some areas of improvement that we need to do and there will be lot of continuous improvement that we need to do, because we really want to create an experience, a digital experience for the customer, who is still coming down to our store and then shopping. How do we make them seamless towards digital as well as physical. That’s the area that we are working on.
On the other side, our infrastructure development, our warehouse development is also on full swing. We are almost 70% done with our warehouse development. We will be watching when — again, we will have another two months to three months more so that we can shift to that premises. That’s coming up very well. Definitely, we have invested a little heavy on those and we have done it for — looking at next five years to seven years of view. And that should clearly give us a real capability, betterment and addition in terms of speeding up the turnaround time from the warehouse to the stores and the logistics facilities. So, all of those are really happening good.
Digitalization, even at V-Mart, lot of analytics-based reports, reporting work on those — the work with the consultant that was going on is happening really very well. The team is getting realigned at the supply side, at the merchandising, design, sourcing. All of those new developments are now — have now started coming on place and we are able to see some, I mean, initial hiccups and initial whenever there are regrouping and there are re-hierarchization or organization structure will change and new departments have been created. There are good resolutions, which starts happening.
We will have to bear with all of those. We will have those issues coming in from the new team. But yeah, I think the best part is the plan that we have. We are coming out on the same plan. We have started implementing most of the areas, right from sourcing of fabrics directly from the mill and nominating them to the vendors and then designing most of designs internally by our design team. So great collections are being expected in this spring, summer period. We are really working on this time real low prices product, where we are trying to provide quality to the customer, which is never seen on.
So, we have done lot of work on those customer, the mass customer segment, which got lost somewhere in the initial part of the year, which we try to regain back, both growth in this last quarter as well as in the future quarters. We are trying to bring them back into the mainframe by lowering our ASPs, by really focusing very highly on those consumers who have really got impacted because of inflation and the inflationary pressure. So, we have really done that. We watch that very nicely. Our ASPs in this quarter was almost flat.
So, all of this, I think is working positive and the margins will definitely be at a little pressure that we will see because we really want to, first of all, provide that real value to our customer and work on that. Our southern India integrations, I think is happening good, lot of better developments are happening. Last quarter, we saw a growth over the previous year. But yeah, still — I’m still clearly not too satisfied with the kind of work that we can do versus what we are doing. Still that understanding that we developed in the Southern part of the India market, we need to polish that up.
We are working on all of those. That market is definitely demanding and we will definitely upgrade and upkeep our quality of inventory, our patterns, our fits, our sizes. And all of those are definitely going to — I mean, all of those additions into the company is definitely going to overall upgrade the merchandise quality of our product offerings that we do. So, I think lot of these are happening. Customer loyalty is another area that we are focusing very heavily on, how do we create or how would we have extra frequency of customers who comes in.
We are seeing some positive responses coming in out from all of those efforts that we have taken up. Digital advertisement has been quite actively engrained in our team. We are focusing very highly on those. We are able to see some youngsters walking back. We are able to see a lot of youngsters now coming into our stores because the colleges have opened up. We are there on the digital space. Lot of reels and lot of personalization videos are being prepared.
So, I think lot of those activities, both from the physical store perspective as well as omnichannel perspective and LimeRoad perspective, we are right now running both the channels, which is the vmartretail.com as well as the LimeRoad. So, all of those are collaborating into the business. We still need to really settle things — let the things settle down and we will want to coordinate and create those synergies of digitalization, technology systems, of our products, of the strength that V-Mart has, how do we use that in multiple other areas.
So, we are very positive. Definitely lot of new things are happening in the company. So people are very busy. I really give kudos to the team that they have been able to manage in such a complex environment very nicely. We are able to see swings in the seasonality because of climate change. Winter somewhere has been fairly okay. We still not been able to have the best winter that we could have expected this time. So, there are those external environment, which will definitely make us more agile and we will have to really make our systems and our processes a little more ready for these kind of smaller disturbance, which will come in. So, definitely, we still have a little higher inventory. We are working very hard to bring down the inventory level.
So all of those, I think Anand will give you inputs and then let’s wait to hear from Anand and then we can answer your questions and answers. Thank you.
Anand Agarwal — Chief Financial Officer
Thank you, Lalit, and good morning, everybody.
