V-Mart, India’s largest chain of smaller-sized fashion stores, said it has started purchasing fresh stock from its suppliers after nearly six months of freeze on garment procurement.
The company was hit hard when a nationwide lockdown was imposed by the central government in late March to control the spread of COVID-19, particularly as it had just stocked up for the summer season.
The lockdown, and a fear of air-conditioned shops in the minds of consumers due to the disease, resulted in a reduction of 66% in V-Mart’s total sales during the first six months of the current financial year (April to September).
“We had completely stopped all purchases in March and the focus was on liquidation of summer inventory,” said Chief Financial Officer Anand Agarwal.
The move to freeze procurement by companies like V-Mart had its impact on upstream suppliers, such as garment manufacturers, as well as on employment in one of India’s biggest providers of jobs in the organized sector.
In what should come as welcome news to the garments industry, Agarwal said the company has now resumed purchases of fresh stock from its suppliers. Stocks, he said, are being purchased for the festival season of 2020.
Speaking at an interaction to explain the company’s second-quarter results, Agarwal pointed out that the festive season has arrived late by around 20 days this year compared to the last.
Despite this, during the second quarter (Jul-Sep) this year, the company was able to achieve 56% of the sales compared to the same period of last year, he pointed out.
This is despite a 58.33% fall in footfalls and a nearly 15% fall in the average selling price of garments this year due to discounts. V-Mart conducted a longer-than-usual end-of-season sale this year to clear out its inventory, Agarwal said.
On a positive note, despite the threat of COVID-19, an average consumer spent more money (Rs 844) at V-Mart stores in the second quarter this year compared to the same period last year (Rs 709).
This phenomenon, also observed in case of other chains, is attributed to consumers squeezing in more purchases into a single visit to reduce the chances of infection.
Most of the demand during the last six months has been for leisure and comfort wear, rather than occasion wear or denims, Agarwal said.
Thanks to the procurement freeze and aggressive promotions, the company was able to reduce its inventory by Rs 60 cr during the three months from July to September to Rs 370 cr, and by Rs 110 cr in the six months from April to September.
Agarwal also said that V-Mart cleared 95% of all outstanding vendor dues by August this year.
However, V-Mart is hardly out of the woods yet.
During the three months to September, it reported a loss of around Rs 30 lakhs from its operations, compared to a profit of Rs 11.3 cr in the same period of last year.
Including non-operating costs such as interest expenses and wear-and-tear, the net loss was Rs 19 cr.
Commenting on the outlook for the ongoing festive quarter (October to December), Chairman & Managing Director Lalit Agarwal said V-Mart is now able to keep its stores open on more days compared to the second quarter.
While it was able to keep its stores open only on around 79% of the days in the Jul-Sep period, since October 1, that figure has been more than 95%, the company said.
More over, said Lalit Agarwal, the winter seemed to have arrived slightly early this year. “We see good demand for winter clothes [this year],” he added.