Vedant Fashions Limited (MANYAVAR.BO) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vedant Fashions Q1 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from JM Financial. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of JM Financial, I would like to welcome you all to Vedant Fashions Q1 FY '26 Earnings Conference Call. From the management, we have with us today, Mr. Vedant Modi, Chief Revenue Officer; and Mr. Rahul Murarka, Chief Financial Officer. Thank you, and over to you.

Good afternoon, and a warm welcome to all the participants. I am Vedant Modi, the Chief Revenue Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited Quarter 1 Financial Year 2026 results. I hope everyone got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchange as well as the company's website. Vedant Fashions is India's leading wedding and celebration wear company. The first quarter of financial year '26 saw a rebound in wedding calendar compared to the same quarter last year. Sales of our customers for the quarter ended 30th June 2025 was INR 4,057 million, which grew by around 23% over Q1 of FY '25. In Q1 FY '26, we continued the momentum built over the past few quarters of our sustained focus on enhancing customer experience, retail training, data-driven merchandising and replenishment, omnichannel integration and KPI monitoring, which has further contributed to strong SSG growth of approximately 17.6% over the same quarter in the last financial year. We are pleased to report that our retail KPIs also grew in a healthy and sustainable manner. With respect to our rollout expansion strategy, in light of the current retail environment, we anticipated a measured pace of retail openings during the period to ensure that our openings are both strategic and business sustainable. As of June 2025, Vedant Fashion's EBO retail area network stands at about 1.78 million square feet globally. During the quarter, we strategically scaled up our marketing efforts across multiple channels, including social media and our various other brands, which contributed to our performance. Our focus on digital marketing alongside traditional mediums further supported this growth. Notably, our category-specific initiative, the Rajwada collection targeting grooms and the Grooms squad has helped establish a sustainable category growth strategy. Additionally, we successfully executed campaigns for Mohey, leveraging influencers and in-store activations aimed at brides and bridesmaids, reinforcing the brand's position as a go-to wedding wear choice for all women. The launch of our Twamev Sunset Soiree collection, supported by extensive digital and social media campaigns and select in-store events further bolstered both brand and category. We also ran successful social media campaigns for Diwas, emphasizing celebration and expanding our reach. Collectively, these marketing initiatives have played a key role in enhancing our brand positioning and appeal across platforms with the positive impact reflected in the performance. Looking ahead, we remain firm focused on our core strengths, supported by well-prepared inventory and designs, comprehensive marketing initiatives, efficient auto replenishment systems and a robust store network. A strong back-end infrastructure positions us well for sustained long-term growth ahead. With this, I will now hand it over to Mr. Rahul Murarka to take you through the financial performance of the company. Thank you.

Thank you, Vedant. Namaskar and good afternoon, everyone. I would like to highlight the key financial performance metrics for the quarter ended 30th June 2025. During Q1 of FY '26, the company witnessed a rebound in wedding season as compared to Q1 of FY '25. The company reported revenue from operation of around INR 281 crores, delivering a healthy growth of 17.2% over Q1 of FY '25. The company also witnessed healthy growth in sale of our customers and SSG by 23% and 17.6%, respectively, as compared to Q1 of FY '25. The company continues to report industry-leading gross margin of 66.9% and healthy EBITDA margin of around 43.2%. The company also reported a healthy PAT margin of around 25% and the profit after tax stood at around INR 70 crores with a growth of 12.4% compared to Q1 of FY '25. Thank you and namaskar everyone. We can now move to the Q&A session.

[Operator Instructions] The first question is from the line of Tejash from Avendus Spark.

First question pertains to Vedant, you partly answered that, that other expense saw a sharp increase this quarter. So is this now from here on structural in the sense we need that much investment to keep the brand and business or the momentum going in our favor?

Sorry, this question in regards to marketing?

Yes, yes. So it's part of other expenses, right? So other expenses also.

So Tejash, actually, this quarter, the marketing spend was in line of how much we've always spent historically. The reason why it looks higher than the same spend in the quarter -- first quarter of last year is because if you remember, the first quarter of last year and the second quarter of last year had negligible wedding dates. So last year, we had taken a strategic call of spending close to no money on marketing in the first 2 quarters. Hence, even though the number looks larger compared to the last financial year, it's actually in line with how much we've been spending at a quarter level usually. So this is the kind of spend that we've typically done. And even though slightly more than last year, at a financial year level, it should not change at a percentage level.

Very clear. Second question is on our store count and our footprint and square footage. So even though sequentially, we have increased the store count, but square footage has gone down. So any rethink on our store size?