Let me take you through some of the key highlights from the quarter and then we can open the session for questions. It’s been a very big and very hectic quarter with an acquisition, big festive season and winters and the marriage season. Traditionally, quarter three is also our biggest quarter. But YTD quarter three, we also tracked our highest ever sales and look forward now to closing this financial year on a new high.
For the quarter, sales grew by 12% year-on-year with like-to-like growing by 1%. Both V-Mart core business and Unlimited had positive like-to-like on a stable base of no COVID overhang in previous year. ASP remained flat as a result of significant corrective measures taken to bring back economy pricing and tweak the product mix to attract low-income customers, which have shied away from buying, at least what we have seen in the last one year or so.
Tier-1 markets continued their growth journey and outperformed Tier-2, Tier-3, Tier-4 markets, reaffirming the K-graph recovery that we have all been seeing in the sectors where the rich have remained largely unaffected post-COVID, while the poor have been forced to compromise on consumption with inflationary impacts in all parts of life. Unseasonal heavy rains in October resulted in one of the wettest October on record and high average temperatures resulted in one of the warmest Decembers in last 122 years. Winter merchandise sales as a result got pushed out to January, denting December numbers. The shift of sales from December was realized in January, though, improving growth for January.
We opened 15 new stores in the quarter, one in south India under Unlimited brand and 14 in rest of India. And also closed six non-performing stores all under V-Mart in North, taking the net tally to 414 stores pan India, out of which 80 are in south. All the new stores especially in south have been performing steadily and in line with the established V-Mart business model at similar margins as that of a normal V-Mart store and in fact, 20% to 25% higher SPSF than the legacy Unlimited stores. While we still wait for these new stores to complete at least one year before passing the judgment on the successful rollout for south in terms of new store throughput, but definitely the team remains very bullish on continuing the expansion plan in south under the Unlimited brand.
There was a strong push on increasing online sales contribution with the acquisition of LimeRoad. Although it’s been integrated only for less than two months now and still going through a stabilization phase, some teething issues, but the business does look very promising as we step it up for higher growth once the basics are back in place. The revenue from marketplace is only the commission that we earn from sellers on the platform and not be full — the net merchandise value.
Coming on to the gross margins. The gross margin at 35.4% were 40 bps lower than last year and also one of the lowest in the last four years to five years as a result of a conscious effort to improve price offering for the value customers. We’ve talked about this in our last quarter call as well, and we have made that change or tweak. We reduced some price points to make the customer offerings more attractive and this strategy has worked well, as it helped pull in sales growth, but yes, at slightly lower margins. There has been a significant impact of increasing cotton prices in the last one year. And although yarn prices have come down from their peak by 30% in September, but they are still 30% to 40% above pre-COVID levels. The winter stocks benefit of any lower yarn prices as purchases are booked at least two months to three months in advance. Going forward, there may be a marginal relief available in summer ’23, but as is the practice, it will be passed on to the customers in entirety as we would want to remain very competitive in the value retail pricing segments.
Coming to the expenses, the expenses for the quarter include an amount of around INR36 crores towards the spend on online business, which include the complete opex for both vmartretail.com and limeroad.com. The INR36 crore expense also includes INR12 crores one-time expense towards integration and other manpower-related costs for the LimeRoad business, as it starts to get integrated into the main business.
Excluding the online business, the expenses for the quarter grew by roughly around 9.5%. Historically, online-only constituted vmartretail.com and marketplace offering, with expenses averaging around INR4 crores to INR5 crores per quarter. But now with a more focused effort to make the online business grow and induction of LimeRoad, this will slightly be bigger.
On a go-forward basis, we are very confident of establishing both the acquisitions in south as well as LimeRoad business, as the biggest growth drivers for the organization and remains committed to invest in the journey to reach the sustainable and profitable destination. While south has already begun well, we will need to give some more time and resources for LimeRoad to start delivering.
Coming to EBITDA, for the V-Mart core business, EBITDA for the quarter came in at 17% plus, with Unlimited also in very close vicinity. LimeRoad only had a little less than two months in the quarter and as planned, it’s still in the stabilization and revival phase. As I mentioned, the business revenue in LimeRoad consists only of the commission earned from sales facilitated for sellers in the marketplace, while the expenses largely consist of marketing, logistics and technology costs.
