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Vishal Retail – Slowdown or consoldation ahead ?

August 4, 2008

Vishal Retail’s Q1FY09 net sales grew 18.26% to Rs 396.09 crore in Q1FY09 as compared to Rs 318.42 crore in Q4FY09 due to 10% higher footfalls. The operating profit stood at Rs 49.09 crore with a margin of 12.37% as against 10.88% in Q4FY08. This improvement in operating profit margin was on account of the enhanced contribution of private labels to 13.2% from 10% of sales in Q4FY08. Also, there was a marginal growth of 1.5% in sales per sq ft to Rs 1788 in Q1FY09 from Rs 1762 in Q4FY08. The net profit grew 36.5% to Rs 14 crore in Q1FY09 from Rs 10.4 crore in Q4FY08.

On the flip side, as per mgt, inventory position at the end of 1Q has worsened to Rs2800/sq ft (Rs6.5bn) vs Rs2580/sq ft (Rs5.6bn) as of FY08 end. Further, debt has gone up from Rs5.3bn to Rs6.5bn, pushing the debt-equity ratio beyond 2x.

DSP Merill expects the company to report an EPS of Rs 19 for FY09 while ICICI Sec expects the company to report an EPS of Rs 35. We find ICICI’s expectations are really aggressive to meet in this market.

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