No. So we are going to continue with our strategy of focusing more on the concept of flagship stores. The reason why this quarter's data looks like this is majorly on account of a larger number of SIS stores opening. So because these counters are typically about 150 to 200 square feet, that's why you see a higher number of store openings vis-a-vis still slight bit of degrowth in terms of retail square feet.

Got it. And any guidance or numbers you would like to share for this year or coming period on store expansion?

So this year, strategically, the focus is to really ramp up our SSG. That is the core KPI for the company. That said, we will still be quite healthy in terms of the gross openings that we do this year. So we are still targeting to open a good number of stores. However, on the other side, we are also sort of consolidating a lot of the older stores and some of the different kind of concepts we tried in the past 2 to 3 years, which haven't worked for us. So at the end of the year, while the net square feet expansion will not be a very large number, the quality of stores that we operate will have significantly improved. So that's the major focus for the year, along with delivering good SSG numbers, which is what we are focusing on.

Got it. And last one, if I may squeeze in, if you can make -- share your observation on current competitive landscape and demand outlook in general?

So overall, I think the consumer sentiments remain weak across the mid-premium industry. This is something which we hope that bounces back in a couple of few quarters. However, we have not seen any positive shift yet. It continues to be how it was till, let's say, about last quarter.

The next question is from the line of Prerna Jhunjhunwala from Elara Securities.

Just wanted to understand demand more in detail in terms of footfalls, conversion percentages that you're witnessing right versus guest purchases, how they are panning out? That would be my first question.

Thank you for the question. So I would say footfalls was in line with the kind of growth we delivered. And conversions also were in an uptick, having improved just slightly by a few basis points compared to the last financial year. At the same time, given that there were very few wedding dates in the last year same quarter, we did see our groom business improve faster than the non-groom business, majorly on account of better wedding dates. So all in all, that is where we stood. ASP also slightly increased and the remaining growth came -- the majority of the growth came in terms of volume.

Okay. And if the mix was better, I'm just trying to understand why margins were under pressure in this quarter versus last year?

See, again, margins can slightly shift by about 80 basis points from one quarter to another. But at a financial year level, there is no change at all.

So the PAT margin, when you compare, we had 25% this quarter vis-a-vis 26.1% in Q1 FY '25. The major reason is the marketing cost. This year, the marketing cost was 5.6% of revenue. And last year, Q1, it was 2.3% of revenue. So that is the major reason. But overall, if you see, then we have a very healthy margin metrics.

Okay. Last question, if I can squeeze in, in terms of Andhra Pradesh and Telangana regions, have they started to bounce back for you or they still remain under constraint?

I would say one of the best positives of the first quarter was seeing a sharp rebound in AP Telangana, which has led the growth momentum for the company in this quarter. So that was a big positive for us to see.

[Operator Instructions] The next question is from the line of Archana Menon from Morgan Stanley.

So my first question was on the growth side. While there are nuances on the wedding date calendar shifting and things like that. But if you look at the F '25 numbers even from a little longer term, say, from a 3- or 4-year CAGR, that number is still a little low. So how do you assess that? I mean what do you think are the major challenges that you face? And is there any expectation -- is there any change in your expectation for steady-state growth?

Thanks for the question. So like I was mentioning, even though the numbers from an absolute level compared to last year look decent, we would have liked to do better in all honesty. And one of the core reasons why we feel that the growth could have been better is because consumer sentiments remain to be subdued as we witnessed across mid-premium discretionary companies. And that is something once it rebounds, that is which will allow us to sort of get to much higher growth levels. From a company's perspective, there are 3 to 4 things which we can really work on. One of the major elements being product, there has been a very large focus on having a lot more variety. As I was mentioning in the last earnings call as well, almost 2.3x to 2.4x the number of variety compared to last year is something we've worked on, which has enhanced our conversion rates and lovability. The second lens being marketing. So there is, again, a large shift both in terms of the teams we have internally and the kind of campaigns we do. So instead of doing one big campaign for a brand, we are breaking it down into multiple mini campaigns run digitally, allowing us to be a little more viral and have a larger word of mouth spreading throughout the quarters and the year. And finally, coming to operations, we have spent a lot of money on investing in modern age technology, the big project being the VFL Parivar app, where we train our fashion advisers almost for 2 to 3 minutes on a daily basis instead of focusing on the 2x to 3x training per year, which was typically done in the retail industry. On top of that, we are also investing more in terms of the omnichannel and endless style technologies to improve conversion rates alongside better and enhanced training through the use of AI intelligence. So we are trying to do as much as we can from a company's perspective by focusing on these initiatives alongside building the newer brands that we focus on, Mohey, Twamev, Diwas. But given the weaker consumer sentiment, overall, things have been relatively slower than we would have liked them to be.