Once the business has started to stabilize, we will be sharing more details around its operations. For V-Mart, considering the initial opex plan around the integration, the EBITDA came in at around — in at 13.3% for the quarter. Coming to inventory, the quarter closed at INR767 crores, which was at 106 days of inventory, slightly higher than our target due to bit of late winters. Winters had been delayed and winter sales slightly shifted into January, leading to slightly higher closing inventory than planned, but that has been recovered in January. As stated in the past, we are carrying slightly higher inventory per store in south to explore newer categories and higher sales.
On the capex side, we’ve spent around INR125 crores so far, largely comprising of spends on the new warehouse, which is on schedule to start operations by end of March in this financial year itself. Other capex included spends on new stores and refurbishment of old stores apart from some IT-related expenditure. There has been some marginal utilization of working capital limits because of this higher inventory buildup and other operating costs. I think the working capital utilization would be to the tune of around INR40 crores to INR50 crores.
On the go-forward basis, I think on the outlook, we remain fairly bullish on how the market has to perform. We are still going on the new store opening plan as originally planned. We’ve opened, I think 40, 41 stores so far this year and I think we should be looking at closing the year by around 55 stores to 60 stores, with some stores also getting opened in south. The growth plan for Unlimited also remains fairly strong. There are — as Lalit mentioned, there are some more improvements, which are lined up for Unlimited, but the team remains very buoyant on — and very bullish on expanding that business as well.
So, that’s all from my side. And I’ll request the moderator now to open the house for questions. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. [Operator Instructions] Thank you. We have the first question from the line of Nihal Mahesh Jham from Nuvama Wealth Management. Please go ahead.
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
Yes. Good morning to the management. Sir, the first question was on the Unlimited part. You mentioned about the sales per square feet being 20%, 25% higher. So just to clarify, this is for a like-to-like store or the like-to-like store that are in existence versus the pre-COVID number, that’s a right understanding?
Anand Agarwal — Chief Financial Officer
So, Nihal, the 20%, 25% higher is only for the new stores. The point that I was trying to make was that the new stores that we’ve opened in south are performing very well in line with the original V-Mart format, which is to open stores in Tier 2, Tier-3 towns, 8,000 square feet with low rentals, low opex and thereby, delivering higher throughput. So the sales per square feet in south is very comparable to a new store opening in north. And that gives us the hope and promise that we can expand more there.
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
And possible to share for the legacy stores, what is the kind of performance versus before the acquisition?
Lalit Agarwal — Managing Director
So it is lower than main V-Mart business, but it should be at around INR500, INR520 per square feet there.
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
That is helpful. Sir, the second question was, you alluded to the margin for the core V-Mart business being around 17%. I am assuming that when you’re looking at the business, the INR36 crores is something you’re accounting separately, you are not aggregating to any other businesses, right?
Lalit Agarwal — Managing Director
Yeah. That’s correct.
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
Yeah. And just a related question was, if you could share the LimeRoad GMV for this quarter, if it’s possible, the run rate, I mean, not for the quarter? And what is the kind of EBITDA impact, while you highlighted the 15%, 20% number earlier, if there is any update to the same after you’ve integrated and looked at the business in more detail?
Anand Agarwal — Chief Financial Officer
So, Nihal, on the operational aspects of LimeRoad, we will start sharing some more color around that once that business has stabilized. We are still ourselves in a learning mode and trying to understand how this business shapes up. It will be slightly be premature to start sharing current data because it is still getting stabilized. On the EBITA percentage share for the spend or in the investment that we will do on the digital side including LimeRoad, we still remain similar as around 20% of the EBITDA that we had stated in the past.
Nihal Mahesh Jham — Nuvama Wealth Management — Analyst
That is helpful. I’ll come back in the queue for further questions. Thank you so much.
Operator
Thank you. The next question is from the line of Pankaj Tibrewal from Kotak Mutual Fund. Please go ahead.
Pankaj Tibrewal — Kotak Mutual Fund — Analyst
Yeah. Good morning, Lalit ji, and good morning, Anand. Am I audible?
Operator
Yes. Please proceed.
Pankaj Tibrewal — Kotak Mutual Fund — Analyst
Yes. So, my question is that in the last one and a half years, we have taken few capital allocation calls. One is unlimited, LimeRoad and the distribution warehouses. Something which we wanted to get more clarity was on the return on capital. We have seen us — V-Mart very closely watching the return on capital for a very long period of time in the history and that separated us from the rest of the retailers. But over the last couple of years that number has been diluted meaningfully.
