V2 Retail Q1 FY27: Growth stayed hot, but productivity and working capital need watching

V2 Retail Limited started FY27 with another strong growth quarter. In Q1 FY27, consolidated revenue rose to 997.2 crore, up 58% year on year. Operating profit grew at a similar pace. EBITDA increased to 139.5 crore, up 60%, and EBITDA margin improved slightly to 14.0%. Profit after tax came in at 41.9 crore, up 70%, with PAT margin at 4.2%.

The quarter again highlighted what V2’s current phase looks like: fast network expansion, healthy volume-led growth, and steady profitability. At the same time, store productivity and working capital stayed under investor focus, especially given the company’s rapid store additions over the last two years.

The operating story: store rollout plus steady same-store growth

V2 ended Q1 FY27 with 381 stores, after opening 57 and closing 1 during the quarter. Total retail area stood at around 40.7 lakh sq.ft. Management later stated on the earnings call that the company crossed 400 stores after quarter end.

Same store sales growth (SSSG) was around 7.5% for the quarter. Management attributed part of the softness in full-price mix and demand to Adhik Maas and fewer wedding dates, which matter in Tier 2 and Tier 3 consumption cycles. It maintained full-year SSSG guidance of 8% to 10%.

Volume growth was strong at 56% year on year, showing that growth is still being driven by expansion and rising scale, not only by ticket size. Average bill value improved to 941 (from 901 in Q1 FY26), while average selling price was 308 (from 303).

Category mix stayed apparel-heavy

V2 disclosed the Q1 FY27 revenue mix by category, reinforcing that this remains a family apparel business with a small lifestyle add-on. Men’s wear was the largest category.

At the same time, the multi-year mix shown in the presentation indicates that the lifestyle contribution has fluctuated materially across years, making it a metric worth tracking in future disclosures.

Financial snapshot: strong growth, mild margin compression at the gross level

Gross profit rose to 285.0 crore, up 53% year on year, but gross margin declined to 28.6% from 29.5% in Q1 FY26. Management linked this to a lower full-price sales contribution (90% versus 92% last year) and seasonal factors.

EBITDA margin improved to 14.0% from 13.8% last year, supported by scale benefits despite the large area additions. Finance cost increased to 25.0 crore from 22.8 crore, while depreciation and amortisation rose materially to 63.9 crore from 32.1 crore, reflecting growth in store base and Ind AS lease accounting impact.

Store productivity: growth dilution is visible

A key operating metric moved in the opposite direction. Sales per square feet per month declined to 886 in Q1 FY27 from 960 in Q1 FY26.

Management provided useful colour on the earnings call. It said mature stores (more than two years old) are delivering around 1,070 to 1,100 per sq.ft. of monthly sales, while new stores are roughly 34% lower and currently operate at about 730 to 740 per sq.ft. It also acknowledged that around 10 to 12 stores were below 600 per sq.ft.

This is not unusual for a chain expanding at this pace. But it does set expectations. If V2 continues to add 50% plus new area each year, overall productivity can remain diluted even if older cohorts perform strongly.

Working capital and cash flow: management wants normalization

Working capital remains central to the V2 story because inventory is built not only for ongoing stores but also in advance of new openings. Management explained that inventory for a new store is typically built about two months before the store opens so that the store can launch with wide variety.

In the PPT, net working capital days improved to 74 in Q1 FY27 from 81 in FY26. But inventory days stayed high at 138 in Q1 FY27 (versus 136 in FY26 and 108 in FY25). Management said the company increased safety stock at the warehouse due to geopolitical tension and expects to reduce it once conditions normalize.

It also stated a target operating range: inventory around 100 days and creditors around 45 to 50 days.

The FY26 cash flow statement shows why investors care. Net cash from operating activities in FY26 was negative at -103 crore, driven by a large working capital build (working capital change of -549 crore). The business is profitable, but the growth model requires careful control of inventory and payables.

Guidance and near-term risks: pricing, costs, and calendar shifts

Management reiterated three key operating and financial guideposts for FY27:

First, store additions. The company said it remains on track to open 170 to 200 stores in FY27.

Second, growth. It reiterated revenue growth guidance of at least 50%.

Third, margins. It guided gross margins in the 29% to 30% range, noting that outcomes depend on full-price sell-through and season performance.

On costs, management expects raw material inflation to start flowing through from Q3 FY27. It indicated a 4% to 5% increase in overall garment cost and said MRPs on relevant future purchase orders are being increased by 4% to 5% to maintain gross margin.

The quarter also underlined how demand can shift across quarters due to the festive and wedding calendar. Management said Q2 and Q3 should be evaluated together because a larger portion of festive demand shifts into Q3.

Execution priorities: product, technology, and people

Beyond numbers, management highlighted three execution priorities.

One is product and sourcing. It discussed consolidating fabric purchases, tying up with mills, nominating fabrics, and giving technical specifications to vendors. The stated benefit is quality standardization and economies of scale.

Second is technology. Management said it has moved its data lake to an AI-enabled platform and expects more workflows to be automated over the next year. It also described an AI layer on CCTV cameras to detect long billing queues and trigger notifications to managers.

Third is team capacity. Management said it announced two president-level hires to build the leadership foundation needed for the targeted growth trajectory.

What investors should take away

V2’s Q1 FY27 reinforces that the company is still in a high-growth scaling phase. Revenue and EBITDA growth remained strong, and the company continues to add stores at a rapid clip.

But the trade-offs are visible. Sales per square feet has declined year on year, inventory days remain elevated, and the FY26 cash flow profile shows that working capital discipline will matter as much as store additions.

The most important monitoring points into FY27 are whether store productivity improves as cohorts mature, whether inventory normalizes toward management’s stated target, and how well the company navigates expected cost inflation through planned MRP increases.