[indiscernible] But just a continuation to this. So do you think that the benefit of some of these initiatives that you've taken is already being reflected in your growth? Or do you think that even if we assume that the consumer demand environment remains as is, we should see a growth pickup in the quarters ahead as these initiatives start helping you?

This is a very tricky question to answer because one thing which I have learned over the last couple of years of working is no initiative is sort of a [indiscernible]. So an initiative which we, as a company, can take 3 years to show us results, whereas something can show us results in the first month itself. So it's a very difficult question to answer. But that said, the goal is to do as much as we can in terms of investing in our people, in our technology, investing in great customer experiences to satisfy the needs of all. And if we are supported by the macro, then no doubt the growth should be tremendous.

Understood. The second part of the question was on the margin side. So for the last 4 quarters, we've seen your other expenses growing quite sharply. So one aspect of it is marketing, but is there any other element which is taking that number up?

So if we talk about the last financial year, then I would say it was majorly on account of operating deleverage because of the lease costs because these costs are fixed. So if the SSG number is not what we anticipate, then that kind of hurts the margins. But from the first quarter perspective, I would say it was a very positive quarter in terms of margins because all the operating leverage kicked in. Marketing, which is a variable cost, which is something we actually plan at an annual level, not at a quarter level, is the major reason why almost 300 basis points extra was spent on marketing. So I would request you to not look at that at a quarter level, but to look at something like marketing at an annual level.

Got it. Actually, what I was trying to check was, has there been any impact of you opening more stores under the model wherein you guys pay the lease over the franchise or any strategic change that's getting reflected in the numbers?

So there are 2 things which are important as far as our PL margins are concerned. One is the gross margin, which has been pretty stable across and another is the lease cost, which comes under lease cost as well as under ROU depreciation. Now as you are aware that we have been opening stores in the last couple of years, but the revenue has not grown to the extent it should have. So that is the reason there's a negative operating leverage, which is there on account of the lease cost. So once we are back with our normal revenue levels, then of course, the margins would improve. And of course, the lease cost is another element apart from the gross margin, which is important.

And lastly, to your question, yes, there has been a slight shift, not large enough where the percentage would have moved slightly towards stores where we bear the lease cost versus where the partners bear the lease cost.

Just last question from my end. Strategically, do you think that there's an opportunity for you to -- because your margins -- EBITDA margins are still very, very healthy, I would say. Is there a strategic decision between growth and margin that you can make in terms of spending more and if you think that could drive up more growth? How do you think of growth versus margin?

Well, it's again a very interesting question. So I think we are a highly growth-focused company. Now there are 2, 3 kind of things when it comes to margins. So there are things which are more long term in nature, let's say, lease cost, for example, -- so these are areas where we would not want to sacrifice our operating leverage. But on the other hand, there can be a dynamic need where a marketing campaign really works for us, and we would like to spend a lot more money than we had anticipated, we will absolutely push the pedal and make that investment. So depending on is the action long-term margin destructive or accretive, those decisions and calls will be made. And if anything makes sense from a long-term perspective, we will absolutely take those calls for growth.

[Operator instructions] The next question is from the line of Gaurav Jogani from JM Financial.

Vedant, my question is with regards to the competitive intensity, and it is more so not from the organized players, but from the unorganized player. If you can highlight how the competitive intensity has been over the past quarter? And has there been any change versus the previous periods?

So like we've been mentioning over the last 8, 10 quarters, we definitely see a large number of store openings. However, given how closely we track them and monitor them, majority of these me-too brands, the performance is something which makes us question if the intensity of openings can keep up. So we've already seen it slow down. And our common sense would tell us that this slowness in terms of the opening should be there from now on.

Sure. So you expect the competitive intensity to moderate going ahead, if that is right understanding?

So again, while I can't give you an objective answer qualitatively, we feel the intensity of the store openings would definitely slow down.

Sure. And Vedant, would like to have your comments on the other brands performance like Mohey and even the freshly launched Diwas, how have they been trending? How are the KPIs trending? If some color you can provide there?