Can you give us some sense on the roadmap for that recovery to happen? And when you look back on all the capital allocation decisions, how do you make sure that most of them were in core with what V-Mart used to operate at? And when do we go back to that 15%, 16%, which used to be our forte for a very, very long period of time. So that’s more — one question on the strategic, which will over a period of time determine our shareholders return. Thank you.
Lalit Agarwal — Managing Director
Yeah, Pankaj. Thank you so much for asking this question. Definitely in the last two years or one and a half years, we have gone out to spend more money, which is unlikely of what V-Mart does. But yes, because we are able to see lot of future capabilities and lot of abilities in the market and potential in the market, as you all understand the kind of risks that we’re taking in terms of two acquisitions and allocating capital on those. So, especially — very clearly, there is a store addition in the south, which went on to that. Certainly, I mean, as the usual business out is, it’s taking time to come closer to what V-Mart business was. So the capital — the return on the capital from that business will take a little more time to come back.
And then if we go to the LimeRoad investment, definitely, this is something very long term and this is futuristic. This will require still more capital as we speak and as we go ahead. So making it very clear that expecting very good capital return or a positive capital return from this business is going to be difficult, because this is definitely creating capabilities for us to cater to those millennial customers and the retail [Phonetic] customers. We will have to invest more in this business, and this is a need for the future sustenance. So, we will definitely want to keep investing in this particular business to acquire our competencies on the digital side.
And as far as the new infrastructure capital allocation is concerned, which is the warehouse capital allocation, we are aware that we are building — because after eight years, we are building more efficiency on the infrastructure development. There also we are going ahead with building our own infrastructure, which is something that we have never done in the past and we will definitely find out a way to try and see how do we use that infra more and then how wisely can we use this capital allocated, so that our overall return on capital allocated doesn’t go down.
So as of now, we will see a little more stressed ROCE for the next, I mean I would say, six quarters, but continuously we’ll see improvement in those return on capital employed coming up. We need to also very, very accurately and wisely manage our inventory where another piece of capital allocation is happening, which is also not something which is still in the numbers that we need to change. So we will need to — we are working and the markets are also coming back and things will come out positively. And most of our bets that we have taken for our future growth should bring in more results and should bring us wider scope of market, both from the physical as well as retail perspective.
Pankaj Tibrewal — Kotak Mutual Fund — Analyst
Okay. Thank you. And we just hope that V-Mart retains back its mojo on the return on capital, which was there for a long period of time. Thank you.
Operator
Thank you. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.
Percy Panthaki — IIFL Securities — Analyst
Hi, sir. My first question is on the sales per square feet. So last quarter that is Q2, we were about 8% — sorry, 10% to 11% below the three years before that 2Q, so 2Q ’19 basically — sorry 2Q ’20 versus 2Q ’23, we were 10%, 11% below. And we were expecting that there would be a gradual sort of recovery on this front. Q2 did see a good recovery over Q1 and we were expecting Q3 also to see a recovery over Q2. But instead of coming down from a minus 11 to a minus 7, minus 8, etc., now we have gone to a minus 22.
So clearly now, I cannot see the direction of the recovery. And I don’t know how to really look at sales per square feet going ahead. Now given that we are in a completely normal situation, COVID has been passed since almost a year or so, I understand there is some demand weakness. But barring that, we are in completely normal situation and we are still 22% below pre-COVID and no company is lagging in such a huge way. So can you give some idea on how do we look at sales per square feet going ahead?
Lalit Agarwal — Managing Director
I think, Percy, I think it will be nice for you to have a separate call with Anand to understand because we have also opened up a lot of new stores, which has just added the square feet, but it has not given us the complete area, number one. Number two, the sales per square feet of the southern business, the Unlimited business is still at a lower level. So you will — whenever you see that comparison, you will see it different. Number three, the Q3 this time, we have seen one festival shifting from October to September. So some numbers went into the last quarter, some numbers are coming in from this quarter. There is some shift that we will see.
So, we should see a likely SPSF recovery. So yeah, I mean, definitely we have also experimented on certain big sized stores in the eastern part of the country. That also — I mean, that’s definitely one bringing down the sales per square feet, but it is constant. So some of these areas, I think definitely the LimeRoad addition — the Unlimited addition itself will put a pressure on the sales per square feet number that you see from this perspective.
