Bengaluru: Vishal Mega Mart Ltd’s September-quarter results and new initiatives raise questions about how hard the value retailer is working to defend its value proposition while pursuing growth.
The company is keeping entry-level prices unchanged while concentrating price increases at higher price points. It is also piloting Belong & Co., a standalone premium apparel brand, and testing smaller-format stores even as it continues expanding its larger-format network. The moves signal an effort to tap new customer segments and markets while protecting affordability.
The strategy comes as the retailer faces pressure on profitability and a muted market reaction to its latest results. Revenue rose 14% year-on-year to ₹3,398.5 crore in the September quarter, but net profit grew just 3.7% to ₹157.9 crore. Operating Ebitda margin narrowed to 7.7% from 8.5% a year earlier, while reported same-store sales growth (SSSG) stood at 5.4%.
The company attributed part of the moderation to a shift in the festive calendar, estimating growth would have been about 9% without the timing impact. Its shares fell as much as 8.2% on Wednesday.
In a post-results call with analysts, chief executive Gunender Kapur said the shift had affected reported SSSG as Durga Puja, Dussehra and Navratri fell in October this year, compared with September last year. “If in normal circumstances, if the season were not shifted, you would have done a 9% SSSG,” he said. Kapur said the company would need SSSG of 12-13% in the December quarter to bring growth for the first nine months to about 9%. “Our goal is to achieve double-digit growth for the year,” he added.
The decline compounds a broader slide in the stock. Vishal Mega Mart shares were down 33.73% year-to-date as of 21 October, underperforming the Nifty 50, which had fallen 12.76%, and Avenue Supermarts Ltd stock, which was down 12.52%.
Sandeep Abhange, research analyst, consumer and midcaps at LKP Securities, said, “The results were dull. They missed on a few with the margin side. But I believe they will, like, overall come back on the margin side.” He said Vishal Mega Mart’s revenue growth of 14-15% was reasonable given its presence in tier-2 and tier-3 markets, but added that “post December quarter, how the margins pan out, that will be a key thing to watch out”.
On the retailer’s new initiatives, he said, “I would not say that it is losing the value proposition,” adding that the premium apparel brand could help increase average transaction values.
Kapur said the company does not see a need for further price increases at current inflation levels, having concentrated increases so far at higher price points. “I’m absolutely committed to protecting our opening price points,” he told analysts, adding that entry-level products account for about 18-20% of revenue. The highest price points contribute 24-25%, with the balance coming from the middle. “Whatever we’ve done, we’ve done, and that’s good enough,” he said.
Testing formats
Alongside its pricing strategy, Vishal Mega Mart is exploring formats and customer segments beyond its traditional model. It has opened the first pilot store of Belong & Co., a standalone apparel brand aimed at young, affluent urban shoppers seeking more fashion-led merchandise. “We want to play in every significant opportunity that the clothing market offers,” Kapur said. He said it was too early to decide on a wider rollout, which would depend on learnings from the pilot. Early feedback had been encouraging, with more than half of visitors to the first store converting into buyers, although the company had only anecdotal evidence.
The retailer is also experimenting with store sizes based on individual markets. It has 18 smaller-format stores in Uttar Pradesh and Haryana and is testing smaller outlets in Gujarat and Maharashtra, where rental costs, electricity tariffs and minimum wages are higher. In Kerala, it increased its planned store count while reducing store sizes after finding that population was spread across a more contiguous geography rather than concentrated in a few large cities.
Kapur said the company would determine store sizes based on catchments and local economics, rather than target a fixed increase in retail space. “I would absolutely focus on stores,” he said, adding that the company wanted “100% viable and profitable stores”. It will continue opening conventional stores of about 18,000 sq ft where the economics allow, while considering smaller outlets where a reduced footprint could generate comparable revenue.
Vishal Mega Mart operated 844 stores across 582 cities as of 30 September, spanning about 1.41 crore sq ft. It added 26 stores on a gross basis in the September quarter and 53 in the first half of FY27. Private brands accounted for 73.9% of revenue in the first half, helping the retailer maintain control over its product mix and price positioning. Its hyperlocal delivery service operated through 781 stores across 532 cities, with about 1.52 crore registered users on its digital platform.
Kapur told analysts the company was confident of opening more than 100 stores in the current financial year and intended to increase openings each year. “The endeavour, of course, is to open as many stores, which are profitable, and viable in a particular year,” he said.
The retailer sees potential for about 2,000 large-format stores nationally, alongside more than 3,000 smaller-format outlets. Kapur said the company would maximize openings across both formats while ensuring new stores were as profitable as existing ones.
“We are quite determined that the new stores should not be diluted in any which way,” he said, adding that the company did not want to open large numbers of stores only to shut them later.