So with Mohey, we have had a strategic shift in terms of how we look at the brand. So we've invested a lot in terms of moving from it being a bridal wear brand to it being a wedding wear brand. That has really worked in our favor. We are continuously being beaten the company average when it comes to Mohey's SSG and overall growth has also been positive. So with this strategy in mind and the evolved digital marketing strategy, we feel we are poised to continue growing Mohey. And I think the way the stores are now looking, we've just come back from a store visit in Hyderabad. We seem very confident about the brand overall and how it's going to perform in the next couple of quarters as well. In terms of Diwas, the last festive was when the brand was launched. It did decently well, although at a very small base. We saw very positive response in terms of the trade shows we've recently done in the last 2 months. So that was a great thing to see for Diwas. But the real test for Diwas is going to be in the upcoming festive season, when we will actually be prepped from an inventory perspective, and we will see the power of the brand on the multiple marketplace channels where we operate and our own D2C website. Finally, coming to Twamev. Again, from an SSG perspective, it's been doing very well. We will also have one very strategically important EBO opening in this financial year for Twamev in the heart of Bombay. So with all of these things running, I think with Prom as well, we are very confident about the product mix and portfolio and continued growth momentum.

The next question is from the line of Rahul Agarwal from [indiscernible] Assets.

A few questions. Firstly, to start with, and I -- sorry, I joined the call a bit late, if they're repetitive, I'll read up the transcripts. On AP Telangana, what is your assessment in terms of the growth bounce back? I mean, should we assume right now, is this the time to assume that this growth, obviously not 17%, but in terms of direction, this growth should be sustainable going forward? Or was there some seasonal impact or maybe some state behavior which caused this?

So there are 2, 3 aspects here. We've actually just come back from a visit to Telangana. And the kind of numbers we saw in Telangana in first quarter were actually much better than the company average itself. So there is definitely the impact of having weddings in this quarter versus not having weddings in the first quarter of the last financial year. But given the intensity of growth, we would feel there are other macroeconomic elements as well, which have led to the growth in walk-ins. So this is something we would like to see for 1 or 2 more quarters before commenting on this. But the first quarter numbers, and I would even go on to say the current quarter 2 numbers, which we see in July have also been decent for AP Telangana.

Got it. So it needs like a couple of more quarters for the right assessment in terms of the direction to call out. Is that correct?

Absolutely.

Got it. Second question was on the emerging brands. I think Gaurav already asked that. But just in terms of the thought process, like scale and size, let's say, 5 years out, Mohey obviously is going to be the largest one out of Mohey, Diwas and Twamev . But just on Diwas and Twamev, what is the vision here? Let's say, if we talk about 3 to 5 years. Could you just help in terms of the thought process, what you have? Where do you see these brands in terms of scale and size?

Great question. So in terms of Twamev, I would say the real goal from a 3- to 5-year perspective for us to have a large market share in the bridge 2 luxury category. This is the market where typically boutiques and small designers operate today. And given the unorganized nature of working, the kind of product being delivered at the kind of price point, we feel we can do a much better task at having better products at better price points because of the supply chain we have. And so the goal is to open the best store in the top 30 to 40 markets of India and have a large market share of those markets. So this is something we are focused on in terms of Twamev and to carry a big brand legacy of a premium brand as we sort of move on with this journey. In terms of Diwas, we want to be the flag bearer of Indian wear when it comes to anything and everything festive. If you look at India, there are 50-plus festivals that India celebrates. At an individual level, each individual in India celebrates 4 to 5 festivals. Yet when you look at the men's Indian wear industry, it is still very small. So majority of Indians are not even buying a single piece of Indian wear annually today. With Diwas, we want to change that. We want to ensure that every Indian has the ability to afford and celebrate the festival of their choice, wearing the right products for that festival. So given the channels that we've chosen, very focused on the e-commerce route through marketplaces, through diwas.com, along with the multi-brand outlets and SIS route, which we are taking, we feel we can really change the aspect of the festival game in India when it comes to a 3- to 5-year perspective. So currently, for the next 1 to 2 years, the goal is to have a much higher market share of marketplaces. But as we grow the brand, we want to improve the industry's market share of festive wear. That will be the larger focus for Diwas.

Got it. Got it. So 2 follow-up questions on the same question. So essentially, how do you achieve this? So let's say, if we have to achieve a higher industry market share for every celebration through Diwas, how do we change that behavior as in terms of go-to-market, right? I mean if you could share a couple of examples, that will help. And the second is both for Twamev and Diwas in terms of -- obviously, the TAM we're talking about very large numbers. But from a Vedant Fashion perspective, would you have -- or could you share something on, let's say, you foresee Twamev or Diwas as a INR 500 crore brand 5 years out, 3 years out, something like that. If you could quantify that will help and give a direction to us.