Otherwise, I think we are — we will be able to achieve — the like-to-like sales is flat from the last year, but still from the pre-COVID levels, if you are still comparing, there is a pressure which is still there from the pre-COVID numbers, which we hope to see positive sign. And if you are comparing with those bigger metros and Tier-1s kind of store mix sales per square feet, definitely, the percentage of growth there versus the percentage of growth in our company, we will be still seeing some pressure there. So things are coming up into the positive direction. We should be able to see them getting normalized even in the next quarter.
Percy Panthaki — IIFL Securities — Analyst
Yeah. So exactly, sir, the last line is what I wanted to focus on, the direction. So when you are saying, things are going in the positive direction, the numbers are actually telling a different story and things are actually going in the opposite direction, instead of minus 11.3 [Phonetic] year kind of growth that we saw in 2Q, we are today at a minus 22. I can understand if the pace of the recovery is slow. I can understand that small towns are there. They are under pressure. UP, Bihar is under more pressure than the rest of the country. I understand all that. But why is the direction actually reversing? That is my question.
Lalit Agarwal — Managing Director
Percy, as I said, there is a seasonal shift also. Please don’t compare quarter-on-quarter. Durga Pooja this time, the whole festival of Durga Pooja and Navratri was in September. So of the consumption shifted into September. That is why those averages will — we will be able to see a little lesser there and little higher here or little more steep here.
So please try to see both the products combined, it will be good, because quarter-on-quarter, at times these quarters are very typical quarter and delicate quarter, where even a slight five days, seven days shift from this particular festival from this month to this month makes it difficult for you to understand. So it is just a calculation understanding issue, not an actual low performance.
Percy Panthaki — IIFL Securities — Analyst
Understood. Secondly, if you can give some idea in terms of the differential between the unlimited and the organic business in terms of sales per square feet. I believe one or two quarters back, you had mentioned that at the time of acquisition the differential was 20% and then it came down to 15%. What does it stand at currently?
Anand Agarwal — Chief Financial Officer
Percy, Anand, this side. I think that number still remains very similar. While both the markets have been growing and both the markets has seen positive like-to-like, but the differential in the sales per square feet still is at around 15% to 20%. There are — the silver lining, although, is that the new stores that we’re opening in south are delivering much higher sales per square feet than the legacy Unlimited stores. And that is a very good positive sign.
Percy Panthaki — IIFL Securities — Analyst
Okay. Okay. And lastly, going ahead, if you can give some idea on what internal targets you have for FY ’24 in terms of EBITDA margins and in terms of sales per square feet?
Anand Agarwal — Chief Financial Officer
So, Percy, it will be difficult to share. All I can say is there are two statements that we have said in the past. One is the total growth should be in line with our historical seven years, eight years, 10 years CAGR, which is around 20%. EBITDA traditionally, whatever we have been, I think there’s around 15%, 20% investment that we will do on the online business. So, we’ll have to work around those two statements.
Percy Panthaki — IIFL Securities — Analyst
Okay. That’s it from me. Thank you.
Operator
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Shirish Pardeshi — Centrum Capital — Analyst
Yeah. Hi. Good morning, Lalit ji and Anand ji. Thanks for the opportunity. If I look back nine months, we started year with lot of hopes. COVID settled down. And then somewhere in the June, July, we realized that the prices needs to be dropped because there is a slowdown in rural economy. And then come October, we had floods and situation and now we had delayed winter.
Two data points what you have shared is that our footfall growth is 13% up, while the conversion rate has fallen to 55%. Maybe I’m looking at this number for a little longer time, and that’s why a bit surprised or rather worried that is there more thing to do with the escalation in the competition profile, or generally, there is a structural shift that the mass consumption is still not picking up and we will face this pain another two or three quarters. So your comments on this?
Anand Agarwal — Chief Financial Officer
Yeah, you are right, Shirish. I mean, definitely, there is a pressure which continues and we are putting our efforts. And we are also not trying to work too much on the shorter-term approach by giving a lot of incentive to the customer by calling them and converting them at a very, very low incentive. So, we are trying to build that standard. We just don’t want to walk the competitor part. So there may be — and then what we are seeing is a correction in the conversion rate, what you are seeing from 2019 to now, I think — or maybe last year to now.