Very interesting question. So when it comes to the overall go-to-market strategy, this is something we've delivered in the past with Manyavar. So 2 decades ago, organized Indian wear did not exist as an industry. So if you go to our YouTube page of Manyavar, and I love to do this sometimes, and I go sort of looking at the videos from the oldest videos to the newest, there is a sort of journey to organize that industry and to make Indian wear aspirational along with making it value for money, which democratize the Aristocrat of India, making Sherwani affordable for a lot of Indians. So that is one journey we've done with Manyavar, which has to be done with the Kurta wear industry for festive wear, which is what we are attempting with Diwas. Now there will be a big marketing strategy behind that. But if I give you one example of Calcutta, which is where we live, if you walk around the city in Pohela Poshak, you will see majority of the people are wearing a yellow kurta. The city being cultural, we've kept up with those values. And if the same values were to replicate in each city of India for their respective festive occasions that they celebrate, that is all we have to do. And this is one thing which we truly believe from our hearts, adds so much cultural value to the country. The kind of happiness that can be felt across the city when something like this happens is also truly beyond words. So this is something which we will truly work hard towards as we build the category and build the supply chain to cater to the amount of people we want to. Again, to your second part, which was to give numbers, this is something which we don't do. We would not like to give any guidance as such. But the goal is to be much larger in terms of both Twamev and Diwas where we stand today. And also while we build those brands, increase the TAM of those brands also significantly.

Got it. Got it. And just last thing on the same-store sales growth, the retail area additions, where are we on the store consolidation journey? And how should we think about new store additions? Coupled with that, the question was also on lease rentals because you mentioned that overall lease rentals still in metro markets are higher and even Twamev will need top 30, 40 cities will have that kind of impact. So both things together in terms of how do you think about new store additions and how are the lease rental trends? And what should we expect for Vedant Fashion overall?

So to your second part, retail inflation continues to remain high. So while we see some pockets, the inflation slowing down, these are the pockets where we are again doing stronger expansion. But where the inflation continues to be very high, where we don't see that the sort of rental yield for us overall rental lease cost makes sense. Those are the markets we are sort of still slow on in terms of expansion. Secondly, to your question of the overall growth numbers, I think, again, at the end of this year, we will have decent growth in terms of gross numbers, which is opening new stores. However, when it comes to closure, there is definitely consolidation of older stores. But on top of that, we are also rectifying some of the strategic sort of new things we tried in the past 2 to 3 years, which did not work for us. I'll give you one small example. Rajouri Garden as a market is strategically very important for us. But inside the market, the stores are very old and there are no large stores. So we had a small store doing very good business for us. So we took a call when we opened a 15,000, 16,000 square feet store right outside the market. However, that is something which did not work for us. So now we are moving back into the market with a store which is half the size of this flagship we had opened, so about 7,000 to 8,000 square feet, which is still the largest store inside the market. So while we have cut down in terms of square feet inside Rajouri market, we will still do much better in terms of revenue. So these are some of the mistakes you want to clear out where square feet number might reduce, but the quality of business will actually improve by a lot.

Got it. So from a gross addition perspective, is there a count here? Or how should we think about that?

So again, I don't want to give a particular guidance as such, but ballpark from a gross number, it should be between 8% to 10% of where we stand at the end of the last financial year.

Perfect. And which much more higher throughputs, which will help the overall sales to be higher than -- despite Net adds being lower.

Absolutely. So the goal is to improve the quality of retail significantly.

[Operator Instructions] The next question is from the line of Aliasgar Shakir from Motilal Oswal Mutual Fund.

Just a question on growth, just a follow-up from the last question. So now that you are indicating that gross number will be 10%, but we'll have a lot of closures. So net numbers may not be there. So I think growth will be more led by, as you mentioned, SSG. So just if you can share some more color on how the SSG trends this quarter because there will be multiple levers in play, right? One is the restructuring of the nonperforming stores. Second is that we have seen now 2 years of negative SSG [indiscernible] be low and there were very weak wedding season also. So that benefit should also be there. But when I see from a very short-term point of view, I think last year, your -- probably September and December quarters were very good. So maybe impacted from there. So if you could just share some color in terms of how we are looking at the SSG performance and each of these levers playing out in your favor because that I think will be the lever of growth for you.

Thank you for the question. So again, we don't give any guidance as such. But from a qualitative perspective, the goal every year is to do decently well in SSG. So firstly, there is the lever of ASP where we want to grow by about 3% to 4% within each of the categories we operate in. Alongside the category improvement because the share of Mohey and Twamev is increasing in the company, there is again an 80 to 90 basis point jump in ASP at a company level every single quarter because of this. So that is one big lever which we have.

How much did you say?

So 3% within the categories, and I would say 70 to 80 basis points because of a larger share of Mohey and Twamev of the company. So all in all, 3.6%, 3.7% is something which we sort of target as ASP growth, which is one lever. The second big lever for us is improving our average basket size, which, again, in terms of the kind of training which we deliver, the kind of layouting which we do in our stores, we've been able to improve it quite decently well over the last couple of financial years. The third aspect is to continuously improve on footfall. This is the one major area where we've lagged in the last many quarters and the last 2 financial years overall, which is something with both very good marketing and rebounds in the macroeconomic environment can really help us step up the overall sort of footfall numbers, driving a lot more bill counts. And finally, there is a large play in terms of our retention strategy in terms of ensuring we are able to recall a lot of the 80 lakh to 90 lakh customers that have already purchased from us, the data with which we carry in our systems. So these are the overall growth levers in terms of having good SSG growth. That said, there are a lot of micro KPIs that we work on, which I mentioned for an earlier question, which is in terms of product, in terms of marketing, in terms of the operation standards. And the real goal is to ensure that we do the best justice to every single guest walking into our store, making them feel extremely happy with what they've purchased.

Got it. This is very elaborate and detailed -- just one quick follow-up. Last 2 years, we were indicating that we will have double-digit footprint-led revenue growth. Now that this year, we are not having a net level strong footprint growth. Do you think that double-digit growth will be difficult? Or you think that SSG should be able to compensate for whatever impact we will have from lower net store addition?

So again, see, the goal of the company is to always deliver on the best financial performance. This year, we believe improving the quality of retail is more important than improving the number of square feet we operate in, which at a net level will be much more beneficial to us. So for any retail company, having a tail is the worst thing possible because that means great inventory gets stuck at the back of the nonperforming stores, along with the overall operating deleverage that comes with it. So the goal is to ensure great SSG along with improving retail quality, making us poised for good growth at the end of the financial year. So if there is any market where we don't operate in, we will absolutely open a store. There is no reason to slow down in terms of store openings. It's just we want to do it in a manner which is sustainable and has great financial outcomes in both mid- to long term as well.

The next question is from the line of Jignesh Kamani from Nippon Mutual Fund.

I just want to know the consumer sales grew around 23% versus reported sales growth of around 13%. So since last 7 or 8 quarters, consumer sales growth has been much higher than the reported sales. Generally, it move hand in hand. And if there's any deviation, probably 1 or 2 quarters, it will reverse. So I just want to know the reason behind it. Are the stores having a very high inventory 2 year ago and that's why second half reported sales looks weak because they're clearing the inventory?

So on a full financial year basis, if you look at the growth in primary and customer revenue goes in a similar direction. On a quarterly basis, it can vary depending upon what is the upcoming quarter, which is coming up.

8 quarters, it is happening.

Sorry.

So if you take the last 8 quarter, fourth quarter, every quarter, the consumer sales growth was higher than the reported sales growth?

No. So that, to some extent, it can be because of -- in generally, if you look at full financial year, like FY '25, if you look at, right, it was in the similar direction. It was moving in the similar direction in FY '25. So what is important is to look at the full financial level. Like if I tell you, last year, our primary revenue growth was 1.2%, okay? And our customer revenue growth was 2%. So it was similar. And so that is what we are saying that if you look at financial year level, it will move in the similar direction. But in any particular quarter, there can be variations because our model is auto replenishment. Every replenishment happens automatically, there is no manual intervention. And the replenishment happens based on the demand and supply, what is -- how is the season in the upcoming quarter. So these factors play a role. And it is fully automated. There is no manual intervention at all. So that is why we are saying it is important to look at the full financial year level rather than a quarter-to-quarter.

Sure. Let me ask this differently. Over the last 2 or 3 years, have you seen increase in the inventory per store, either in number of SKU or the absolute amount? And how is it currently?

It again depends from a store-to-store perspective. At an overall level, our receivables have not changed dramatically. They might have improved for some stores where we've taken a strategic call to add Mohey or Twamev or both. So in those stores, you would find that inventory levels in terms of MRP have increased because each store can only carry a certain number of pieces. But the moment we decide that we will change, let's say, 10% of the inventory from Manyavar to Twamev, the overall stores MRP value actually moves from 100 to about 130 because Twamev carries a much larger revenue. So that is one reason why receivables increase from a store-to-store perspective. But as a company, we love to be a company that has very high inventory turns overall. So the goal is never to fill up stock. We look at our stores to be beautiful retail environments, we don't want them to look like warehouses. And the goal always is to have only the optimum inventory on the floor level. But yes, when we move from Manyavar to having a little bit of Twamev or Mohey, both the receivables and the inventory line at the store increases because of the change in ASP of the product.