So last year to now, I think the reduction in conversion, you will see because there was a consumer behavior that we’ve watched during these period. And where the footfalls were very low and people who came in used to buy and most of the customer used to buy because of the COVID fear, if you remember, which I think is coming back to the normalcy. And people have now increased their bill sizes, but the number of the conversion is at a fair level. And 58% conversion is a very fair number to look at because of the south. Because in South, we have seen that the conversion rate has been really lower, but the bill sizes have been very high. So all of those, I think that’s the behavioral shift that we are watching just after COVID to now.
I think from the consumer perspective, definitely things are improving and we are seeing pressure, not only in our industry, but in also other industries compared to pre-COVID which I said in my opening remarks as well, which is improving day by day. And I think this consumer segment, this rural customer or the semi-urban customer that we are focusing on, we should see more respite coming in the future quarters.
Shirish Pardeshi — Centrum Capital — Analyst
Lalit ji, I agree to your comments. But I know you always remain hopeful for the recovery. But when we look at the competition angle, is that which is worrying you? And if that is true, what are we trying to take measures to improve this? Because the other thought is that if the things are not in our control and there are external factors, why not to consolidate the stores and keep a pause of store opening?
Lalit Agarwal — Managing Director
No, I think — see, I mean, definitely the markets, which are the new markets, we are taking the decision to double the new markets for the long-term perspective and these store openings are not for the shorter-term time. We will continue providing work to that particular peak [Phonetic]. If those new store’s performance would have taken a hit, we would thought over it. But I think, just looking at from the previous two year’s numbers and we are comparing those 180 stores with 200 stores on a like-to-like perspective, I think we’ll have to now come up and look this new scenario and start comparing with the last year and then see how does it — how do we grow from here. Definitely, the market has densified more. We are seeing more competition.
There are more outlets to visit for a consumer. There is some market share, which is occupied by them, which is there, but I don’t see a great heightened strategic move from them in terms of the customer acquisition and in terms of the customer moving because of the fundamental offerings which is provided by the retailer. So, there will be some tactical move which the retailers will do and will try to get some consumers into their stores, which is going to happen. I think this newness effect will certainly die down over the period, and we will be able to establish our relationship with this customer and the new customers are going to come back to us.
Shirish Pardeshi — Centrum Capital — Analyst
Thank you, Lalit ji. My second and last question to Anand ji. I think some quarters back, we were saying…
Operator
Mr. Pardeshi, I’m sorry to interrupt, sir. There are many other participants who are waiting for their turn.
Shirish Pardeshi — Centrum Capital — Analyst
I’ll just spell out the question. Later on they can answer whenever they get time. So, my question was to the Anand ji’s comment in the past that we were trying to get the inventory normalized. Obviously, understandably this quarter we had winter, which is prolonged and the inventory is around 106. So, maybe in next four to five quarters, where do you would like to settle, given the context that our warehouse will be operational by March end. So maybe any qualitative comments you can offer later on. Thank you, Lalit ji and Anand ji.
Operator
Thank you.
Anand Agarwal — Chief Financial Officer
Thank you, Shirish. Let me just quickly answer that. So the long-term trajectory for inventory days will hover around 90 days that we have maintained in the past and we will work towards that. Thank you.
Operator
Thank you. The next question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.
Resham Jain — DSP Investment Managers — Analyst
Yeah. Hi. Good morning. So, I have just one query on the inventory. So if you look at the modern retail, all these stores have, I mean the — a lot of competition has moved to the display mechanism, which is hanger model where the piece per — or the piece per square feet has been much lower compared to our erstwhile model where we used to stack clothes on the top of each other. And that has also led to much lower kind of employee kind of cost as well. So, is there any change in our display mechanism also in our old stores and how are the new stores being built, if you can just help with this?
Lalit Agarwal — Managing Director
Yeah. Resham, definitely we are not trying to look at the competitor and trying to learn, but we definitely will learn from them as well. And there are some changes that we had already initiated, if you remember the SBU concept that we had launched. But still the kind of customer segment that we target to, because these are massive and these are little lower segment customer compared to the competitors that you are speaking of. We believe that these customer segments still are not too organized and still are not easy to handle.
And they need a little extra variety and little higher inventory and the kind of model that we have built, that also ropes in these things. But yeah, I hear you what you’re saying and we are working on reducing this inventory per square feet, both from a display perspective as well as the inventory perspective and giving a little more clearer display to the consumer. So, a lot of work has happened in that area in trying to improve upon the density, which is what you’re trying to talk about. The density of clothes per — or units per square feet, that’s what we are watching and good suggestion. Thank you. We will take care of it.