But at an overall level, if you look at, in TTM June '25, our receivables days are 71 days, whereas in FY '25, it was 77 days. So it has actually come down compared to FY '25.

Sure. And second question on the SSG, like last almost 2 year SSG has been very soft. So are we seeing the franchisee partner, you can say there's a fatigue created at their end because their payback period has elongated and ROI has been much deteriorated because of the overall condition. And account of that, are we seeing higher number of closures or when you want to open a new store, interest from the new existing franchisee owner for the second or third store has been slightly weak now?

So, I'll take this question in multiple levels. So from a workflow perspective, the way we function is our business development team signed a store. And after signing a property, we look for a partner from the existing network or from outside as needed. And that has never been a challenge for us, including even now. That's rather one of the easiest parts of the operations. Coming to the ROI of our partners, majority of our partners are well established retailers having worked with us for many, many years. They understand what the mid-premium discretionary spend is going through. They are wary of the facts. And the best thing is that even 2 years ago, we operated at ROIs, which were extremely high. So while that number would have come down slightly for the partners, it is still very healthy and positive. That is the reason why there is a lot of hard work that needs to be put in by our franchisees and the company. However, there is no sort of story of negative ROI as such. Hence, all partners remain to be committed towards the overall growth of the brand. And finally, when I talk about closure, -- majority of the closures that we take up are actually led by the company itself, which is more strategic in nature due to the reasons I mentioned. Very rarely do we have closures coming from the partners end.

Understood. And my last question.

Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions. The next question is from the line of Devanshu Bansal from Emkay Global.

Most of my questions are answered.

The next question is from the line of Sameer Gupta from IIFL Capital.

I'm sorry if somebody has asked this, I joined the call a little late. I was of the impression it starts at 4. First thing on the EBITDA margin. Now historically, if I look at EBITDA margin in first quarter and full year normally is in the same range. This quarter has started on a very unexpectedly lower note at 42%, 43%. Now how should we look at it? Is it that ad spend this quarter have been disproportionately higher and you expect some phasing? Or this is the normal level which you think will sustain going forward? So just if you can elaborate on that, please?

Sameer -- so this time, the marketing cost is the main reason why we see a decline in EBITDA margin because -- last year in Q1 FY '25, we had a very negligible marketing cost because of we were negligible wedding last year in Q1 FY '25. So that year, in Q1 FY '25, the marketing cost was only 2.3% of revenue, whereas in this quarter, we have spent 5.6% of revenue and marketing cost. So around 3.3% is impact of marketing cost only. So that is a major reason where we see that the EBITDA margins are looking lower compared to last year's Q1.

Understood. But if 5.6% is going to be a consistent number for the full year, that would mean that all things equal, 43% is also going to sustain for the full year, right?

No, no. The point here is, look, there are multiple things which play a role. Another thing -- one is the marketing cost. Another is there is operating leverage as well because when we look at the full financial year, Q3 is the highest revenue-generating quarter for us. So by the time we reach a 9 months period, of course, the revenue levels are very different compared to the cost, right? So of course, the margins at EBITDA levels also look different because of positive operating leverage.

So just for reference, quarter 1 advertisement cost was 5.6%. And last year's entire year's financial year advertisement cost was also similar to that level, if not slightly higher. So at the financial year level, advertisement costs are always at that level. It's just we had strategically decided to save money last year first quarter to spend more in the second half, which we decided not to do this year. If you remove that, then we also had operating leverage, improving the overall margins. And that 80 bps that came down from a gross margin level is more of a quarterly thing, something which will fix itself in the remaining financial year.

Got it. A little bit of follow-up over there. So I'm noticing this GM contraction, it's still not high, but it's happening for the last 3 quarters. And the reasons we still are not sure. I mean, it's something similar that you have mentioned last 2 quarters also. So what exactly is happening over there?

So Sameer, on the gross margin, if you look at, in Q4 FY '25, we had 66.2% of gross margin. And this current quarter, we have 66.9% of gross margin. Now our point here is that it is always better to look at gross margin at an annual level, right? On your point of quarter-on-quarter, we have actually improved on gross margin, but our recommendation would be to look at annual level. And as a management, we are very comfortable with a gross margin of anything above 65%.

Okay. So let me ask this in a different way. I was actually looking at Y-o-Y contraction. So 80 bps is the contraction this quarter. Last quarter was 90 bps prior to that was 50 bps. This is what I was referring to.

So that is what, Sameer. I mean, look, at the full financial level, if you look at, last year, we had 67.2% of gross margin in FY '25, right? And now we are at 66.9% of gross margin in Q1, right? So there is only 0.3% of difference which we are talking. That also can be of different reason on a quarterly basis. So firstly, it is important to look at a financial year level. That is what we are trying to say because quarterly, it can always vary.

I would also just like to add one thing. FY '24 gross margins was 67.2%. FY '25 gross margin was 67.2%, absolutely the same. And quarter 1 FY '26 is just 30 bps lower than that, 66.9%. So all we are trying to say is, if you look at it from a full financial year level, you will hardly find things moving here and there. That said, as a company, the goal is to improve our gross margin within each category of a brand. With Mohey, Twamev and Diwas growing its share of the pie at company's revenue level, managing the same gross margin we operate is becoming more and more difficult, but somehow we are able to manage to stick to the same levels. And that is something which I would say is a great achievement by our merchandising team. And the goal is if we are able to maintain these numbers, that means significant improvement in the departments that are operating Mohey, Twamev and Diwas.

Got it. Sorry, just to belabor on this point again. So logically, if a Mohey, Twamev and Diwas is giving higher growth versus Manyavar, there should be a natural contraction in GM. Is this a correct understanding?

See, that is a correct understanding, but that is what I'm trying to say. Even though they've grown much better than the company average, still the FY '24 gross margin and the FY '25 gross margin was absolutely the same. Even the current quarter gross margin is almost the same at 66.9%. So we are actually improving a lot on our gross margins when it comes to within the brand level. So there is a lot of improvement happening. So the goal is to actually maintain the company level average for which we will actually have to do a lot of hard work within the brands.

Second question, if I may.

Sorry to interrupt, sir, but I request you to rejoin the question queue for follow-up questions. The next question is from the line of Vishal Dhoodhwala from [indiscernible] Asset Managers. The next question is from the line of Jignesh Kamani from Nippon Mutual Fund.

Just want to know more on the -- you can say Mohey and Twamev. There, I believe, since Manyavar is more established brand versus while Mohey and Twamev is more on the seeding stage right now. So your revenue per square feet will be slightly weak there. And as you said, the ASP is 30% higher. So your inventory turn also is higher and inventory amount will be higher and inventory turn might be weak. So from the franchisee partner point of view, ROI on the Mohey Twamev might be slightly inferior versus the Manyavar. So are we compensating them enough for them to make it motivated because when I interact with some of the franchisee partners, they was not keen to promote more or Mohey because from their perspective dilutive in the ROI.

Well, I would like to take this answer up in 2 parts. So when I talk about Twamev, when we talk about having Twamev within Manyavar Mohey stores, then it will always add ROI value to any partner that operates with us because Twamev is added in the same space where Manyavar is kept. In basically a nutshell, it increases the ASP of the store and also improves the average ticket value of the customers because of having better ASP products and satisfying to the already existing demand. So it will always be ROI sort of improving the ROI for our partners. Now when I talk about Mohey, what we have seen is in the larger stores, Mohey actually has tremendous value in terms of the growth it gives to that particular store. And on the second part, when you are building a store, let's say, 5,000 square feet store versus 7,000 square feet store, the amount of CapEx you spend for that incremental 2,000 square feet is much lower than the average of the 5,000 square feet you are spending because there is economies of scale when you are building that store. The second part is in the store operations as well. So there are some larger cost components, let's say, the store manager. Now the same store manager is able to handle both Manyavar and Mohey, and you don't need to have another person doing that job. So even from an operations economies of scale, having Mohey makes so much more sense than not having it when you have a larger space. So from an ROI perspective, when I look at Mohey as an incremental perspective to the Manyavar store that was already going to open, it will be at a very similar ROI level. So that is what our understanding is. And majority of the partners we interact with across India, everyone is now pretty happy with Mohey and very happy to have Mohey in all the new stores that are opening up. Hence, you will find...

What about the existing store understood about the new store, but existing stores, which are already doing the mover, where you are replacing part of the area of mover, which Mohey, there ROI will get compromised, right? No, because I would say 2 years ago, that exercise was completed. So in the last 2 years, we've never really transferred the Manyar store to being Manyavar, Mohey because any store where there was enough space and we could have done that, we've already done that. So that opportunity does not exist anymore.

Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to the management for closing comments.

It is always a pleasure interacting with all the analysts. Thank you very much for joining. Looking forward to interacting again the next quarter. Namaskar, and thank you very much.

Thank you. On behalf of Vedant Fashions, that concludes this conference. Thank you for joining us, and you may now disconnect