Resham Jain — DSP Investment Managers — Analyst
But are new stores being built with this concept? Or they are also being at the similar model which we used to have earlier?
Lalit Agarwal — Managing Director
No, I mean the new store, definitely, as you said the SBU concept, it is largely on — large part of that has shifted into hanger based product line, but still in the smaller part of India, a product which has been opened up and hanged, not all product is being appreciated by the consumer and they feel that [Foreign Speech]. So there is still that cultural piece or expectation from the consumer that we have to manage in terms of certain product lines where they don’t accept those opened up pieces
Resham Jain — DSP Investment Managers — Analyst
Okay. Understood, sir. Thank you. All the best.
Operator
Thank you. The next question is from the line of Mandar Pawar from Kotak Mahindra AMC. Please go ahead.
Mandar Pawar — Kotak Mahindra AMC — Analyst
Hi. Good morning, Lalit ji, Anand ji. Sir, my question is on the price corrections that we have taken for our merchandise. If you can help us give us a data point as to how much price correction that we have already taken in percentage terms and compare to pre-COVID levels where this selling price will be compared to pre-COVID?
Anand Agarwal — Chief Financial Officer
We’ve not really just taken a price correction. There have been a variety of measures that have been implemented. So, one is improving the product availability at lower price points, which had got thinned out because of margin pressures in the past. Second is some amount of improvement in the product profile, coupled with price correction at some strategic price points. And third is more around price laddering, where we have also ensured better availability of product at strategic and key price points. So, a mix of all of these is working to ensure that our ASP, if you look back versus last year has remained flat. So it’s a variety of measures, and the team is continuously working to improve on it further.
Mandar Pawar — Kotak Mahindra AMC — Analyst
Okay. So with possible reduction that may happen on the yarn prices and garment prices there, do we expect our gross margins to settle at, how much do we retain, how much do we pass on to the customer?
Anand Agarwal — Chief Financial Officer
So, that remains a very clear strategy for us. We have always been a honest price shop. So when the price go up, we pass on the price to the customer. When the price come down, we again pass on the benefit back to the customer. So, as I had stated in my opening remarks, we are expecting some amount of marginal price relief in yarn prices, which if gets effected in summer, we will pass on that back to the customers keeping the gross margins at the similar range for the core V-Mart business at around 32%, 33% and for the Unlimited business at around 37%, 38%. Weighted average should be at around 34% in the medium to long term.
Mandar Pawar — Kotak Mahindra AMC — Analyst
Got it. Got it. And just one final question. You mentioned in your opening remark about the postponement of winter sales into Jan. Also want to check if, along with that, was there any discounting on the winterwear which happened during December and whether that had any impact on the gross margins? That’s my final question.
Anand Agarwal — Chief Financial Officer
Not really. Not really. We are not very heavy into discounting or promotions. And because there was a shift in climatic conditions, the customer came and bought that product in January. If at all there is more liquidation time, it will happen subsequently.
Mandar Pawar — Kotak Mahindra AMC — Analyst
Got it. All right. Thank you very much.
Operator
Thank you. The next question is from the line of Tejash Shah from Spark Capital. Please go ahead.
Tejash Shah — Spark Capital — Analyst
Hi. Thanks for the opportunity. Lalit ji, in your opening remarks, you sounded cautiously optimistic on demand environment. So just wanted to know, because we have been having this tone for a while. So let’s say, if we have to see near-term only, so what are you optimistic about and what are you cautious about, let’s say, in terms for coming six months of the calendar year ’23?
Lalit Agarwal — Managing Director
I mean, see, the optimism I said, the business is coming back and the consumer pulse, we are able to see some respite as we compare quarter-on-quarter. And we have seen quarter-on-quarter, there are improvements that is coming up and that’s what we are seeing. And then I’m indicating more towards the consumer confidence index and that’s what is important to me and how does that confidence grow up for the consumer. If the confidence comes up, the feel good factor becomes better, then they start investing on our discretionary — so called discretionary product lines. And that’s what drives the future sales or consumerism in India and in new Bharat.
So, we see some — we are seeing some hope that is built here. Still not — not exactly similar but quarter-on-quarter, we are seeing improvement and inflation has come down, but still not to that level that our consumers have come out of that budgetary pressures that they had. So it is still going to take another one or two quarters, which will make it happen. But the challenges, yeah, definitely, as I said, the challenges are also — this is what — we see the challenges. But the hope that our pricing that we increased are our offerings that was available. We have to read all of those, hope that consumer will have got some benefit in this last quarter and consumer will get future benefits also in the next quarter, so that they once again relate back and they start consuming at our stores and that’s what we feel we are optimistic about.
Tejash Shah — Spark Capital — Analyst
Sure. And Lalit ji, if I compare our commentary post-COVID versus pre-COVID, there always used to be an element of hustling or growth mindset irrespective of the macro environment that we used to face. Now off late since COVID we are attributing most of our slowdown or challenges to macro issues only. So should we think that the bottom-up initiatives which we are doing are not responding anymore and we are at mercy of macros only? Or you believe that there is lot can be done at our level also irrespective of the macroenvironment to revive growth?
Lalit Agarwal — Managing Director
Tejash, you’re absolutely right. Definitely by speaking, we will talk about some part about the macro, but definitely we have lot to do internally. And this is what I said both from the inventory management perspective, the new things that we’re trying to offer, the new designs that we are trying to offer, the themes that we have created, the differentiated thought process that we have brought in, the digital advertising that we are trying to do. So, lot of work is happening at the company’s end. We definitely internally talk and believe that if we are pointing one finger outwards, there are four fingers coming back to us. And there are lot of those that we have to work, because these are not the similar environment, but then the competitive pressure was very low and the competition in the market were also very low.
So one, there is a competition in the market, there are more stores in the market, which are offering unique capabilities, unique potential and unique SKUs, who are definitely seen more, visit more doors in the market. So there are changes in the market. There is a higher opportunity for the consumer to visit, both from the online as well as the offline perspective. So, there is — even a small shift in that will definitely affect us, could affect us and when there are growth concerns at the macro level, that is where those are smaller digit. It’s all about the 5% or 7%, or 10% up, down, is what is brings in benefit and [indecipherable]
Tejash Shah — Spark Capital — Analyst
Sure. Lalit ji, last one on this. Sir, as an outsider, if I have to, let’s say, evaluate after a year on that all these initiatives that you spoke about are working, it will reflect in which all top three parameters? Will it be inventory at store level or sales per square feet or SSG? How should I actually monitor as an outsider that the initiatives that you spoke about are actually delivering results or not?
Lalit Agarwal — Managing Director
See, definitely, the sales per square feet is a key indicator or even the like-to-like growth is a good indicator. So, I think we should be able to do that. While we are doing some of the experiments, reorganizing the teams, restructuring the teams, there may be some pressure that we will see on the inventory side a little bit, which could prevail. But our endeavor and our endeavor is to try and manage these pieces also. So, that’s what is also a part of the project in trying to bring down the inventory management, have a better digitalized forecasting, have a better consumer understanding [indecipherable] so that beneficial features can turn out well. These are all work in progress. These are all something, which we’re rolling out and we should be able to — I mean that’s the whole, entire — the effect is on a 360 degree that we should be able to create, which finally boils down to the ultimate like-to-like sales.
Tejash Shah — Spark Capital — Analyst
Fair point. That’s all from my side. Thanks. And all the best.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you. And over to you, sir.
Lalit Agarwal — Managing Director
Yeah. Thank you so much. I understand the kind of questions which are coming in. People are really concerned about our performance. People are able to see a little volley [indecipherable] from our side. We definitely believe and we understand there is no hiding away. This is definitely a situation, which continuously has been prevailing and we have been regularly talking about it.
We still want to maintain those positive moats because we are motivated, looking at the market. There are situations, there are challenges which will come in. We will not face the same or similar or pleasant weather every time. There will be bounces and we will have those little longer stretch of those and that’s what we are here to fight for. Fundamentally, we are becoming stronger. This is what I just want to reinstate the belief that fundamentally we are working.
We are working on those key parameters, where things has to be strengthened in a longer-term perspective. At a shorter-term perspective, there could be some tactical approach by the competitor or by us, not affecting to us which may deviate us slightly on those. The investments that we’re doing on the new initiatives will definitely — the bottom line may not seem similar that we used to have, the ROCE will not seem similar, have patience on those. You have shown enough trust with us continuously for a period of time. We will definitely hold it up, and we will want your trust not to be diluted and we will keep it up.
Thank you so much. We will put our best efforts to prove whatever we do. Thank you. Thank you. And have a great day.
Operator
[Operator Closing Remarks]